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Does anybody have experience in taking out 0% credit cards for 6-12 months and putting them into a savings account and then paying them off before the interest rates kicks in? I know a lot of my favorite bloggers do this and a few have posted step by step guides on how to do this. To me especially in this low savings rate environment it seems like a lot of work just to make a few hundred dollars. Curious to see what others think. |
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It does seem like a lot of effort for a 1.88 - 2 % gain (what I believe is the highest savings rate right now). I don't know how available 0% interest cards are right now either. I have excellent credit myself, 792 according to Credit Karma, and in the last 15 months I've opened 2 cards (Discover and US Bank) with 0% interest rates - one was sent to me in November 2008, the other I had to apply for in spring 2009. I have not received any new offers on low-interest cards since the Discover offer, about a year and a half ago. I'm sure the banks, with all the banking crisis issues that are happening right now, are not offering much credit. If I had done this with say, my Discover offer, which had a $5,000 limit, with 3% transaction fee (up to a $100 limit), and a rate of return of say, 1.88% on a savings account, I would still have lost money. It cost me $100 and I would only have made $94. You'll have to either get an interest rate that equals more than a 3% transaction fee (which is fairly standard) or $100, whichever the balance transaction fee is. But I'm not seeing that kind of return available. Maybe if you got a higher-rate CD, but those are usually for longer than 1 year. I would also reiterate the dangers involved. I know (in pre-CARD legislation) that any late payments reported for any of your bills (credit cards, loans, utility payments, late library overdue payments) could have resulted in a loss of that 0% rate. I don't know if this is going to change with the upcoming Feb. CARD enactment, but if you do pursue this course, to be extra vigilant that EVERY bill is paid ON TIME, all the time. |
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Considering the risk involve-like getting laid off, car wreck, or other income issues-seems crazy to me, especially in this low interest rate environment. Having money sitting there would be tempting to a lot of people, if they got desperate.... Now if you could earn 15% on your money-maybe it would make sense. If double digit inflation indeed rears it's ugly head, then maybe the work, math, and risk could be argued. But, personally, I don't think it's worth it. |
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As a former bank teller, I tried to talk people into the balance transfers. It was an easy way to get a referral and it often helped the customer. I would do it if it was cost effective. Sometimes the fees can make it now worth it. Do you mean "sometimes the fees can make it not worth it?
(Mar 16 at 06:30)
mbhunter ♦♦
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Once upon a time, it was worth it. Back in the days of 5% BT with no fees, and 5%+ interest on savings accounts. The ROI was even better when you used it to roll up credit card debt and pay it down, that's how I took care of maybe $20K in CC debt for my parents without paying interest. Nowadays, just about every card carries a BT fee of 3% and some don't even cap it at $75 anymore. That just eats up any possible profit. |
I haven't tried this at all. I'm not the best with details so I would probably make a late payment or something and lose all of my profit.
There are also typically transaction fees, so it would have to be a really good rate to make it worth it. I had no idea people did this. Clever.