This article is not meant to convince you to try credit card arbitrage. Rather, it’s meant to explain what credit card arbitrage is and start a discussion about it. Ultimately, I would like to hear your thought on credit card arbitrage as a money making strategy.
Photo by Classyshot via Flickr
First, we start off with a little background information.
Credit Card Arbitrage is a strategy where the arbitrager borrows money from credit cards that offers 0% APR for a certain amount of time (usually 6 or 18 months). Then use the money borrowed from these credit cards and put it in a bank with high interest rates.
Before the balances are due, the arbitrager withdraw the money from the bank and repay the loan. More experienced arbitrager may even open new credit cards to pay the debt and keep the money in the bank.
The answer depends on many variables such as:
With my excellent credit score, I should be able to get enough 0% APR credit cards to borrow $100,000. Next, I would deposit the money into a high yield savings account, which pays about 1% on average (this used to work much better when these accounts were yielding 5%). Let the money sits in the bank for 12 months, and I’ll ended up with $101,000. After I repay all my credit card balances, I ended up with $1,000. That’s not bad for very little effort on my part.
Now, let’s look at some of the negatives.
Have you tried credit card arbitrage? And what do you think about this money making strategy?
What others are saying about credit card arbitrage: