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Thursday, 25 July 2013

Free money redux

It's been a long while between drinks, but I suddenly received a cold call from Citibank offering me a cheque for a loan of up to 80% of my Redicredit limit ($60,000) for four months at 0% interest rate, with no fees of charges for this 'balance transfer'. Several years ago such 'balance transfer' offers at 0% interest for 6 months or even 12 months were common, and it was great fun taking the offered funds and investing them in a high interest bearing online savings account for the period of the loan. Such 'credit card arbitrage' was a good way of earning hundreds of dollars income from OPM (Other People's Money). However, the credit card companies eventually woke up to the fact that some people were taking advantage of them (which must have been a surprise turn-around for them!), and they introduced either a flat 'transfer fee' or a minimal interest rate (compared to their normal exorbitant rate of ~18%), which made the proceeds hardly worth the time and effort involved.

But this latest off from Citibank is apparently fee-free, and, provided I pay back the borrowed funds on time, there will be no interest to pay. So I've accepted a loan of $40,000 and when the cheque arrives I'll use the funds to reduce the balance of my St George 'portfolio loan' for about four months (which will save me 5.59% pa interest). Allowing 7-10 days for the funds to arrive, and repaying the loan a week before the 'due date', the interest saved over about 3 months should amount to about $560.

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