In my monthly report for January, I revealed I had over $25,000 in credit card balance from various balance transfer deals. Before January, most of my balance transfer activities were related to limited-time 0% APR offers from Citi, Discover and alike. Such 0% APR balance transfer offers are really no brainer: for every $10,000 one can borrow at 0% APR, putting the money to work in a high-yielding savings account like ING Direct (currently running a promotion that gives 4.75%) can easily yield risk-free $400 or more in every 12 months.
In order to get those sweet offers, the easiest way is to sign up for new cards. You don't need to look very far for such deals:
• Citi® Platinum Select® Card: 12-month 0% APR on purchases and balance transfers; no annual fee.
• AT&T Universal Platinum Card: 12-month 0% APR on balance transfers; no annual fee.
• Discover® Platinum Clear Card: 12-month 0% APR on purchases and balance transfers; tiered cash reward; no annual fee.
If you are not in the mood of opening a new account just for the sake of some quick cash, you can also look at your existing accounts. What I usually do is to surf balance transfer offers for my outstanding cards every months -- most credit card issuers promotes such deals online -- and pull the trigger when I see a fantastic deal.
These deals don't surface very often, but last month, Citi presented to me such a deal
on my Citi® Driver's Edge® card that I cannot refuse:
• 1.9% lifetime APR on balance transfer until paid in full
• Balance can be transferred to your checking account directly
• No balance transfer fee (and $5 reward for every $1,500 transferred)
• Monthly minimal payment is 1.5% of the outstanding balance
Why is it a good offer? 1.9% isn't as sexy as 0%, but "lifetime" is the key. By borrowing at 1.9% and lending to institutions like ING Direct or EmigrantDirect (and many other risk free channels) at about 4.50%, one can easily earn about 1.5% per annum on any transferred balance, and even more if Fed continues to hike the rate. (The math: one will pay tax on the interest income of 4.50%, but can claim no deduction on the 1.9% interest you will pay. For people at 25% tax bracket, the net gain is 4.50% * 75% - 1.90% = 1.475%.)
I quickly phoned Citi to transfer my credit limit in other Citi card to this card with the golden offer, and pulled $11,000 from Citi. A quick spreadsheet shows if I pay the monthly minimal and never miss a due date, I stand to make $600 after-tax over three years. (And if I stick to the minimal payment, I will still be paying off this debt in my 40s -- this is not a bad thing if Citi will still charge me 1.9%!)