Sunday, 30 July 2006

Money for nothing

Although, from a wealth accumulation viewpoint, you're generally better off spending your spare time on continuing education than wasting it trying to get small amounts of money for free, you sometimes need 'downtime' just vegging out in front of the TV, listening to music, or, in my case, getting a trickle of money for nothing. (It also helps subsidise the cost of the broadband connection).

Many US blogs (eg. mymoneyblog) have quite a bit of information about using a 0% APR credit card transfer offer to access to free money which is then invested to earn some interest when deposited into a savings account. In Australia things are a bit different - your credit card apps don't drop your credit rating (this isn't any), but they do appear on your credit report, and, more importantly, if you're honest in your application, there is a limit on the total line of credit you'll be able to get (based on your income and existing repayments). Also, in Australia, these interest free offers often only run for 6 months (compared to 1 year in the US) and you can only get the balance transfer from an existing credit card or other account - you can't simply get a check for the transfer amount as seems to be possible in the US.

For these reasons, I took a while to figure out a way that would make the 0% offers available in Australia work in a similar way to the US - and I think I've found a way. I'll outline the "PLAN" today, and we'll see how it actually works out...

Before, we start, let me remind everyone that I'm not giving any financial advice here (I'm not allowed!), just blogging what I'm doing myself. If you want to try it yourself, it's entirely your own choice, and you'll need to do your own investigations into the risks involved.

Now, my plan:
1. Open a new Coles Source Mastercard (currently with a bonus $20 giftcard offer) [] or any similar card offering a 0% balance transfer offer (and no annual fees) - I got one with a reasonable credit limit without any problems.
2. In the specific case of a Coles Source MC - I bought $30 worth of groceries at Coles to earn a 4c/L fuel discount voucher AND qualify for the gift card offer.
3. I'll now pay off the purchase amount so I don't have a balance on the card (otherwise it would be charged interest while I have a balance transfer amount on the card)
4. When I send in the 100 point identify check form, I'll apply for a balance transfer to my RediCredit account with Citibank.
5. As I currently have a balance owing on the Citibank account (for some margin loan interest prepayment) I'll be saving 11.99% interest on the balance transfer for 6 months. If I didn't have any current debt on the Citibank account I could draw a cheque to myself and deposit it into an online savings account earning around 5.85%
6. Don't purchase anything using the Coles MC while the balance transfer amount is owing - otherwise you'll pay the normal interest charges until the balance transfer amount has been paid off in full.
7. Before the 6 months interest free period ends I'll pay off the balance transfer amount owing on the Coles MC - either with cash I've got sitting in a savings account, or I could pay off using my Redicredit account (back to square one).

The end result - we'll see. But, hopefully, I'll have saved 11.99% interest on the balance transfer amount for 5-6 months. Assuming a balance transfer of $6,000 this will be worth around $350 - not bad for around 20 minutes work.

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