January 23, 2007

adding to the 0% balance transfer discussion

Lately, there's been much talk about how profitable it can be to exploit credit cards with 0% balance transfer offers, including articles written at 2million, Consumerism Commentary and Blueprint for Financial Prosperity.

I used to do that back in the day, right after I graduated college. Actually, right after college, I transferred balances left and right to stay financially afloat, because of my silly, "Just because I can't afford it doesn't mean I should live a certain lifestyle" philosophy (ah, the ignorance of youth). But after I paid off my debt, I realized it was possible to transfer a "balance" from a new credit card that offers free transfers at 0% (for a limited time period) to another credit card that has no balance, withdraw that extra money, and put it into a savings account or (here we go again with the stupidity) invest the money in stocks.

Those days of tracking when I needed to pay back the new debts and/or find a new credit card to transfer a balance to are long over for me. The effort-reward ratio just didn't make it worth it for me personally.

However, I still strongly recommend transferring credit card balances -- if they're held on a card with a high APR. This article at SmartMoney.com has some good advice on finding not 0% cards but cards with low APRs to transfer to -- doing so will save you a ton of money in the long term, so the effort-reward ratio is certainly worth it.


Anonymous said...

You just didn't do it right ;)

I did two balance transfers for a total of $18,000 at 0% interest for 6 months. Invested in an online account at 6% pa this earned me $540 in interest.

Total cost in my time? 1 hour.

At $540 for one hours work, you'd have to be earning over $1m pa in your normal 9-5 job to say that this isn't worth your time.

not confucius said...

Apparently so. =P

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