Monday 9 October 2006

Zero Balance Transfer CC Arbitrage [Part 4]

The second new credit card account finally processed my 0% balance transfer request. Because Virgin Money decided to give me a $22,000 credit limit, I decided to do a balance transfer of $12,000 (rather than the $6,000 I had originally expected to be able to do). I didn't use the full $22,000 available as this will be the first time I've do a "cash withdrawal" from the destination CC account of the balance transfer. Theoretically (according the bank's call centre) I won't pay any interest on this "cash advance" as my account is in credit by more than the amount being "advanced". But I'll only believe this when I get my next CC statement from them confirming that no interest is due!

The current status of my balance transfers experiment:

Card #1 Coles Source MasterCard:

I transferred $6,000 at 0% for 6 months onto my day-to-day CC. I'll use this extra credit balance to cover my normal $2,000 per month living expenses for the next three months. This will allow me to save $2,000 each month into an online savings account earning 5.90% interest. $6,000 x 5.90% x 4 months = $118

Card #2 Virgin Money MasterCard:

I transferred $12,000 at 0% for 6 months onto my day-to-day CC. I then took a "cash advance" of $12,000 to remove the surplus credit balance created on this CC by the balance transfer. It may cost a $3 cash advance fee to withdraw the funds (this charge hasn't appeared in my online CC statement yet, so I'll see if it gets added in this months statement). I've deposited the cash into an online savings account with my Credit Union that will earn 5.90%pa for 5 months. This will earn me $295 in interest. BTW I was a very strange feeling walking out of the bank with $12,000 CASH in my wallet! Luckily I only had to go to another bank next door to make the deposit into my Credit Union account.

Total interest income from the 0% balance-transfer offers;
$118 (card #1) + $295 (card #2) - $3 fees = $410

Not bad for less than 2 hours filling in forms and switching funds between accounts.

ps. The online banking for Virgin is provided by Westpac - they have the cutest "virtual keyboard" for entering you login information:

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