credit card technique used by my grandfather (not a scam)

[Gregatron]

So my grandfather called me today asking me for advice. He wanted my feedback on on an idea he has. He has amazing credit and gets a lot of offers for zero percent interest on credit cards for periods of six months. What he has been doing is taking a lone on these cards and putting them in an interest bearing account he has with his credit union. Then just before the zero interest period ends he pays the credit card balance in full. He has been doing this for a while now.

Recently he was amazed when I told him that ING has accounts with 4% interest (as I learned from many of my poker buddies who use such online accounts). So he wanted my advice on this. He found an account with Emigrat Direct for 4.5, and I just found one for 4.8 with HSBC.

This is going to seem like a dumb question, but I don't think I'm missing anything am I? (I figure his money is pretty safe with HSBC of course.) Also, does anyone know of interest rates better than the 4.8?

Sorry if this post is somehow improper -- if Sniper needs to edit or alter it in any way that is cool.

[DesertCat]

No, as long as you can handle the cards without running them up on stupid stuff, and can invest the money wisely, it's not a bad idea. I'd check the fine print on that HSBC account to make sure you don't also have to have other accounts there or anything.

[AvivaSimplex]

Lots of people have exploited these in the past. Now usually the credit card companies put in 3% fee for cash advances. Check the fine print very carefully.

[LondonBroil]

2 weeks ago, I received an offer from MBNA for 0% interest on cash advances until February 2007 with a 3% fee up to $75. I wrote a check out to myself for $25,000 ($25,100 credit limit) and took it to my bank to deposit it. 3 days later I moved it from my bank to ING. As long as I make the minimum payments on time (this is key!) I should make about $900 minus the $75 for a couple hours of work. Not too bad.

[LittleOldLady]

Before you try this, you should be aware that all of these transactions will be reported to the credit bureaus and may very well have an adverse effect on your credit ratings. AN excess of credit cards counts against you because the credit limit on each account is considered to be available debt that you might incur at any time. Also opening and closing a number of credit card accounts would raise a red flag.

[Sniper]

Greg, there are fewer and less generous 0% offers around now, but when they were easy to come by, I used to take advantage of these 0% loans to the fullest extent!... it is literally free money (the interest or other earnings), if you know what you are doing and pay them off when the 0% period ends.

LOL brings up a good point on your credit being impacted, so you need to manage this around the primary time when your credit rating actually counts, when you need a real loan for a house/car/etc. However, taking these loans and actually paying them down is generally a plus on your credit.

You will still need to make minimum payments, even though there is no interest... and make sure that you make them on time, because if you are late that can put an end to the 0%.

0% loans are +EV.

[Gone Fishing]

I thought the HSBC deal only paid 4.8% until April 30. After that I think it reverts to their normal rate. Did I read the fine print wrong?

[Gregatron]

[ QUOTE ]
I thought the HSBC deal only paid 4.8% until April 30. After that I think it reverts to their normal rate. Did I read the fine print wrong?

[/ QUOTE ]
This is what it says on their site

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* Annual Percentage Yield (APY) is offered on accounts opened through 04/30/06. After 4/30/06, all deposits will earn the variable APY available at that time.

[/ QUOTE ]

I take this to mean that the account is 4.8 as long as it's opened and deposited before that date. Am I missing something?

[Sniper]

[ QUOTE ]
I take this to mean that the account is 4.8 as long as it's opened and deposited before that date. Am I missing something?

[/ QUOTE ]

Its likely that the rate adjusts after 4/30 on ALL accounts... though that should be a simple email to get a definitive answer.

[Carl_William]

This technique of essentially free money is not new. It's always been done by a few slick people who can handle it. Banks don't run on air, and when these techniques become a handicap to the bank(s); they will terminate these options. When Carter was president, interest rates were almost off the map; and I knew a guy who made lots of essentially free money for about two years until the bank put an end to it. In essense....

The banks are baiting people with these free money options; and the banks make money on balance because most people don't know how to do or maintain the bookkeeping to their benefit.

A similar technique is Internet Poker Whoring; on balance the Internet poker sites make or expect to make money on the whoring business. If the sites start to lose money they will modify the payback to the whores.