My Personal Finance Journey

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What A Year of 0% APR Arbitrage Has Brought Me

Contributed by mm | October 17, 2007 8:21 PM PST

Long-term readers of PFBlog knows I have been taking advantage of credit card companies for years. Especially, I'm very good at 0% APR arbitrage, whereby I sign up for new credit cards with attached introductory 0% APR balance transfer offer, move the entire balance immediately to my bank account, and enjoy the high saving account rates of 5% or more while remitting only the monthly minimal payment back to the credit card company.

Of course, this strategy will drag down your credit score. Last summer, especially, I applied five cards in two months' time, and my credit score tanked from 720s to 640s, and I was essentially denied new credit application after being seen a credit risk by most banks. But credit score is only of cosmetic value if you don't need credit any time soon. To me, after all, I have no better use of my credit score now that I'm sitting on a portfolio of over $800k and has no plan to buy a property any time soon.

The below chart is a great summary of what happened in the last dozen months:


So what did I get from a full year worth of arbitraging activities?

First, over $3,000 in hard, cold cash. I keep an average balance of $45,000 during the timeframe, and the difference between 5% APR interest received from online savings accounts and zero interest paid to the credit card companies means a net $2,250 additional income. Plus, I also made another quick $1,100 by showing good payment habits to Citibank.

Second, over 30 points of credit score improvement. now that I have brought my credit balance to where it started (~$22,000), my credit score is even better than it was one year ago. Why? Credit score calculation takes into account the average age of one's credit accounts, and recent credit inquiry history. After a year's seasoning, my outstanding accounts are growing beard, which helps my creditworthiness.

So it should be no surprise that armed with a 759 credit score, I'm coming back with more credit card applications. In the last few days, I have been granted over $20,000 credit line by applying to these credit cards. Good beginning for the next round of David vs. Goliath!

• $8,000 from Citi® Home Rebate Platinum Select® MasterCard® (0% APR on balance transfer for 12 months, and no balance transfer fee)

• $7,000 from Citi® Professional(SM) Cash Card (0% APR on balance trasnfer for 12 months, and no balance transfer fee)

• $6,500 from Chase-issued Disney Rewards® Visa® Card (0% APR on balance transfer and purchase for 12 months, and balance transfer fee capped at $50)

If you are in the same camp, take advantage of those offers when you still can! Given how the credit market squeeze is playing out, less and less offers will be on the table.

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This Post Has Received 22 Comments. Share Your Opinions Too.

John Commented on October 18, 2007

Great graph! This is what people wonder, of course. My high watermark is $85k mostly due to some enormous grants near the end of the growth cycle, like one was thirty grand, wtf? What the hell are they thinking with offerings like that? Freaking hilarious that you came out with a higher FICO. I hate how everyone's talking fees now. Just not the same.

The Dividend Guy Commented on October 18, 2007

This is really amazing how you do this. I have been looking for opportunities like this in Canada but can't seem to find them. If anyone knows let me know...

Creative Investor Commented on October 19, 2007

MM: I don't really understand how you suddenly get these huge credit card balances, going from 25k to 60k in a few months, do you go on crazy shopping binges? :)

MM Commented on October 20, 2007

Creative Investor, by getting a few new cards and doing balance transfer to my credit union's card ... I can transfer excess balance from my credit union's credit card to my checking account free of charge.

Creative Investor Commented on October 22, 2007

MM: Thanks for the response. The numbers are still mind-boggling to me :) But I commend you on making money from this. By the way, I think it's been a while since you talked about your activity, has anything improved on that front? I was disappointed to hear from you and a few other sources about high defaults rates and lack of the secondary markets for loans.

payday advance Commented on October 22, 2007

Oh My God, that is a big credit and you are really a hard worker, that is how a person can repay that.

payday advance Commented on October 22, 2007

Oh My God, that is a big credit and you are really a hard worker, that is how a person can repay that.

ted Commented on October 23, 2007

I've just started doing that with credit cards. It's a bit nervewracking at first, but the "free" money you can make is really amazing.

matal Commented on October 24, 2007

ted - How do you get around the balance transfer fee (typically 3% of balance transfer)? MM does it via his credit union card - how do you?

DoubleD Commented on October 24, 2007

MM, I have been flowing your blog for more than a year now, Love all the posting,

I have the same question as Matel, I am not clear about how you get around the 3%-5% balance transfer fees, I am also getting many balance transfer offers for 0%, and I have no balances in my CC, so how do you start doing this?


ADD 200 POINTS to your Credit Score Commented on October 25, 2007

That's a huge drop! Don't make the mistake of thinking of credit being for cosmetic purposes only - auto insurance companies are now looking at your credit to determine rates etc

Jeffrey Commented on October 26, 2007

DoubleD - A lot of the cards have a "max fee" of $50-$75, which is how you get around the 3-5% terms.

If you're really interested in credit arbitrage, you should check out

They have all the answers to those kind of questions in the FAQ section.

Bharani Commented on October 29, 2007

How do you get your credit score? Have you signed-up for a yearly service? All places charge to get a credit score? Isn't it?

Juan22 Commented on October 29, 2007

That is a great graph. I wish I was in that boat with you.

DoubleD Commented on October 29, 2007

If you have a Credit card with WaMu you get your Credit score fro free from TransUnion, I use to have a CC from Provedian and they got bough by WaMu and WaMu is offering this service.

Money Blue Book Commented on October 29, 2007

Hey I really like the graph of yours. Do you use a chart program?

I'm trying to get into the App-O-rama myself...sort of bummed that interest rates have dropped and will probably drop further. It's going to cut into my potential savings interest earned.

kiasuchick Commented on October 29, 2007

Thanks for sharing your data.

I have $200k from 0% cards at this point in time.

My score went from 796 to 643 with $164k debt. Now after 5 months I'm up to 762 with around $145k.

Very sad the Fed are lowering interest rates.

Myself Commented on October 31, 2007

Way to go MM! (:thumbsup:)

For the posters wondering how to avoid the fees, that is typical of new credit lines.

I've done some of the same (only I didn't track it like MM did. I believe I made about $4,200 over the past 2 years doing what MM did with already existing cards (and paying the maximum balance transfer fees).

We recently bought an investment property (at a significant savings ... meaning we paid less than half of what it appraised for). And as a result, my credit score has gone down to the 640 range for the first time in over 5 years! :(
However our net worth has grown by more than $80,000 due to this transaction (and borrowing all the money to purchase and completely rehab the place).

Credit guru Commented on October 31, 2007

I have been reading your blog for a while now. As far as 0% goes, I think I have done slightly better. How about $175,000 for last seven years with MBNA (now Bank of America) at 0-1.9% APR. Between me and my wife, we have 11 Bank of America cards (some were MBNA that got converted to B of A). I call ech one of them individually (up to their retention department) and get between 0-1.9% for 6 to 12 months (success rate is about 25%). Once they offer a nice B/T APR, I then have them move most of my credit limit to that one card. That means now I have one card with over 100,000 limit with 0-1.99% B/T APR and other ten with $500 credit limit. Last year I made over 10K in high yield accounts. Hope this post helps. There are plenty of other tricks that I can share (however, card companies are also getting smarter :)

Myself Commented on November 1, 2007

So how do you get it above a certain amount. They won't raise our CC limit above $34,000 (well, OK I only asked for $1,000 more about 6 months prior to having it raised by $2,500). I guess time may tell.
I'll have to try it again this month. Although they may not do it because they just lent me $40k on an investment property :)

Russ A Commented on November 5, 2007

Excellent work with the balance accruals! I wish I had the diligence to replicate your work.

For your readers though, just be careful of the taxes you'll be hit with come April. That's probably the only pain with the higher-interest savings accounts ;)

Rebate Processing Commented on April 15, 2008

I saw that you ended up with an even higher credit score than when you started! That is great, the icing on the cake.

Plus, you got over $3000 to do it!!

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