Thursday 19 February 2009

One last balance transfer offer

A couple of years ago I had fun opening new credit card accounts that offered 0% balance transfers for periods of 6 months or a year. Back then there were no fees for doing the balance transfer, and the funds could be invested in an online account earning 6%pa or more.

In the past year plunging interest rates and tightening credit markets saw fewer and fewer balance transfer offers appearing in my mail, and those that turned up were for "low" interest rates, short periods (4 months), or charged a fee for doing the balance transfer. Coupled with lower interest rates on savings accounts, it wasn't worthwhile doing balance transfer arbitrage any more.

But it looks like I may get one last chance to get some "free" money from my credit cards - Virgin Australia is getting out of the credit card business and their customers have been issued new "Ignite" credit cards by Westpac Bank (who were the card issuer for Virgin. The "ignite" card has no annual fee (same as the Virgin CC) and Westpac is offering 0% balance transfer (from any non-Westpac CC account) for 6 months. I'll apply for a $25,000 balance transfer "from" my existing NAB Visa CC account, which will put my NAB CC roughly $25,000 into credit. I can then withdraw the surplus credit via a "cash advance" for a $10 admin fee. Taking a cash advance on a CC is usually a very stupid move, as the interest rate on a cash advance is even higher than the usual CC interest rate. However, there is no interest charged if the "cash advance" is less than the amount the account is in credit.

I won't bother putting the funds into my online savings account however, as the interest rate on deposits has dropped below 4%pa. Instead I'll use the funds to pay off some of my variable interest rate margin loan balance, which is costing me around 8%pa. When the 6 months interest free period ends, I'll withdraw the funds back out of the margin loan account and repay the CC account. Overall, this should give me a benefit of around $1,000.

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