I recently heard you on NPR radio 90.9 FM WBUR from Boston.
I was interested in how you borrowed from your credit card at a low interest rate and then invested it in a CD and earned about $1,800.
Which of your books covers that interesting topic? I’d like to know more!
Thanks for listening! This is always a topic of interest by hosts and listeners. That is, making money using credit cards.
People are always looking to make something from nothing, and that may be possible in this case. However, for most, the way to gain, bigtime, is to use similar techniques to save money on existing debts.
Actually, I didn’t put the money into a CD; it was a money market account. Also, most of the details of how to get these low-rate deals, and manage them successfully, are contained in all of my best-selling books, Credit Card and Debt Management, How to be more Credit Card and DebtSmart, and Talk Your Way Out of Credit Card Debt.
First off, I want to be clear that I’m not recommending that you do this; game the system to make a profit. I present it here for your pure entertainment. “Kids, don’t try this at home.” I don’t want to hear that someone cash advanced money and got into more debt. Because you do get into more debt. Okay, so now that I’m disclaimed and all (I hope), here goes.
My original intent was to experiment with what would happen to my credit score if I suddenly added $62,000 to my debt load. Also, I wanted to test a zero-percent transfer offer to see if there were any catches and/or extra charges.
I took advantage of four zero-percent offers totaling $62,000 and put that money in an ING Direct Money Market. These offers were good for one year; the rate ING was paying at that time was around 3 percent. I held the money there for one year and paid it back to all cards when the offers expired.
The total interest earned from that experiment was $1,800! For the first time in my life, I was actually profiting from using my credit cards. It was like a refund for all past interest charges sucked out of my personal economy for the last 15+ years!
I also learned a few things that I will discuss briefly:
1) There are a few tricks in credit offers. One of these cash advance offers tried to charge me an overlimit fee, which they quickly removed. You can read the details about this in my article, Chase Bank Tries to Pull a Fast One.
2) My credit score dropped from 736 to 728. Again, I must stress that this is what happened to me, and you may not get the same results. Right now my credit score is 819. And, I’m trying to get to the absolute top of 850. Not bad for a guy with 50+ credit cards.
3) I was able to make money with this strategy. Of course, there is work involved, e.g., tracking the credit card deals, paying on time, writing checks, etc.
4) The minimum payment on one of those offers was $15 on a $9,000 balance. That’s the lowest minimum payment I’ve ever seen. The reason is because they want my balance to be as big as possible when the rate changes.
5) When I paid these banks off at the end of the year, I received a call the next day with more offers to extend the 0 percent rate. I took them and made even more money!
Managing these low rate offers is the key to making the strategy work. In my first book, Credit Card and Debt Management, I go through the details of evaluating every offer as well as the math needed to calculate the real cost of the offer. In my latest book, Talk Your Way Out of Credit Card Debt, I discuss the details of how to negotiate low-rate deals with the bank, thereby giving you the cash you need at the rates that save you money. And, in the case of this example, make you money as well.
The best place to find low rates is from your current cards. However, it may be necessary for you to get new lines of credit to reduce your current debt and make money. You may be able to find low rate deals from my recommended list of credit cards.
Please remember to use caution if you try to make money with the method I discussed here. You don’t want to end up paying the banks! Be sure to take a look at my books before getting started.
Hope that helps!
PS: I do have a special on all three of my books: receive all three when you get my latest book. Check it out at DebtSmart.com!