0% 15 month credit card

[DK]

I'm trying to figure out what kind of hustle I can run with a new credit card offer I got in the mail but not sure how I can take advantage of it. Once I sign up for it, it's a 0 apr for all purchases for 15 months, not for balance transfers though. It also has some rewards points after I spend so much too.

The only outstanding debt I have is my student loans at 1.875% and my mortgage at 4.375%, no auto, credit card, etc debt. So.....the only thing I can really think of doing is get it and use it for all my new purchases, just make the minimum payments until month 14 when I pay it all off with the money I've saved in the meantime. But where do I put the difference to try to make something on it? ING pays less than a percent, and for the short term I'd be worried about putting it in stocks. CDs don't pay much either, not to mention I'd be looking to invest the saved amount on a monthly basis.

So any ideas? Maybe I"m missing something?

[James]

If there was a sure fire way to make easy money this way then the offer wouldn't exist...

[smedleyb]

I'm trying to figure out what kind of hustle I can run with a new credit card offer I got in the mail but not sure how I can take advantage of it. Once I sign up for it, it's a 0 apr for all purchases for 15 months, not for balance transfers though. It also has some rewards points after I spend so much too.

The only outstanding debt I have is my student loans at 1.875% and my mortgage at 4.375%, no auto, credit card, etc debt. So.....the only thing I can really think of doing is get it and use it for all my new purchases, just make the minimum payments until month 14 when I pay it all off with the money I've saved in the meantime. But where do I put the difference to try to make something on it? ING pays less than a percent, and for the short term I'd be worried about putting it in stocks. CDs don't pay much either, not to mention I'd be looking to invest the saved amount on a monthly basis.

So any ideas? Maybe I"m missing something?

Use it to fund a Lending Club account (initial LC accounts can be funded up to $5K with a credit card) and milk the difference between borrowing at 0% and lending out at 20%. 

[James]

Use it to fund a Lending Club account (initial LC accounts can be funded up to $5K with a credit card) and milk the difference between borrowing at 0% and lending out at 20%.

If this was truly a good idea, the banks loaning you the money at 0% would instead be loaning the money to Lending Club.  I'm not saying Lending Club isn't a valid option for your money, but borrowing from a CC to put money there would not be smart in my opinion.

[DK]

If there was a sure fire way to make easy money this way then the offer wouldn't exist...

I disagree. The offer is made by the CC company to make money off me. At a minimum they are getting 3%-ish returns due to transaction costs from any purchase I would make using it. Plus they are hoping I charge enough where I won't be able to pay it off before the 0% goes away and get the huge APR costs on my balance so they make more off me. They are doing it because they can and will make money off of it.

I am trying to make money off of the offer. I'm not going to keep a balance for the full 15 months, so they are not going to make any off me that way. I'm just trying to find where I can put the "spread" in the meantime to make some money off of it. Doesn't seem like there is a good place. The LC suggestion seems a bit risky to me so don't think I'd like to pursue that.

[gmaxwell]

The LC suggestion seems a bit risky to me so don't think I'd like to pursue that.

Not only are lending club loans directly risky, they don't have good liquidity, so you can't just easily exit them in 15 months. Not a good match.

A good match would be buying appropriately timed CDs or I-bonds. But at the moment, things like that don't return enough to make it worth your time and the (perhaps small) risk that something goes wrong and you don't pay it off in time.

[smedleyb]

If there was a sure fire way to make easy money this way then the offer wouldn't exist...

I disagree. The offer is made by the CC company to make money off me. At a minimum they are getting 3%-ish returns due to transaction costs from any purchase I would make using it. Plus they are hoping I charge enough where I won't be able to pay it off before the 0% goes away and get the huge APR costs on my balance so they make more off me. They are doing it because they can and will make money off of it.

I am trying to make money off of the offer. I'm not going to keep a balance for the full 15 months, so they are not going to make any off me that way. I'm just trying to find where I can put the "spread" in the meantime to make some money off of it. Doesn't seem like there is a good place. The LC suggestion seems a bit risky to me so don't think I'd like to pursue that.

You asked, and I gave you my best CC hustle! 

In my case I got back roughly $1000 from AMEX for spending $10K on a new card in less than 3 months, and there was no way I could have made that spend requirement without funding the LC account (LC treats initial CC funding request as purchases, not cash advances -- that's huge!).  Now, it just happens that I was looking into LC (MMM's influence, of course) and I have another card which sent me some balance transfer checks that allowed me to transfer the $5K at 0% for 12 months and with only a 1% transaction fee. 

The liquidity issue is important, but my thinking is to keep rolling over that debt  to other CC balance transfer options (which I seem to get every month or two, usually with 2-3% transfer fees but at 0% for 12 months) and to hopefully grow the account using future CC debt as well.  It's an experiment in interest arbitrage more than a retirement plan, using a fraction of my net worth to make usurious rates off my fellow consumers, while attempting to elicit CC points on the side as well (which can have tremendous value when used for travel purposes). 

And finally, if the" cheap money" dries up it would take a few months of saving (maybe a little more if/when I can get the account to $15-20K, my ultimate goal) to retire the credit card debt being used to fund the LC account. 






 

[James]

Sounds like arbitrage between two markets with different levels of risk.  You are personally a very low risk market, so the CC company is willing to loan you money interest free in return for a chance they will make money through transaction fees and interest.  You then loan that money out at higher risk, accepting both the higher risk and higher returns.  If the amount you stand to earn on the money is greater than the perceived risk to you personally added with the hassle of handling the exchange of money, then it's a good deal for you.  I have nothing against that as long as the level of risk is understood.  I should have said this instead of suggesting it wasn't smart in general.  I don't think it would be smart for the OP because it doesn't sound like the risk is acceptable.

[DK]

Looks like LC isn't available in Michigan after I took another look at it, so it wouldn't even be an option anyway. I guess I'll just end up sticking with my normal rewards cards and pass up this offer. Thanks for the thoughts and suggestions everyone. I appreciate it.

[The Bearded Bank Builder]

Somewhat related - Does anyone know how long you have to wait between getting new credit cards to not get a hit to your credit? I think I've heard that opening more than one in a short time period is considered too much activity

[smedleyb]

Somewhat related - Does anyone know how long you have to wait between getting new credit cards to not get a hit to your credit? I think I've heard that opening more than one in a short time period is considered too much activity

Every hard inquiry dings your score by 2-5 points on average.  Hard inquires drop off your report after 2 years. 

[DebtDerp]

You asked, and I gave you my best CC hustle! 

In my case I got back roughly $1000 from AMEX for spending $10K on a new card in less than 3 months, and there was no way I could have made that spend requirement without funding the LC account (LC treats initial CC funding request as purchases, not cash advances -- that's huge!).  Now, it just happens that I was looking into LC (MMM's influence, of course) and I have another card which sent me some balance transfer checks that allowed me to transfer the $5K at 0% for 12 months and with only a 1% transaction fee. 

The liquidity issue is important, but my thinking is to keep rolling over that debt  to other CC balance transfer options (which I seem to get every month or two, usually with 2-3% transfer fees but at 0% for 12 months) and to hopefully grow the account using future CC debt as well.  It's an experiment in interest arbitrage more than a retirement plan, using a fraction of my net worth to make usurious rates off my fellow consumers, while attempting to elicit CC points on the side as well (which can have tremendous value when used for travel purposes). 

And finally, if the" cheap money" dries up it would take a few months of saving (maybe a little more if/when I can get the account to $15-20K, my ultimate goal) to retire the credit card debt being used to fund the LC account. 

Sounds like arbitrage between two markets with different levels of risk.  You are personally a very low risk market, so the CC company is willing to loan you money interest free in return for a chance they will make money through transaction fees and interest.  You then loan that money out at higher risk, accepting both the higher risk and higher returns.  If the amount you stand to earn on the money is greater than the perceived risk to you personally added with the hassle of handling the exchange of money, then it's a good deal for you.  I have nothing against that as long as the level of risk is understood.  I should have said this instead of suggesting it wasn't smart in general.  I don't think it would be smart for the OP because it doesn't sound like the risk is acceptable.

Ah, but it's not Arbitrage if it involves risk. In this case it is just a highly leveraged investment. You are borrowing from the CC Company (albeit at 0%) to fund an investment in LC. Your margin is the minimum monthly payment that the CC charges you and your fees are the transfer fees when transferring to new cards. If you were guaranteed a return on the LC investment like you are with a CD (FDIC insured) then you would be closer to arbitrage. However, I think it is a wonderful experiment and I hope you will let us know how it goes!

[bigchrisb]

I severely burned my fingers getting greedy with balance transfer arbitrage.

I had been playing the balance transfer game, using 0% transfers and sticking them in high interest accounts (5-6% at that time in Australia).  This worked well, and had minimal risk.  However, I got too clever for my own good in seeking a higher return.  As I had a margin loan against stocks that was at 9%, I figured I could park the balance transfer in the margin loan, "earn" 9%, then pay it back.  As I was holding the margin loan any way, no additional risk, right?

Well, doing this through 2008 proved otherwise.  Soon enough I ended up with margin calls, and my losses were exacerbated by needing to inject new cash to repaying these transfers.  I tried to get too smart, was too greedy and regretted it.  If it was doing it again, I'd stick with the vanilla options with no liquidity risk, for a lower return.  Given current rates in the US, and the low rate / long term nature of your existing debt, I suspect its probably not worth the hassle.

I have no direct experience with options like peer to peer lending, but I'd view them as an area where you may not recover your money on the time frame you need.  Unless you have the spare income to underwrite the risk, I'd be tempted to pass.

[James]

Unless you have the spare income to underwrite the risk, I'd be tempted to pass.

And by my judgement, if you have spare income to underwrite the risk, it's probably not worth the hassle...  :)

[bigchrisb]

[/quote]


And by my judgement, if you have spare income to underwrite the risk, it's probably not worth the hassle...  :)
[/quote]
+1

[Rangifer]

You might be able to get a Square account and just pay yourself.