MY way of thinking around these 0% CC’s is to “arbitrage” inflation instead of trying to eke out a one-digit return in a dicey stock market. REAL inflation is well above 10%, so I buy goods/hard assets which will cost after the 12-15 month period of the offer expires.

But each to their own.

The first 0% offer was 12 months, the second was for 14 months.
(The offers being sent to me currently are now up to 3%!)

My total “arbitrage” return is 97% — tax-free.

Keep things SIMPLE!

Credit Card Arbitrage II – An Analysis

I’ve had 3 MBNA card and used them to my advantage on a few occasions, but have since closed them down. Used properly, they’re great!

I don’t want to sound like a party pooper, but you may have heard the recent news of TD buying Bank of America’s Canadian credit card assets right? Well that’s the MBNA cards.

What’s worse, is that one of the TD executives were interviewed on BNN the other day, and he basically said that they will be “rolling out” these promotional cards over the course of the next 12 to 16 months.

So take advantage of these promotions while you still can!

Just when you think there’s a nice, low-interest introductory rate product for Canadians to take advantage of, we see it being taken away in exchange for a more conservative credit card arrangement for customers. I suppose we can’t expect anything less given Canada’s financial institutions having more conservative approach to things.

I used to really enjoy reading some of the credit card arbitrage stories at My Dollar Plan’s blog, even though they were tailored mainly to American consumers. If Canadians had half of the credit card promotions that our friends south of the border were able to avail of, some of us, like Frugal Trader would certainly be reaping the benefits!

Nice post! BTW – I’m officially tied as your top commentator. Next week’s roundup? :)

In 2007, as you’ve said “…interest income is taxed 100% at your marginal rate.” As of Jan 1, 2009, you could save yourself the tax by putting up to $5000 annually into a TFSA, where investment income earned is tax-free. For those who haven’t contributed to the annual max of $5000, the unused contribution room is carried forward and accumulates in future years. Combining the power of a TFSA with credit card arbitrage could be a great opportunity for those who do so wisely!

I received a new 0% credit card from MBNA and closed out my old one. This time I have 15 months to pay it back and the limit went from $20k to $30k. Most of the money will go to TFSAs and RRSP contributions.

[...] might include putting all debts on a line of credit, home equity loan or a 0% credit card transfer. Some people prefer to take all of their debts and consolidate them to one large loan. This is what [...]

[...] I wrote about credit card arbitrage before, I came to the conclusion that the strategy wasn’t worth it due to the thin spread [...]

Without being specific, I would caution anyone who cares about his financial well being to use extreme caution employing any of the strategies used on this page.

Timing is everything, as is the no fee & no carrying charges Arbitrage.

I’ve used it, but unlike Frugal mentioned on writing a cheque to yourself it is generally considered a cash advance … & does not always work that way, for free anyway.

One option I used was to go out with CC 1 and purchase something big. I did this at $13k, I went to the Sony store and bought $13k of the most expensive home entertainment equipment there is.

Having the pre approved MNBA zero 12 months interest card ready to go, when the bill came in on CC1, I did the balance zero interest, no-fee transfer to CC2 12-months.

Within 2-weeks of all of this I returned the purchased items to the Sony store (policy return for full refund) and they weren’t too pleased, however, CC 1 had a credit of 12K. I called CC1 company and said “close my account” and send me the money.

Now $13k in hand for one year, what do I do?

Timing is everything … and I did this twice

Example one: December time frame, maxing on RRSP’s (since I hate these, unless I can profit from the exercise)I slapped $10k into an RRSP daily interest account with TD.

Early January I took $10k out in $5k lots, (minus the 10% witholding tax)giving me $9k, not forgetting I have $1k of tax credits, but will have to deal with reporting the $10k RRSP withdrawal next year.

With that $9k + $1K from the $3k left from the CC1 closedown, this time I slapped $10k back into the RRSP again, putting this time into the Questrade RRSP (fee free) trading account. What I used the $10k for to get more OPM’s and further tax savings/refunds, I shall tell you later.

Now I have a $20k RRSP deduction, which in my case provided a refund of $8k in early April… always efile

I still have $2k of cash from the CC1 return, $8k from a tax refund, totals $10k … What should do with that $10k before year end, should I stick it in mut-funds, do the SM manouvre, pay down the mortgage and increase the HELOC …

Since I dislike paying taxes, dislike paying others to manage my money from the likes of financial institutions, stock brokers, FA’s and the Mutfund companies, all IMO since I’m frugal, take their service charges, broker fees and MER’s on my behalf and all of whom are not responsible for the downside of my portfolio. There are no guarantees I’m told by all of these people.

My initial financial goal (since I work for an employer)was to see if I could get all of the income tax money back that was taken from my wages at source and get this back using the Aribitrage method (starting out with zero & using OPM)then working my way up to building equity and hopefully getting a low interest lown that is even more leverageable.

This one method allowed me to build my own version of frugal’s million dollar journey, adapting and already using many of the articles discussed in Frugals web-blog

TBC

[...] Play the credit card arbitrage game (note: this is too risky for my tastes) [...]

Yes, the 1% interest is tax deductible. But you must also pay taxes on the 4% you earned in the savings account.