What would flyertalk do?
 

I have an offer from Chase (MR Visa) for 12 month zero 1.9% balance transfer with a $99 max transfer fee. I have a rather high credit limit and was about to toss the offer then I thought -mmmm with my new ING savings account at 4.6% APR I could forgo the extra points for a year (5 points at Marriott and 2 points for rest, airline and car rental) and would net about $700 on this little deal after (inlcuding the tax guy's share).

I would charge everything to my Starwood Amex so really the net loss in points would be reduced. I look at my travels for the past year and my Marriott, airfare, car rental and restuarant charges netted me roughly 65-70k points. Same charges this year if I charge everything to the SPG Amex would be about 15k - plus I would end up staying more at Sheratons as the hotel police at work have a deal with Sheraton for two of the major cities I travel to.

I have no major purchases in the forseeable future - i.e.I am not about to buy a house or a car. My credit can overcome a small temporary hit (actually from what I had read and the credit simulator on myfico.com - I will still have "good credit"). I am not worried about making the payment as I would set up automatic payment for the minimum directly from the account where the funds are held.

I am tempted to do it, but most likely wont (what if bells are ringing too loudly) - but was curious to know how many here would do something like this.

There is a huge thread on people who do this on regular basis on Fatwallet.

http://www.fatwallet.com/forums/mess...y&keyword1=aor

I'll quote my wife's response when I explained flytertalk to her..."wow, I didnt know people had time to do this"

I was reading some of the posts on that link at Fatwallet.com and I just have to say, man, I can't believe there is such a market going on for people to be getting what seems like 10-15 or more credit cards. Are they really making the money they claim to be making off of the deals they get?

Eric

To begin with there is no real cash return(BEY or IRR) bcs if you put the money which you would have applied towards a bill into a savings account your effectively cutting off your opportunity cost (lifestyle + time = money). And if you cant find anything yielding you more than 4.6% with the formula i gave you then you have some other serious issues imho.

Secondly, your better off of looking at this as a free loan to be applied vs. your credit score.(therefore not entirely free) If you want to fool yourself into beleiving your "making" money go right ahead. Remember, that IF like many of us you pay your debt in full at the end of each term making it not subject to fees, than its truely no difference. OTH if you make the minimum payment, then this might be worth some of your money but than again you have entirely different issues.

Lastly, you can do much better than 4.6% using FDIC insured payable at will savings accounts. Almost 100 beeps better, fyi.

-Signing off, running to catch a plane...

Gee my girlfriend would ask "Why do people spend so much time on FlyerTalk?"

It Works
 

I currently have $65k on credit cards at 0 % in a GMAC savings account earning 5.3% APY (currently) (BEEN AT LEAST 5% FOR 6 MONTHES) with no fees on the advances for 8 monthes. Pre-tax interest will be almost $2300 with no cost to me. I keep getting any credit card I want so effect on my credit rating is apparently limited. I make minimum payment plus $10 each month. Have been doing this for two years and so far have netted (pre-tax) over $5,000. Chase United card has had 0% promo rate for a couple years and each time mine comes due they have another one.

How about the improved lifestyle achieved by having more money, courtesy of the banking industry paying interest on a free loan?

What issues, other than the math that determines if the money after taxes earned in interest on the bank's money via a free loan exceeds the fee? (I'm not sure I want to fight the IRS over whether or not the fee is a tax deductable expense.)

Let me start off by saying that after reading the site posted above, there is just no way I would do this. The site makes interesting read, but I think those guys are nuts (unlike us of course :D )

Having said that - its all free money as I would have used the bal tranfer checks that was sent to me, not to pay off a cc debt I am carrying as there is NONE (bills paid in full each month), but simply deposit it into an account I currently have which gives a 4.6% return; sure I can look into ways to get more interest but... FYI my ING account is used just to pay bills. The MR card MIN payment would be made each month from the same funds and within a week of so from the promo expiration the balance would be paid in full from same funds. As for my credit score, it would still be above 700 if I had done this (so said myfico.com simulator).

I think the real point I was trying to get at is how many would give up points earning opportunity for cash.

I've done this for years. It takes me about five minutes to run the numbers, set up the transfer, set up the auto monthly payments, and make a note on my outlook to remind me to pay off the balance due before the deal's expiration date. I also just dump it into my ING account, I know I can get higher interest somewhere else but too lazy to do the paperwork. I generally don't bother if I don't at least have a gain of $1000 pre tax. Been doing these promo interest rates for years, no negative effect on my credit at all.

I was amazed when I first found the thread and read it with absolute fascination, but I realize that it was similar to when I first found FlyerTalk.:p I haven't done it and I don't think I will. For some reason, I'm obsessed with keeping my high FICO score and seeing some FICO scores nosedive after AOR scares me. For those people who do make money, more power to them. ^

I have done it a few times myself. I love it.

Get a 0%/12 months offer or better. If there's a 3% fee with a cap, then the larger the amount, the more sense it makes. Make sure card balance is $0 before doing it and then stick it in a drawer afterward. Set up auto-pay (my checking account is also tied to my HELOC as overdraft protection). Find a savings account at >5%.

Credit score impact has been minimal for my wife and I.

I think this is a classic case of YMMV. The improved lifestyle achieved of having more money is not the case bcs you are assuming that you have paid in full the balance HENCE more money, yet your not keeping under consideration the COSTS. FICO, points/miles, time (opp cost) for these dealings. Hence its a YMMV case. Lets keep in mind that there is no actual return on investment but return on deficit, since deficit is moeny you never had you can not disguise it as money made.


Again, the issues vary by consumer and how he/she determines their payment frequency based on liabilities. If he/she is a serial balance holder than yes you could discount the applied APR from one card to the other for moving those liabilities in a non-interest bearing account. You could deduct the off-set as money saved, NOT money earned.

The gist of this trade is negative carrying imo bcs you can achieve much higher returns than the spread this thread is all about. Therefore the issues implies a case where someone is subject to short-term returns on a long-term liability. While you COULD apply the long-term return on a long-term liability and in the long run you will win, and this trade WILL loose


PS - sorry for the delayed response... was FLYIN!

Some pretty interesting reading indeed
 

Well, it was good reading this whole thread. For myself, I'll look at it as something that is good for others but not for me. I don't like playing with my FICO scores, even if it is a guarantee that they would return to a level of normalcy after playing, as they so eloquently call it on Fatwallet.com, an App-O-Rama.

Good for them. And it is not for me. I would rather just buy tickets, take my flights, earn my "elite" status and be content with that.

Have a good weekend everybody.

Eric

Jarn, when I look at the math, it seems marginal at best. (for the record, I'm one of those crazy fatwallet guys juggling about 5 cards right now, and planning on applying for 10-20 soon)

Here's the way I see it.

1) Take ING's 4.6% return.
2) Lop off 33% for taxes, get about 3%
3) Subtract the 1.9% interest rate on the card
4) Subtract the BT fee
5) Subtract the marginal reduction due to you probably not getting an entire 12 months, and having to make minimums.

... it may not be worth bothering with this if you're only talking about a 1% spread.

Applying that to a rather larger trade line yields some cash....I was tempted to do it for various reasons, however, good sense wins out in the end.

I took out $80K with Citi and my credit score went up 5 points. I was quite surprised to say the least. Only reason I can think of is that the card was a World MasterCard and the credit limit wasn't getting reported before.

So I just took out another chunk, with BofA. I'm getting $400/month in interest (pre-tax). Well worth it for me. Now, if Chase would only cooperate and drop from 1.99% to 0%...

I'm keeping my wife's credit record squeaky clean, just in case though.

An update... once the second large balance (90%+ of available credit) hit the credit report my score took a 40 point nose-dive. So looks like one is OK in the FICO algorithm but it goes nuts with multiple ones.