Using balance transfer checks and credit cards to your advantage


I’ve been known to take advantage of the deals that my credit cards give me, and use them to my advantage. A year ago, I refinanced my 9% (now 10%) HELOC to a fixed 2.99%, for a fee of only $135 using balance transfer checks from one card, and a balance transfer from another card.

Now, I have a new low-rate balance transfer offers on an existing credit card, and am planning on making a little extra money from mr. Visa.

The plan is simple. I have a credit card with a $25,000 credit limit, which is offering balance transfers for the next 10 months at 2.99%. There is a 3% fee for each balance transfer, but it’s capped at $75.

I also have an Emigrant Direct savings account, which is FDIC insured up to $100,000 per depositor, and my current APY is 5.05%.

I’m going to take out a cash advance on my credit card, using one of the balance transfer checks. I’ll write a $24,500 check to myself and deposit it into my checking account. (Why not the full $25,000? Because I’m paranoid that some sort of finance charge might put me over the $25,000 credit limit).

When that check clears, I’ll transfer that money to my Emigrant account, where it’ll sit tight for the next 10 months, earning away.

My credit card statement will show a balance of $24,575 (the amount that I transferred plus the $75 fee), and I’ll make monthly payments (roughly 2% of the total balance, or about $490) directly out of the Emigrant account.

The first month, I’ll be charged $61 in interest by the credit card, plus the $75 fee, but make roughly $100 from the money in the emigrant account. The first month doesn’t make me any money, but in each subsequent month, I’ll come out ahead — $98 earned, $60 paid. Without figuring the compounding interest, or the money used to pay down the credit card balance, that’s a profit of roughly $40/month. Over the 10 months that the balance transfer is good for, that’s a profit of about $325.

Sure, I won’t get rich doing this, but why turn down an easy $325? As long as the payments are made on time (I recommend setting up auto-pay), you don’t spend the money in the savings account, and you pay off the credit card balance promptly when the deal is over, this is an investment that you don’t really even have to think about.

I did a similar thing with a 0% balance transfer for 12 months a year or two ago — I transferred $10,000, with no balance transfer fee, and made an easy $500.

Credit card debt, used wisely, can sometimes be a financial tool, rather than a setback!


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2 thoughts on “Using balance transfer checks and credit cards to your advantage

  1. Am I wrong, or don’t credit cards use compound interest while savings accounts use simple interest? That might not work out as well as you’d hoped. I’m not sure about it, though.

    But, I thought the compound interest thing was one clever way credit card companies can “get you”. And, banks use simple interest on their accounts to not pay you as much in interest.

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