Credit Card Arbitrage

I have been scheming lately and thought of something. Is this possible? Take out your limit on a credit card and invest it into a one month risk free investment. When you receive your principal back from the investment, pay back the credit card. Essentially credit cards give you a risk free loan for a month. Thoughts?

Sure but would the gains offset your plummetting credit score.

If you had a card with a $10,000 limit, you would make about $16 a month with this strategy assuming zero friction (payment delays) and zero transaction costs. Both of which would not be zero and would quickly turn this into a losing proposition. When T-bills pay 5% you might have a prayer at making a couple of bucks. For the amount of time you’ll spend, I’d suggest rummaging dumpsters for bottle deposits as a better idea. Now get back to studying!!!

Wait. I don’t get it. What’s wrong with rummaging in the dumpsters?

JoeyDVivre Wrote: ------------------------------------------------------- > Wait. I don’t get it. What’s wrong with > rummaging in the dumpsters? It takes away time from studying, other than that, I don’t see any problems @ original poster…another problem I see with your scheme is that Credit Cards usually have a repayment window that is less than 30 days. Unless you are dealing with large figures it’s difficult to get any investment that matures in less than 30 days.

Yes, there is actually a name for that. AOR or “App-O-Rama” See this link. If you can get $200-300k out from credit cards at 0% then you are looking at an extra $10k - $15k per year. Anyways, if you are really interested, check that link. Most individuals are looking at just placing the $$ in a high yield savings account.

Or “Stoozing” as it’s called over here. Not worth the embuggerance to do properly, but I do have a maxed out 0% interest card lying around at the moment.


JoeyDVivre Wrote: ------------------------------------------------------- > Embuggerance? From : “a natural or artificial hazard that complicates any proposed course of action” Nota: I did not know this word up to 45 seconds ago

In NZ I’m fairly sure that all credit cards charge interest on cash advances from day 1. So not really a feasible scheme down here. Most likely designed to thwart such arbitrage.

Alright, I have a plan: Everyone max out your credit cards and send the money to me. I will invest the money in a risk free investment (I promise) and send you your principal back and most of the interest. You will not have to do any work*, and get free money. I will achieve economies of scale. Send all money to… *I will charge a small fee

^ lol

If you do want to read up on how it works in practice (in Blighty at least), then: But I think the opportunity costs are a bit high for me…

The main thing I reason why I wouldn’t try this is because cash advances from credit cards (well in Canada anyway) charge you interest starting from the day you take out the cash, unlike purchases which you have a month or so before you get the bill/have to pay the bill.

True, although many times you can structure the cash advance as a balance transfer (basically into your checking account) instead of a cash advance. Often there are 0% introductory rates for 6-12+ months on balance transfers with a 3% transfer fee up to a maximum of $75. There are a ton of variations but that is the basic idea. If you are unable to obtain a 0% balance transfer into your bank account, that effectively kills the arbitrage.

Or you just do it on purchases. I put all of my living expenses onto my credit cards then just pay off the minimum balance whilst it’s 0% interest. Once it ratchets, I clear the balance. It means I have c£1,000 per month of money that is in my savings account rather than having gone to pay off the balance. Also, as the wife is Australian, I tend to take out a new credit card around the time that I need to book flights back to Aus!

I’ve come across a great strategy as well. I saw that tv commercial for a great site that lets you work from home and earn up to double your current salary*, making up to four figures a year. I don’t see how it could fail. *given that your current salary is a negative figure.

Scoff all you want mate, but borrowing money at 0% fixed for a year, and sticking it in a risk-free asset isn’t really rocket science. It’ll never make you rich, but it does effectively reduce the cost of purchases by 6%.

You can do it, it easy. Just ransfer to your Discount Broekrage account. Put it in MMK at around 2.6% or whatever, 1 day settlement. Just sell a day before and repay it… Put the amounts have to be large to do this

2.6% aye? Maybe you should send the funds down our way. Rabobank (AAA rating) has a call account offering 8.25% at the moment. Case study in interest rate parity relationships?