The Revenge Of The Consumer

Making a Tidy Profit From the Credit Card Companies

How many hundreds – even thousands – of dollars have you paid over the years to banks, credit card companies and other financial institutions in interest payments and other monthly charges? Take a rough guess and think about what you could have used that money on. A new car? Home improvements? A boost to the kids’ college fund? Sickening, isn’t it? It seems to be almost a fact of life that the majority of us have to pay a premium to furnish our lives with those little extras. The credit card companies take, take, take and we get nothing back.

But it doesn’t have to be that way. There’s a very simple, utterly legal and highly effective way in which you can reclaim thousands of those lost dollars. With the minimum of effort this no-risk strategy can reap you a very tidy profit. As well as earning thousands of dollars legitimately, you can do so in the knowledge that you’re getting one over the very same companies that have in the past earned countless dollars at your expense.

The premise – in a nutshell – is this: numerous credit cards lend new customers money at 0%; take this money and save it at a high rate of interest, and YOU profit.

Admittedly this strategy isn’t for everybody. If you’re forgetful, undisciplined or inattentive you might as well stop reading now. Do this incorrectly and it could cost you. Also, anyone with existing credit card debts, or a need to borrow, should forget it too. Concentrate on paying off your debts and utilize top credit card offers to reduce your interest costs with balance transfers and suchlike.

If you don’t fall into these two categories, then read on…

The deal works like this. First you need to pin down a credit card company offering what is known as a ‘Super Balance Transfer’. There’s a subtle, but considerable difference between a standard balance transfer (BT) and a Super BT. A standard balance transfer (BT) is where debt is shifted from one card to another to reduce the interest rate; ‘Super BTs’ are where the new card, upon request, pays money directly into your bank account – ostensibly to pay off debts. By holding this sum in a high interest account for the duration of the offer – paying off the minimum amount each month – it is possible – over the course of a number of months – to make hundreds of dollars worth of interest.

It’s important, however, that you look carefully at the small print ahead of applying for a card offering a super balance transfer. Not all offers are equal and there are two main criteria by which to judge Super BT cards.

How long is the 0% offer? The longer the introductory period the better, as it means less maneuvering of money and applying for new cards is required.

Does it charge any balance transfer fees? Some providers have begun trying to claw back money by imposing charges for 0% balance transfers, commonly 2% of the amount transferred capped at around $50. In other words, if you shift $2,000 worth of debt and you’d have to pay a BT fee of $40.

It’s important to never do this by a cash withdrawal or payment: that usually attracts a much higher interest rate and is NOT a super balance transfer. Instead, once the card is set up, simply call up and request the money be ‘balance transferred’ to your bank account. Hence the term 'super balance transfer' - this is a crucial distinction – if you don’t get this, it’s worth re-reading above. Be vigilant.

Once the money is paid into your current account, move it to the highest interest easy access savings account on the market.

Now follows the easy part. The credit card debt is now at 0%, the savings at hopefully 4% plus. All you need to do is make doubly certain that the date the 0% period ends is engrained on your diary and calendar, put your feet up and watch the interest grow and grow.

Just before the 0% period ends, simply pay off the debt with the savings to bag the gains. If you’re happy – as you should be – with the tidy profit you’ve made, double it by moving the debt to another 0% deal. This maintains the money making. In fact, it’s also possible to do this whole system with two or three cards at the same time.

How much could you make? Well, it’s certainly possible to generate substantial gains. Someone with a $20,000 credit limit rotating debts to keep it 0% over a year, would earn over $850. But there’s no need to stop there. Until the credit card companies finally get wise, you can continue to do this system for years. Not a bad return for a few hours work – and all the more satisfying that you’re doing at the lenders expense!

Important things to remember:

Using Super BTs it is possible to immediately max out a credit card at 0% by paying up to the credit limit into the bank. One warning though; if you’re using a card for ‘free cash,’ never use it for other purchases or borrowing. This could inadvertently crash the whole system.

Make a diary note reminding you when the interest free period runs out so that you can repay the balance owing. Do this and you’ll save making unnecessary interest payments – which, of course, eat up your profits.

Ensure you’re not paying for the card’s payment protection insurance. This is unnecessary because if a problem occurs you can pay off this debt with the savings. Also remember to set up a direct debit to pay the credit card’s minimum monthly repayments, usually around 2.5% of the outstanding balance.