How to Profit from 0% Balance Transfer Offers

Have you been inundated with 0% balance transfer credit card offers from your banks recently? With interest rates plunging to record lows banks have once again started offering 0% introductory periods for credit card balance transfers, most banks are offering the 0% intro rate for 12 months!

Banks are also trying to raise capital these days to shore up their banking reserves so interest rates on deposits are higher then they normally would be with the Fed Funds target rate at 0% to .25%.  Dollar Direct Savings Bank is offering an online savings account that currently yields 3.50%, MBR reviewed the Dollar Direct online savings account offer back in November 08 when the yield was 4.00%.

Borrowing money at 0% and earning interest at 3.50% on the borrowed money isn’t a bad deal. Borrow $10,000 for a year and earn a 3.50% return or $350.  The trick to making this work is to read the fine print on the credit card offer and to make sure the balance transfer fee is capped, usually the cap is $75.00.  In this example, we borrowed $10,000 at 0% ($75.00 balance transfer fee) and earned a yield of 3.50% giving us a $275 profit.

If you decide to take advantage of the credit card offers make sure to read the fine print on the balance transfer fee, if there isn’t a cap do the math and make sure the transaction is worth the effort. You don’t want to end up lowering your credit score either so be sure to keep your debt to credit available ratio to around 25% on your credit cards, this is the ratio experts recommend.

Update: Craig, one of MBR’s readers has made a good point about this post. We should have named the post ” How to Profit from 0% Cash Advance Offers” and written the post more along line of a 0% cash advance not a 0% balance transfer.