The Boston Diaries

The ongoing saga of a programmer who doesn't live in Boston, nor does he even like Boston, but yet named his weblog/journal “The Boston Diaries.”

Go figure.

Monday, January 14, 2008

Money money money … money, Part III

Third item today, which ties into the Money is Debt video I linked to the other day. He may call it How To Make Money From 0% APR Balance Transfers, but I would call it “How To Abuse 0% APR Balance Transfers”.

In reading it over, it appears to work like this:

  1. Sign up for a credit card that allows 0% APR for balance transfers for at least a year or so.
  2. With some creative accounting, you transfer the credit card limit into, say, a checking account that pays interest (and no fees, hopefully). So, if the credit card limit is $10,000 you now have a bank account with $10,000 at no interest for up to a year.
  3. Pay the monthly minimum, but keeping the rest of the money in the bank.
  4. Just before the interest rates spike upwards, pay off the remaining balance. You should have some left in the account, due to the accrued interest. That would be “profit.”

So, if you manage to find a $10,000 limit credit card with 0% APR balance transfer, and manage to transfer the $10,000 to your bank and collect the interest while paying the minimum, you can earn about $450 over the span of a year. That doesn't sound like much, but what if you had 75 such cards? That's over $34,000 a year profit (it's a bit more than the $33,750 you would expect because you earn more interest from a larger sum of money), for not much else than keeping track of credit card bills.

And if keeping track of 75 credit card sounds like too much hassle, there are people juggling more than that out there.

I don't know if I should be amazed or appalled by such shenanigans. There's no real work going on there—no real value being added to the economy. You're just shuffling paper (or electrons) hither and yon and end up with more “money.” Talk about your house of cards.

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