If you have great credit and have no plans on using it in the near future, this post may help you earn an extra $1,000 to $2,000 per year with relatively little work. I heard about it a while ago, but I felt it wasn’t for me, yet. I know there are probably a lot of readers who could benefit from this, so I decided I would give you a little background so you can look at the facts and figure out if it would be good for you.
What is it?
It’s called credit card arbitrage by most bloggers and websites I have read. The idea behind it is you rack up a lot of credit card debt. A lot of credit card companies will allow you to write a check to yourself. Then you transfer the balance over to a 0% introductory card and put the money from the check in the bank. You will then leave the money in the bank and accrue interest while paying no interest or fees to the credit card company.
What are the risks?
There are relatively few risks, but they are important to know. This plan is definitely not for most people. First of all, this will probably hurt your credit rating a little bit. You will be carrying a lot of debt and have a pretty high credit card utilization ratio. This looks bad on your credit report. So if you are looking to buy a home or new car in the next 2 years or so I would not recommend trying this as it could possible cause you to get a higher interest rate on your loan which would probably not be worth it.
Also, this could cause problems if you don’t have good self control. When you get that big check in the mail from the credit card company I could see some people wanting to go on a shopping spree instead of putting it in the bank. If this sounds like something you would do, do not try this. It only works if you are able to pay the balance off in full once the introductory period is over.
What are the rewards?
The rewards are pretty decent for the amount of work you do. If you have good credit, then you could probably obtain $50,000 worth of credit. If you were able to earn 3.5% interest in a high yielding bank account, you would earn $1,750 in one year.
Do you know anyone who has tried it?
Yes, I read a lot of blogs. Like I said earlier, this was not my idea. I had heard about this long ago. Here are a few people who have successfully tried credit card arbitrage:
Bargaineering earns $444 a year – he got really small lines of credit.
Stop buying crap also does this – he even tracked his FICO score so he could see the effect of the extra credit cards on his score.
The american express had long ruled the credit card arena. Even the mastercard has been unable to achieve that glory. There are new credit card companies sprouting up every day. One promising name is that of capital one credit card.