MOAR Money – CC Game – Interest Arbitrage
MOAR Money – Credit Card Game – Interest Arbitrage
From time to time, I will share a trick to reduce cost or to make MOAR (more and roar) gay money! Normally with these techniques your millage may vary and sometimes geographical differences may occur with related store policies/management. It is always advised to start small with a trial run before scaling.
Ever wonder what good that credit score is after you locked in a killer mortgage and have got a great car loan? For most people it is an asset that collects dust and really does not matter until the next house or car (I am anti car financing unless the rate is crazy low). For me, I monetize that great score a variety of ways: interest arbitrage, sign-up bonuses, and rewards with manufactured spending.
These financial institutions exist by screwing over the general population by using interest arbitrage. So when you have the chance to top them hard go for it. When it comes to finances don’t be a power bottom for the banks. Don’t worry the banks can take it like a champ.
Interest arbitrage works by borrowing money at a low interest rate and then securing a higher producing interests rate with those funds. The banks do this by borrowing from the Federal Reserve currently near zero percent then they loan out the money to customers at 5% up to 29.99% for credit cards. The federal reserve gets the near 0% interest and the bank gets to keep anything additional. Thus the banks collect funds without having to do much taking advantage of the lendor and the lendee by positioning themselves as a middle man (PC term market maker) position.
Some times banks do silly promotions where they take the lendor role and provide loans cheaply. For instance, 0% introductory rates, 0% balance transfers (pay attention to fees). Once you find a lendor who is offering a cheap loan you need to find a lendee willing to pay a high interest rate. There are high yield savings accounts which get up to 3% in the current environment.
Now you must make the market, you must move the money from the lendor to the lendee. Balance transfers are easy. Normally the credit card will require that the balance be a credit card. Make the lendor pay an already paid off credit card and then call the credit card to request a check (works with City bank spelled wrong). For 0% on purchase you will have to manufacture spend or make the card your currently used card. If you manufacture spend the spoils of the spending will be placed in the lendee account. Until, I write a post on manufactured spending consult Google. If you switch to daily spend then put the amount offset from charging the card up into the lendee account.
Doing this with just one credit card and one bank account can net you about $350/year in today’s environment while using FDIC or NCUSIF insured accounts. If you risk tolerance is greater you may take the money and by stocks or other assets. However, there is a risk of loss.
How many accounts can you juggle? Don’t think it is worth the effort? Tell me about it.
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