Author Topic: 0% APR fo r18 month balance transfer credit card provides the cheapest leverage  (Read 12887 times)

JSArbitrage

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I have explored this opportunity but found it to be not worth the hassle for the following reasons:

1.  In order to borrow any amount of money that would move the needle on most people's portfolios, you'd basically have to take a hit on your credit score.  It doesn't make sense to me to try to skim a few percentage of a short-term loan just to end up paying an extra 50bps on a home loan or car loan.  You'll end up hurting yourself economically in the long-run.

2.  If your portfolio is so small that the credit offered to you is large relative to your portfolio, your profit is so small that it's not worth the risk.  Risk bouncing a credit card payment, hurting your credit and basically spending hours juggling something that will make you a few grand at most is not worth it. 


StubbleJumper

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I have explored this opportunity but found it to be not worth the hassle for the following reasons:

1.  In order to borrow any amount of money that would move the needle on most people's portfolios, you'd basically have to take a hit on your credit score.  It doesn't make sense to me to try to skim a few percentage of a short-term loan just to end up paying an extra 50bps on a home loan or car loan.  You'll end up hurting yourself economically in the long-run.

Absolutely.  You need to monitor the impact on your credit worthiness.  As long as you don't go too crazy, your credit score drops a few points for a couple of months after you apply, and then it can also drop if the ratio of credit outstanding over credit extended gets too high.  But for most people who have a couple of existing credit cards and pay them off monthly, the credit usage ratio is not really a problem.

In Canada, interest on consumer credit is not deductible for income tax purposes (unlike mortgage interest in the U.S.).  As a result, it generally makes good sense to pay off consumer debt before investing (ie, if your marginal tax rate is 40% and you're paying 5% interest on consumer debt, you would effectively get a risk-free pre-tax return of 5%/(1-.40) by simply paying off your debt).  As a result, buggering around with credit cards really makes most sense when you've already paid off all your consumer debt, at which point who really cares about your credit score?

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2.  If your portfolio is so small that the credit offered to you is large relative to your portfolio, your profit is so small that it's not worth the risk.  Risk bouncing a credit card payment, hurting your credit and basically spending hours juggling something that will make you a few grand at most is not worth it.


Yeah, it doesn't do much to move the needle because it's not scalable.  But, that's a similar problem to odd-lot investing.  Individually, these actions just don't amount to much, but if you can find 4 or 5 such opportunities per year, then it can provide at least a little bump to a portfolio.  The labour component is definitely there, but it really only amounts to an hour or two of work for each CC offer that you exploit.  I guess it's up to each person whether $1,000 is adequate compensation for an hour or two of administrative work. ::)

   

Lance

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Chase is currently offering a 0% APR balance transfer with no transfer fee for 15 months.

Thanks,
Lance

NoCalledStrikes

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Thanks for the heads up. I haven't seen a no transaction fee offer in years, but back in the day I used to play this game.  I'll start looking again... It just fun to make money off a bank.  I usually limited myself to 50% of the balance to avoid damaging my credit rating.

deepValue

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Even if you don't have to pay any interest for 18 months, wouldn't carrying a balance month-to-month count as a late payment and kill your credit score?

I only have one credit card and I never use it, so I don't know anything about this stuff.

ourkid8

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There is also a utilization rate for credit cards.  If you breach that rate, it will adversely hit your credit score.

https://www.creditkarma.com/article/CreditCardUtilizationAndScore

Thanks,
S