This blog is a way for me to share hard learned lessons about money with those who are just starting out on their own. I hope it's a way for you to avoid making the mistakes I made, and to benefit from my experiences

Thursday, July 27, 2006

The $900 phone call

So I was on another blog called Stop Buying Crap and it was talking about making money off of 0% Balance Transfers on your credit card. One of the cards on there was the Citibank Platinum Select MasterCard. Well, I just happen to have this card. So even though the offer was for new members, I called Citibank anyway, because I've been a card holder and good customer of theirs since 1986.

I asked them if they could make that 12 month 0% Balance Transfer to me, with no transfer fee. The lady said, "Unless you want to close your account there's not much I can do." In essence, she was telling me to tell her that I wanted to close the account. OK, so I told her well if you can't do anything for me, then yes, I'd like to close the account. She immediately says, let me transfer you to someone who can help you.

Next thing I know I'm talking to Mike, who's offering to upgrade me to the Diamond level MasterCard, lowering my interest rate, and to cut me a $20,000 check at 0% for 12 months, with no fee. Needless to say I accepted the offer.

I'm going to deposit $15,000 in a 5.45% 11-month CD my credit union offers, and $5,000 in an online savings account earning 5.05% 5.15% interest. That last account will be what I pull money from every month to make the minimum payments. At the end of 12 months, I'll pay the remaining balance off in full. I computed this will earn me about $900 in interest, using Citibank's money the entire time, while never touching any of my money. Not bad for a 10 minute phone call and a couple of hours of research and moving money around. Thank you Citibank!

There are some dangers you should be aware of if you wish to try this yourself:
  1. You cannot use that card for anything else until that balance transfer is paid off. Nothing. Otherwise your monthly payments go to pay off the 0% balance only, and not the balance on purchases with higher interest rates.
  2. You absolutely must pay your minimum payment every month, on time! You can't give them any excuse to say you violated the agreement so they can raise the rate to 18% or whatever it will be. It might be a good idea to set up an automatic minimum monthly payment with your card issuer, so they are responsible for taking the minimum payment every month on the day it is due. Of course, make sure you keep enough money in your checking to do this. It should only be a few hundred dollars.
  3. You absolutely must pay back 100% of that balance transfer by that 12 month mark. Otherwise, they'll hit you for interest, possibly dating back to the beginning.
  4. Your FICO score will take a hit, as you increase your ratio of debt to available credit. If you are planning a major credit purchase, like a house or car this year, you may not want to do this.

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