Possible to borrow money on credit card at 0% interest & not pay a fee for borrowing?

Question

I read an article yesterday that got me thinking. One part was that these people are constantly opening credit card accts and I would think if I did that for the purpose they do (to save money) that I will over-extend myself in credit, dragging my credit rating down. It sounds like a good idea as I'm all about my savings acct right now. Take 90% of the credit limit on a credit card at 0% and put it in a savings acct. for a year. But with the fees, I think not such a great idea. Are there credit cards that would do this and not charge a fee? How much money can these people be making if they are getting 5-6% interest, but paying those hefty balance transfer fees or cash advance fees. Someone enlighten me. Thank you!

Here's the article:

Don't have much money in your savings account? No problem. Maestros will borrow from credit cards with 0 percent introductory rates and then use the money to earn a little interest, often stashing the cash at EmigrantDirect, HSBC Direct or one of the other banks with high-yield online savings accounts.
"One year, I took $62,000 in cash advances on four cards with 0 percent rates and put it in a money-market account," chortles Scott Bilker, founder of DebtSmart.com, who has 80 credit cards to his name. "I made $1,800 in interest."
When the maestros aren't gaming those 0 percent offers, they're hunting for the credit cards with the best rewards.

So, Sexy, you are saying they are paying 3% to borrow the money at 0% and putting it into an acct that pays 5-6% and gaining 2-3% in actual interest.

Abel, this question was not asking how do I establish credit for myself. This question was clarifying how to work the credit card system to benefit me.

Abel, this question was not asking how do I establish credit for myself. This question was clarifying how to work the credit card system to benefit me.

Answer 1

I've done this myself on a limited basis. Most credit cards offering a 0% or low % interest rate do charge balance transfer fees. The key is that there is usually a cap on the balance transfer fee.

So, for example, let's say I borrow $10,000 at 1.99%, and the credit card company charges a 3% balance transfer fee with a $75 cap. Even though the nomimal balance transfer fee is 3%, my actual cost translates to 0.75% for a one-year borrowing period. So borrowing the $10,000 for one year translates into an effective total cost of 2.74%. If I can get a return that's 2% above this, then I gain $200 for the year.

The credit card company is betting on a couple different things: 1) you'll be late on a payment - even one day - and they then can jack up the interest rate to 30% or more, in addition to charging a substantial late fee. Note that they legally can and will change the payment due date hoping you won't notice; 2) you'll charge something else on the card, and you'll have to pay the higher interest rate on the charges before you start paying down the transfer balance.

This can be managed successfully, but you have to be careful, and you have to decide if you're making enough for it to be worth it. Good luck.

Answer 2

It's 0% interest, but at a 3% fee. They will make more money on the interest they gain in the savings account.

I just did this recently (I've been unemployed for a few months, and I start work next month):

A few weeks ago, I applied for a Discover card which offers 0% interest on balance transfers for a year. I was thinking ahead.

On Monday, with my checking account at it's lowest, I used a convenience check from my Washington Mutual credit card to put a few thousand dollars in my checking account.

With that, I paid my rent, and I have enough left to get me past my first payday with the new job.

The majority of my necessary purchases are also on my Washington Mutual card (groceries, gas, bills, etc.).

5 days before my Washington Mutual payment is due, I will transfer the entire balance to Discover. The fee will be 3%, but much better than the cash advance fees or the 5.99% interest on using the convenience check.

Answer 3

I actually do exactly this. In January, for example, I took out two balance transfers at 0% interest; most of the money is now sitting in HSBC. The trick is to find cards that have low or capped interest; one of the cards I used charged 3% capped at $75 (which worked out to half a percent, since I put $15k on that card) and the other had no fee whatsoever. I've linked to my finance website, where I give more details.

Answer 4

If you have lived in the same home for at least a year and held a job for the same period of time, you may qualify for small lines of credit with department stores and other businesses within your local community. Make sure these businesses report your account information with the three national credit bureaus or you will be wasting your time using their cards to build your credit.

The interest rates on many store cards may be higher than a typical credit card, so make sure to keep only a small balance on any of these cards you may have. It's often a good idea to avoid paying off your entire balance so you can build a repayment history for your fledgling credit report. As long as you don't max out your cards and make your required minimum monthly payments you'll be fine.

Another way to build credit is to take out a small loan from a local credit union or bank where you are a member. If you can avoid it, don't use the proceeds of the loan except to repay the debt. You will pay a small fee in interest but that's often a small price to pay for building your credit.

Once you've established a credit record and creditors can see you have no problems paying off your debt you may start receiving offers from major credit card companies. You could start getting all sorts of mail from Discover, Visa, MasterCard and even American Express. Read more abour it at: http://www.credit-card-gallery.com/article/43,Many_Credit_Repair_Techniques_Can_be_Used_to_Build_Credit

Answer 5

There's still a few 0% APR credit cards without 'balance transfer fees'. But you'll have to read the Terms and Conditions completely to determine the cash advance limitations. It's become a lot harder to make money this way-- but people are still doing it. Just read the fine print...

Here's a great resource for 0% APR credit cards:

http://www.asapcreditcard.com/0-apr.html

GOOD LUCK!

Answer 6

It's my understanding that with the "cash advance" features you have to start paying interest immediately and they aren't covered under the 0% deal. You'd need to read the fine print of the deal to be absolutely sure.

It's never a good idea to borrow money to invest though.