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Zero Interest Loan

I received an offer for a credit card with zero interest on purchases or balance transfers for the first six months, and for the first time, took the lender up on the offer. I found myself with a card having a $20,000 credit line and a blank check for a balance transfer. The fine print showed the transfer was subject to a 3% fee, but capped at $50, so I wrote a check to my brokerage account and deposited $19,950 into a money market fund earning 5%. For the effort of writing that check and making the payment back in 6 months, I’m ahead $450. I’ve read there are people that manage to find offers such as this one on a regular basis, making a few thousand dollars a year just by shifting this money around. I’d think there are only so many banks making such offers, and at some point too much available credit will impact one’s credit rating, but for now, I’ll take the $450, and be sure to make the payment in full when this becomes due.
JOE

  • JAL September 20, 2007, 9:52 am

    Joe,

    Besides possibly affecting your credit score (by having too much available credit), presumably you’ll want to cancel the account(s) at some point… right?

    I’ve read cancelling too many accounts in too short a time period also negatively impacts your credit score.

    Then there’s the impact on your score from new repeated credit inquiries, etc.

    Now assuming all that doesn’t scare one away from accepting free money, what about the tax impact on the earnings you’ll receiev? Once you subtract the income tax, the $50 transfer fee, and the temporary possible credit score damage, do you think it’s still worth it?

    I ask because I always shred these offers with nary a second thought… but now you have me thinking. 🙂

    Love your blog and web site BTW!

    JAL

  • JOE September 21, 2007, 10:41 am

    Your comments are much appreciated! Today’s post is in reply. As I said in the blog’s first post, and introduction, this is me, thinking out loud. Discussing topics not appropriate for a monthly article on the main site. For the disciplined person, this idea can make some extra money if done just twice or three times per year. Thanks for visiting!
    JOE

  • JAL September 23, 2007, 11:19 pm

    Thanks Joe… I enjoyed your follow up post.

    Best regards,

    JAL

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