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Saturday, 3 March 2007

Zero Balance Transfer CC Arbitrage Update

It turns out the $13,500 balance transfer to my day-to-day CC had come from my BankWest CC (I asked for the Balance Xfer when I accepted an increases credit limit for this card), not the new HSBC CC I'd applied for recently. It was just coincidence that the BankWest CC xfer happened at the same time the new HSBC CC arrived in the post. I rang HSBC to activate the new CC today and was told that the $10K balance xfer for this card had been processed on the 27/2 so there should now be an extra $10K credit balance sitting in my NAB day-to-day CC account. I'll withdraw that $10K on Monday and deposit the funds into my Credit Union account so it can be added to my online savings account earning 6.1%.

I'll have a total of $34,500 of 0% balance transfer funds invested at 6.1% once I do the deposit on Monday. $11,000 of this is from the Virgin CC where the 0% period ends on 10 April, so I'll be repaying this amount on 5th April (to make sure it gets processed before the Easter Holiday period).

The new 0% offers are only until August and September this year, so I'll have to keep an eye out for any new offers that arise in the meantime.

Enough Wealth

3 comments:

mingworld said...

Hi,

After reading your post, I am wanting to do CC Arbitrage. However I am not sure how to start. If I apply a CC with 0% balance transfer and I take the money out and put into online saving account, they will charge me cash advance fee plus interest.

Thanks in advance.

enoughwealth@yahoo.com said...

You have to actually make a balance transfer from another CC, not just take out a cash advance from the new CC. You'll have to check out the details pertaining to your own situation, but the way it works for me is:
1. I get a new CC with a 0% balance transfer offer, and request a balance transfer of $X,000 from my existing CC (which I use for all day-to-day bill payments, grocery shopping etc, pay it off in full each month, and generally have a thousand or so charged to it at any time).
2. I get the new CC (which I won't use for any purchases) which will have an outstanding charge of the balance transfer amount - but this will cost no interest during the 0% period. I just have to make the minimum monthly payments each month (I setup an automatic electronic payment from my credit union account so that I can't miss a payment) and then pay off the remaining balance when to 0% period expires.
3. Now that my "day-to-day" CC has a large CREDIT balance (due to the balance transfer of funds INTO this account) I can do a "cash advance" without getting charged interest - although I have to pay a $10 cash advance fee there is NO INTEREST charged on this "cash advance" because this CC had a large positive balance due to the balance transfer (as far as this CC is concerned I've just made a large overpayment and am now withdrawing the excess funds). I just make sure I withdraw LESS than the positive balance available at the time of the cash withdrawal. As the balance is still slightly positive at this time, the "cash advance" is considered to have been paid off immediately, so any future CC charges onto this card will get the normal interest free period.
4. I take the cash I withdrew from my day-to-day CC account and deposit it into my credit union account and move it into a high interest rate online savings account for the duration of the 0% period.

The whole process is a lot simpler in the US as many 0% balance transfer CC offers can apparently be taken as a cheque and just get deposited into whatever account the user wants. (But in the US it seems that the CC companies are starting to make a "transfer fee" a standard charge, which makes balance transfer less profitable. In Australia all the 0% balance transfer offers I've seen haven't had any fee for making the balance transfer). In Australia you actually have to request a balance transfer from an existing CC (I tried doing one using a savings account and it wasn't accepted), and then withdraw the excess funds from that CC account.

mingworld said...

Thanks a lot!
That makes sense.

I thought so, but I just wasn't sure that you can balance transfer the 'Credit' as well.

Really like your blog. Keep up the good work!

Ming