Credit Card Arbitrage

[gtwise]

Originally Posted by Anthony Marrone

You're much more brave then me. I cannot understand why credit scores for people who partake in the arbitrage game keep going up (I understand how it happens, just not why). It would seem to me that this type of pattern of borrowing would be a red-flag to credit bureaus. I think this is smart strategy if you can pull it off, but I think it highlights another major problem with our credit system.

The credit system is flawed, but that's for another discussion. However until they fix it I'll abuse it as much as I can. As long as you can keep track of the money coming in and making the monthly payments there is no problem with CC arbitrage. It works like a charm and I get free money. What's not to like?

[Rapuccini]

For those that have tried it, how do you handle the payment process? And shifting money around? And, do you have checks and balances in place? Would be concerned about making a mistake in the process.... it just seems like a lot of coordination but maybe it is not once you get the hang of it?

And, what do you do with your money to maximize the return but ensure that you're liquid enough to pay off at any time?

thanks!

[Tightwad]

CC arbitrage fascinates me but scares me to death to actually try. I am afraid of getting caught with my hand in the 'cookie jar' and being rate jacked or lose my money in some way. We purchased our last used car on a 0% credit card and are currently paying for DH's college on a 0% card. You'd think I wouldn't be such a wimp about trying it!

[cccdude]

I think it is too much trouble to go through for what you get back. Now if you could do the arbitrage on say $1 million than I would go for it, but for $2,000-$2,500 a year might be too much work/time involved to make it worth while, at least for me.

[gtwise]

Originally Posted by Rapuccini

For those that have tried it, how do you handle the payment process? And shifting money around? And, do you have checks and balances in place? Would be concerned about making a mistake in the process.... it just seems like a lot of coordination but maybe it is not once you get the hang of it?

And, what do you do with your money to maximize the return but ensure that you're liquid enough to pay off at any time?

thanks!

I personally opened a 6 month CD a 3 month CD and a high yield savings account. I also opened a Amex Blue card with 0% for 15 month for purchases only.

I have locked a large amount of money into CDs and left enough in the high yield savings to meet the requirements ($10k minimum) for high yield.

I charge everything I can on the Amex Blue card and whatever I charged onto the amex card usually covers the minimum payments on the other 9 or so accounts. This way I will owe a ton on my amex card at the end but by then I'll have the balances reduced on all other accounts by just that much and I'll just pay everything off from the savings and CDs. If I spent less on the amex card in any given month than I have spent on minimum payments, I transfer the money from savings to checkings for the difference so my cash-flow is balanced. I hope this makes sense.

I also keep track of everything in Quicken so I know exactly when each credit card payment is due and I schedule them on-line via ACH so I never send a check. I tend to schedule them from the credit card companies' site that way I have confirmation from them directly that I am making the payment. I also tend to schedule them a week in advance of the due date to make sure if they don't get it I have time to sort it out what happened. I also put future transactions into Quicken with $0 value for the time I need to pay off the entire balance as a reminder for each credit account.

As for time involved, I have set all my Citibank accounts to the same due date and my others are kind of clumped together as well so I spend about 30-40 minutes a month on-line scheduling the monthly payments for all accounts. I figure I'll be making over $3k after taxes this year on credit card arbitrage. That's over $250 a month for 30-40 minutes of my time. I think it's worth it but I'm no lawyer making $400/hr so your mileage may vary.

[Xin Lu]

The credit system works like this: if you have a lot of debt they're willing to give you more debt. I don't have that many credit cards and each one of them have a fairly small limit (< $5000) so when I apply for a new card they give a small amount, too. I have never missed a payment so I am a customer that's sort of undesirable to the credit card companies. Basically this credit card arbitrage thing won't work for me because they won't give me a lot of debt. It's pretty funny to me that they are getting screwed by all of you that can take advantage of it.

[Julie Rains]

Originally Posted by Xin Lu

The credit system works like this: if you have a lot of debt they're willing to give you more debt. I don't have that many credit cards and each one of them have a fairly small limit (< $5000) so when I apply for a new card they give a small amount, too. I have never missed a payment so I am a customer that's sort of undesirable to the credit card companies. Basically this credit card arbitrage thing won't work for me because they won't give me a lot of debt. It's pretty funny to me that they are getting screwed by all of you that can take advantage of it.

I don't think that everyone who is getting those 0% offers has a lot of debt, unless I am the sole exception. I do have large credit card limits (over $40,000) but don't carry a balance; and have less than $16,000 in first/only mortgage debt. The 0% interest card offers (some pre-approved, some inviting me to apply) have been piling up.

[Megan]

Originally Posted by Xin Lu

The credit system works like this: if you have a lot of debt they're willing to give you more debt. I don't have that many credit cards and each one of them have a fairly small limit (< $5000) so when I apply for a new card they give a small amount, too.

Really? I don't have any debt at this point (is it sad that I look forward to debt because it means I'm paying a mortgage and have bought a house?) and I think I get decent limits when I apply for cards. I've never carried a balance, and newest card (which is a few years old) has a $35K limit on it. The company has offered to increase that in order to entice me to use the card more (as if I've EVER gotten anywhere near that limit).

Have you tried asking for a higher limit on a card?