Balance Transfer, Part 1 – What it is & How to get started
Posted by beachgirl on 07/22/2006
Well, after reading about other bloggers participating in the “0% Balance Transfer” game, I decided I would give it a try. So, I have applied for 4 new cards and am also using 1 card that I already have. For those of you who haven’t heard of this, here’s a brief description.
You apply for or use your current cards to get 0% Balance Transfer offers (hopefully with little or no transaction fees to increase your earnings). Once you have the cards, you do a balance transfer. Each card is different. Some companies will only let you do a balance transfer to another card…in this case, you do it to a card with either a zero or low balance, and then request a check/refund for the overpayment. Other companies, like MBNA, will do an automatic transfer to your checking account, counting it as a balance transfer (and not a cash advance). And still other companies, like Citi Cards, will allow you to request via their website to have a check sent to you to do whatever you want with it, also counting it as a balance transfer.
Once you have the money, you then stick it into a high-yielding savings account, like ING, Emigrant Direct, HSBC, etc. (Just ensure that you stick to the 6 withdrawl maximum…so you might need more than 1 savings account if you do lots of offers.) Then you make the minimum payments each month, and when the balance transfer is nearing expiration, you pay off the balance. Depending on how much you transfer, how long you get, and what the interest rate for the savings account is, you can easily make a few hundred dollars doing this. You just need to be extremely careful that you pay the minimums on time (or they’ll change the rate from 0% to a normal high rate) and that you pay off the balance on time (or you’ll start paying interest at a high rate). It’s necessary to read all the terms and conditions associated with each offer.
Here are the cards I have applied for and their status:
- MBNA World Points – Credit Limit $8,900.00, 3% Fee*, 12 Months
- Citi Platinum Select – Credit Limit $4,500.00, 0% Fee, 12 Months
- AT&T Universal – Credit Limit $4,500.00, 0% Fee, 12 Months
- Citi Professional – Credit Limit $2,500.00, 0% Fee, 12 Months
Here’s the one I already had:
- Capital One – Credit Limit $4,000.00, 2% Fee*, Til January 2008
*Yes, I realize the fee will eat into my profits, especially the 3% one from MBNA. However, after doing the calculations, I realized I’d still earn around $150, so I decided to give it a shot. And the Capital One card was for about 16 months, so that helped earn back any of the fee.
Check out Balance Transfers, Part 2 for how to get your money. And for further information regarding this venture, a great site is MyMoneyBlog. All the information in his posts related to this are great to read about so I’d recommend clicking on all links within the post. Also, for personal experiences and questions, read through the comments.
*Note: Thank you to WhoAmI at US Indian Finance for bringing up tax and inflation. I did forget to mention that. You do want to make sure also that the amount of money you earn on these (especially if you pay a fee) is worth it when you factor in having to pay taxes on the interest you earn. I’m not extremely knowledgeable about inflation, but I would think as long as you are earning interest at a rate to beat inflation (which most of the online banks do), I think you are alright. Not completely sure.