Balance transfer offer -- no thanks!

Chase just sent me a "great" balance transfer offer: 3% fee ($75 max), 0% APR until 3/2009. What a joke. Considering the risk in paying at the last minute plus the delay in getting the cash, that's only like 4 to 5 months for the promotional rate! At the amount I'm considering ($10k) that is hardly worth it. At ING I'd earn roughly $10k * 3% * 4.5/12 - $75 = $37.50 over the entire period.

Ah... upon closer examination, the promotional rate ends at the opening date of my 3/2009 statement... in other words, 2/2009. So make that 4 months max!

And furthermore, switching my purchases to another card would mean losing quite a bit of cash as this is my best rewards card.

Thanks Chase! But no thanks.

Notice that a 3% fee for 4 months equates to approximately 9% APR. I love how tricky they are, it's like a game.

Profit so far

In July, which was a partial month, I earned $7.64 in interest. In August, I earned $11.23. Not much but a good proof of concept. It certainly beats filling out little online surveys for 10 points (7.5 cents)!

At the end of the balance transfer, I'll transfer the leftover money in the account to my Fun fund.

My Prosper loans are doing well. I added a little bit more money and bid on three more loans. Prosper is fun but also scary. I spend quite a bit of time looking for loans I think sound reasonable and am pretty horrified at what some people are willing to bid on. I've seen listings that are entirely blank, but offer 33% interest or so, and have many people bidding. What are they bidding on?? Surely these loans don't make it past the review period. My only guess is that people with automatic portfolio plans have settings that pick up these awful loans. Good luck to them. Who knows what other garbage loans they catch.

One thing that irritates me about Prosper is how they strip out any identifying information from the loan application. I understand it's a safety issue, but it's kind of ridiculous.

Another is the waiting period after you bid on a loan where your money is tied up, earning no interest, until the loan is created or it expires. I don't know who bids on loans that are 10% funded with 5 days left, but someone does. I just sort the loans by time remaining and look at the ones that expire within a day.

The net result is it takes me a good week or so to find a few loans worth bidding on. Kind of silly for a $50 loan, in terms of return on my time investment. I guess I do Prosper mostly for the fun. If I ever invest serious amounts of money, it would probably be better to do one of those "Reinvest in Prosper" loans and let someone else do the work. I wonder if there are any stats about their performance versus Prosper loans in general.

Balance transfer trickiness

Well, I got a letter in the mail (how quaint) from Citibank confirming my balance transfer and got a rude surprise. They calculate the end of my 0% term as December 2008! Apparently the "12 month 0% transfer" is still from last year when I opened my account. I emailed customer service and they confirmed that.

Oh well, I'll still make some money. I'm glad I didn't do something rash like stick the money in a CD. And I'll still be on the lookout for other profitable balance transfer offers!

Kiva -- loan sharks?

I really like the idea of kiva.org but I keep getting dissuaded by one fact -- they charge a very high interest rate to borrowers, but expect you to loan them money interest free.

On the info page of any field partner (the local agency that actually lends the money and collects payments), you can see stats about how much interest they charge for Kiva loans. For instance, Fundación Paraguaya charges 20% interest, and you can see that the average charged by all Kiva partners is 22.77%. I have to ask... why?? The money is entirely put up by sponsors so there's zero risk to the lending partner. I understand that they have overhead costs, but come on, this is an outrageous interest rate. I could understand 5% - 10% to recover costs, but 20%?

Keep in mind that even though these are micro-loans, to the people borrowing the money they can be fairly large, like the equivalent of a year's income. Imagine getting a loan equivalent to your salary and then paying 22% interest on it! Good luck actually making a profit on your new farm equipment or whatever.

Credit card rewards

I'm getting my first cash-back rewards check from my Chase Freedom card -- for $200 of credit I'm getting a $250 check! Not bad.

On a related note, I used Chase's online credit limit increase request function to give myself an additional $22k credit. Holy crap! We're in a credit crunch, right? I'm not planning on using any of it until Chase comes through with a great no-fee balance transfer offer. I'm patient. Maybe I should open up a few more cards with Citibank, wait a while, and then increase my credit limits with them.

If I can 10x my balance transfer amount then I'll be making around $25/week even in this low interest rate environment. That is going to trounce my cash-back rewards.

Balance transfer account funded

The deposit from Citibank came in today and I immediately opened up a new savings account to hold it. I should earn 36 to 37 cents each day in interest. There's also a chance that within a year interest rates will rise.

The only snag is I don't know what the minimum payment is going to be until August because it still says 0 for the amount due at the end of July. I have to remember to check on that!

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.