Comments on: Credit Card Arbitrage II – An Analysis

By: M7L

M7L — Wed, 25 Feb 2009 06:53:07 +0000

First of all, good blog… it’s my first time here. One thing that should be noted here is that those checks that credit card companies periodically send with your statement are cash advance checks. You can write the check to your name and deposit into your account. However, cash advance rate applies, which means that you are usually charged interest from the moment you withdraw the funds. Even with promotional rates, they will have perhaps 0% on balance transfers, but usually at least 1.9% or higher on cash advances. So that’s something you should be careful about. It is good to use for balance transfers from higher rate debt. That is also arbitrage in the form of paying less interest, thus having more to pay off your debt quicker.

By: FrugalTrader

FrugalTrader — Fri, 13 Feb 2009 13:08:47 +0000

Thanks for the heads up L505, I will fix it.

By: L505

L505 — Fri, 13 Feb 2009 04:35:07 +0000

Note to FrugalTrader: above post is link spam from mr Visa Black Card if you look at his URL. His only intention was to spam his link in his name.

“however, with my past experience with credit cards, none so far have offered me a chequebook, so if this step could be explained in further detail, that would be great.”

Well the credit card cheques can be ordered by calling your company, they will send you personalized cheques usually. Depends which card company you have but most of them offer the cheques as they are a money maker for the card companies (except for the shrewd and cunning investors that use the cheques cleverly).

By: FrugalTrader

FrugalTrader — Mon, 24 Nov 2008 01:59:55 +0000

Hi Arid,

Good call, that is exactly what i wrote about recently in my TFSA strategies:
http://www.milliondollarjourney.com/top-4-tax-free-savings-account-strategies.htm

By: Arid

Arid — Sun, 23 Nov 2008 23:42:18 +0000

Have recently heard about the Tax-free saving accounts from PC as well as from other institutions. I guess the equations will change once it comes into effect Jan. 1.

By: Jeff

Jeff — Thu, 20 Nov 2008 23:53:57 +0000

Sounds like Canadians have very few options for this compared to Americans..

As a result, I do have one question.

If an MBNA card is used for this purpose, can you cancel the card after completing the arbitrage, and then immediately re-apply for another 15 month 0% APR card?

Or will you almost certainly be turned down because its clear you’re only using the card while there are no interest fees?

By: Alf

Alf — Tue, 18 Nov 2008 00:21:06 +0000

Hello, not sure if anyone will reply, but I am also a Canadian and I do not have any outstanding debt (no mortgage, no car loans, no CC debt).

So, I would like a piece of this $200, but was wondering what my options are in Canada. The MBNA mentioned in this blog post is out of date.

Also, I cannot do a “balance transfer”, as I have no debt, so I will probably need to write a cheque…(right?)…however, with my past experience with credit cards, none so far have offered me a chequebook, so if this step could be explained in further detail, that would be great.

By: TDang

TDang — Thu, 13 Nov 2008 19:55:21 +0000

We used balance transfer cheques to pay down our HELOC and withdraw from HELOC to pay it back usually 1 month before term expire. So far we’ve tried RBC, MBNA, Citi and President Choice. The lowest rate we got is .9% with no balance transfer fee @ RBC with low monthly payment for 20K loan you’re looking at $12/mth payment .The highest is MBNA 0% but 1% balance transfer fee.

By: crystal evans

crystal evans — Thu, 07 Feb 2008 22:38:56 +0000

need a $10,000.00 credit card right away.

By: nobleea

nobleea — Mon, 22 Oct 2007 16:13:58 +0000

I have applied for the MBNA 0% transfers card, we’ll see what they give me for limit. I was hoping for over 20K.

I plan on putting the money against a LOC that I use for investing (6.25%). The effective interest rate after tax credits is closer to 4%.

Compare that to putting the money in a high yield savings account (say 4.5%) that would be taxed. The effective interest rate after taxes, including the 1% fee used as a tax credit would be around 3.4%. If you can only get 4-4.25% high yield savings account, then the return is obviously less.

They are both guaranteed money. A rise in interest rates would be immediately reflected in the LOC savings, but could take a while to filter through for the high yield account. Conversely, for a drop in interest rates, both the LOC rate and the high yield rate would likely drop simultaneously.

By: The Financial Blogger

The Financial Blogger — Sun, 21 Oct 2007 11:46:26 +0000

I don’t know if it would a good idea. The 0% rate is usually good for period for 6 to 12 months. If you like gambling, this is a game you can play but you can not calling this investing!

You are better off with an investment loan at prime that will last forever as long as you make your interest payment!

By: JC

JC — Sun, 21 Oct 2007 11:26:23 +0000

Has anyone tried putting the money somewhere besides a savings account, i.e. a mutual fund? I know this is riskier, but would be curious to hear anyone with experience doing this.

By: Rick

Rick — Mon, 15 Oct 2007 03:30:46 +0000

I just tried MBNA for their 0% credit card but they just offered me 1.9% and the credit limit was low. They did offer me 0% on “purchases only”. Perhaps they are catching on…

By: K.K.

K.K. — Thu, 06 Sep 2007 04:11:30 +0000

Another good way to make extra spending money is using referrals with banks. I came up with several ways to maximize income with a total of sign-up Bonuses for and instant $83, and max $843. This includes ING $13 (max $260) (sorry, no ref codes in comments), and ICICI $20 (max $500). So far I have made about $450 extra spending money in only approx 2 months. And there is no credit impact because a soft credit check is only done unlike a hard credit check when applying for credit. You can check the link for a full details.
http://www.forum.smartcanucks.ca/showthread.php?t=12204&highlight=ing+direct

By: Cannon_fodder

Cannon_fodder — Wed, 05 Sep 2007 10:58:19 +0000

Well, it seems that if you have a mortgage with prepayment privileges AND it is coming up for renewal within the timeframe of this offer, it would be worth putting the money down on your mortgage.
For example, if you have a 5% $200k mortgage at 25 year amortization with $1,163 monthly payments your balance at the end of 1 year would be $195,845. If, however, you got $50k in ‘free’ money and put it down on the mortgage, then a year later your mortgage would be $143,312. You then renew your mortgage and take the $50k out to pay the CC balance and your mortgage is $193,312. You’ve just saved $2,500 tax free.

By: nobleea

nobleea — Tue, 04 Sep 2007 23:29:05 +0000

Wealthy Canadian/Financial Blogger;

Of course that scheme works. The credit card companies make money each time you make a cash advance. Unless you have a ridiculously low APR on cash advances, then you’re essentially getting a line of credit at the cash advance APR.

FT:
Another way to use the credit card arbitrage would be to put the money against a balance you have on a Line of Credit. This might be 6% interest, plus you don’t have to pay taxes on it, since you’re saving interest rather than earning it. Of course some might not enjoy this as there’s nothing to show for it at the end (ie, no interest earned).

By: FrugalTrader

FrugalTrader — Tue, 04 Sep 2007 20:50:15 +0000

Telly, I think your best bet would be to call a rep and see what they say. But Bean Counter mentioned above that Citibank gives 10% of gross income. Not enough in my opinion.

By: telly

telly — Tue, 04 Sep 2007 19:09:33 +0000

BTW, ther citi card offer is not just for Rogers customers (we’re not) and the offer code is: C7Y.

Is it possible to find out what your credit limit would be without applying for the card?

By: telly

telly — Tue, 04 Sep 2007 18:10:57 +0000

Oddly enough, we just got an offer from Citi in the mail today. It’s for 0% on balance transfers until August 2008. It also says that the promotional transfer cheque fee is waived for this offer.

I’m still worried that writing a cheque to myself would result in a cash advance…

By: The Financial Blogger

The Financial Blogger — Tue, 04 Sep 2007 17:27:33 +0000

WC,
I did it a few of years ago (about 5) and it works. However, CC companies always find a way to charge you a little something. Either fees to use their cheques or interest on immediate withdrawal.

Personally, I was withdrawing money from a ATM machine through my CC to pay off others. The only flaw is that I was charged interest (about 4%) on the amount withdrew right away.

You better make sure you validate with you CC company before you do such things ;-)
Also, keep in mind that banks don’t like to see that kind of techniques either ;-)