Tuesday, July 8, 2008

First attempt at credit card arbitrage

I randomly signed on to Citicards.com (Citibank's credit card website) to see what's up and I found a balance transfer offer on one of my unused, zero-balance cards. There's no balance transfer fee and no interest for 12 months. Let's make some money!

Just now I submitted my balance transfer request and the money should show up in my ING Electric Orange in a few days. Here's my plan:

  1. Set up a new savings account and transfer the money into it.

  2. Set up an automatic transfer from the new savings account to my Electric Orange monthly for slightly above the minimum payment amount required by Citibank.

  3. Set up an automatic payment for the same amount from my Electric Orange to Citibank, scheduled waaaaay in advance of the due date.

I only transferred a few thousand dollars because A) I have a pretty small credit limit on this card and B) I've never done this before and I don't want to get burned too badly. Next year I'll pay off the balance and all of the interest will be mine to keep. I figure I'll make around $100. That's not much money over the course of a year, but considering it's going to be fully automated it's worth it.

Maybe in a few years I can build up to $50,000 or more in balance transfer offers and make some significant money. I bet that interest rates will be heading up (they sure can't get much lower) so it'll only become more profitable. Maybe credit card companies don't make such sweet deals when interest rates are up, though. We'll see.

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