As Easy As It Gets
This blog will walk through how to make easy money off 0% credit card offers if you qualify for them from the credit card companies. This is one of the easiest ways to make money or side hustle as long as you can manage your temptation to not misuse the funds. This side hustle or idea isn’t new but I have outlined all the steps in one place for you….. this really took off in the early 2000s before the crisis which is when I started!
Some Personal Background
I have done this side hustle or easy money trick consistently over the years in varying capacities. At my height before the financial crisis I had upwards $100,000 of 0% credit card debt that was earning me roughly $5,000 a year. My strategies have changed over the years and the debt doesn’t flow as cheap and easily as it used to but this is solid easy money to earn but you need to not get tempted! Emphasis this is a business venture – not an excuse to spend like no tomorrow!
Arbitrage 101
Arbitrage is simply the act of making money by exploiting discrepancies identified by the finance professional – in this case you!
A formal definition from the Dictionary.com: the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices.
0% Credit Card Arbitrage 101
Anytime someone gives you 0% debt – you have an arbitrage opportunity to make money off that cheap debt until it needs to be repaid. Any fees need to be of course included in your math.
Simply put you:
- Find and Apply for a 0% credit card
- Get the 0% credit card debt. This could be achieved by several methods outlined below
- Invest the cash – Make money!
- Pay the minimum balances each month
- Pay back all the debt before the 0% grace period ends
- Cancel the card
Who should not try this venture?
You should not try this venture if:
- Your credit score is bad…. you won’t qualify for all the good offers and based on your credit score you are not good at controlling debt
- If you have a major financial purchase like a house coming up….. your credit score will take a small hit with your credit applications and debt load. Do not put your low mortgage interest rate at risk! At my height of $100,000 of 0% credit card debt, my credit score went from an 800+ to low 700. I was over 740 again quickly after the applications died down!
- You are not comfortable with money or this concept. You need to be committed.
Step 1: Find and Apply for a 0% credit card
I am not going to be one of those sites hocking credit cards to you. There is simply one place to go for these deals that’s better than anywhere else and I am not going to try to beat it: Creditcards.com
The following is going to walk you through how to do this step by step with a credit card available at the site. Obviously the deals change often and that’s why you go to a site that specializes in credit cards.
Step 1: Go to the site. I want free money so I want 0% credit card offers. While likely not a surprise… better credit, better offers!
Step 2: Find a credit card…. here is an absurdly good offer. Someone is willing to give me a 0% interest loan for 15 months. That is absurd but I’ll take it! ***** at the time of this post there was a 20 month offer as well – I’ll explain why I skipped over that one.
Step 3: Let’s read the fine print…. I’ll share my insights below.
Some insights from the above:
- If you have been doing this a while you will need to pick out new cards each time as most wont let you qualify for the introductory offers more than once (or within 2 years or so I have noticed… some cards have tried to recruit me back!)
- No annual fee…. awesome! Sometimes you’ll have to figure this into your math
- 5% cash advance fee or convenience check fee…. this is on the high side!! This is good to know as this is a hurdle we’ll discuss below. You will find some rare offers with 0% fees here but they have dried up over the years. This fee is typically 3 to 5%. Most companies charge 3%.
- Penalties for late fees – not going to happen! But good to know.
- This card has a $150 sign up bonus and 1.5% cash back these can change your math so I included this offer for discussion. Sometime its better to go for the longest 0% period, sometimes the cash up front is helpful!
- **** likely obvious but when you apply ask for double what your current credit cards give you as a limit… we need a big loan!****
Step 2: Getting our hands on that 0% debt
This used to be really easy but the credit card companies have gotten wise to what everyone is doing with these offers. My strategy today typically revolves around one of these strategies:
- All new charges I put on the new credit card and I don’t pay the credit card in full each month (just the bare minimum). This allows me to “bank” the amount I normally pay to my credit card company as savings that I can invest (the next step). Depending on how big a line of credit you have and your spending habits, this may take take some time. Added benefits: qualify for bonuses the card may qualify for like the example card. Downside: not core to my credit card rewards strategy.
- Take the 3% charge if the card doesn’t have a rewards amount and the period of 0% interest is beyond 12 months which makes the interest charge less of a drag (3% spread over 18 months which is the typical length of time I get for these offers works out to about a 2% charge). Benefits: I get to keep all my reward card cash back and not change my spending habits. Cons: I don’t like fees and this is cost hurdle for making money!
As a reference point – I make about 3% cash back on all of my purchases with the strategy I described here: Making Money Everytime You Buy Somehting: Why Cash Reward Cards Are King
Step 3: Invest the cash – Make money!
Ok now to make money on the arbitrage! We have some amount of money from your 0% debt. I am going to follow the example above through.
- Assume $10K of 0% credit card debt
- Assume it takes 5 months to build the balance
- Assume $200 a month is the minimum payment
- Invest in securities that give you a 1% or a 3% return
See the spread sheet below….. and you’ll see we make $100 to $300 over the 15 months! This excludes the $150 bonus and the $150 I made off the 1.5% cash back rewards! Adding those in we made $400 to $600!
Ok so what to invest in to make that 3%+? I am a believer in the following:
- Buying ETFs… you can start building a position with zero commissions very easily
- I outline the securities I love here to get upwards 5%+ here: Actionable Passive Income – An Ease Simple Scalable Diversified and Liquid Income Portfolio Starting at $25.
- If you are new to this I would suggest 50% of your money in LQD (Investment grade bonds) and 50% of your money in SLQD (short term investment grade bonds). As of the time of this post this is a comfortable 3% yield with pretty low risk.
- If you have been doing this a while, what I tend to do is invest in ETFs that are at the lower end of their range within my portfolio to see if I can get some capital gains in the short term. I of course sell the losers to tax harvest! All of that is also outlined here: Actionable Passive Income – An Ease Simple Scalable Diversified and Liquid Income Portfolio Starting at $25.
- If you took a one time charge of 3% to get the money you will want to target a portfolio yield higher than 3%.
- For those of you that are more conservative I shared the 1% scenario above. Almost all high yielding savings accounts are yielding well over 1.5% now. American Express has one of the best.
Step 4: Pay the minimum balances each month
This should be obvious but the minimum balance needs to be paid each month. If you use ETFs you can easily get a hold of anywhere of $25 to thousands within a week if I need it and I just sell potions about a week in advance.
I try my hardest to not exit a position… if I can pay that minimum due out of my normal operating funds… even better!
Typically a monthly schedule works well here to make sure everything is queues up in time.
Step 5: Pay back all the debt before the 0% grace period ends
I get everything ready to pay off several weeks in advance…. missing the payoff date can be costing at a 15%+ interest rate!
Step 6: Cancel the card
Some likely disagree with me but I shut all of these cards down after I make my money. I don’t want 100+ active credit cards out there tied to me!
In Conclusion
Investing obviously entails risk. Your principal may not stay at it’s original investment value and you’ll need to determine how comfortable you are with taking on this risk.
The set up time for this side hustle is close to 2 hours but that is spread out – applying for card, awaiting to hear back, buying investments, setting up payment schedule efc.. After the set up there isn’t much extra work to do….. beside find another card to do this all over again!
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