How to Make Free Money with Balance Transfer Card Offers

Many smart folks save money by taking advantage of balance transfer credit card offers. With balance transfers, you are looking to transfer a high interest rate credit card balance to another credit card that offers a juicy low interest rate. In many cases, the annual percentage rate is 0% during a certain time frame. Before the promotional rate ends, you would pay off the balance transfer amount and save money on the interest that would have paid on the old high interest rate card.

Free Profits Using Credit Card Company Money

There are some very savvy credit card holders who have taken balance transfers to another level. They have figured out how to make a profit, using the credit card company's money, every time they do a 0% or super low APR balance transfer. This practice, more commonly known as balance transfer arbitrage, when done right amounts to free money from something you would do in the first place - pay off your credit card bill.

How Balance Transfer Arbitrage Works

Instead of paying off the old high interest rate credit card balance right away, the savvy credit card holder is looking to have the credit card issuer cut them a check in the amount of the old credit card balance. If the issuer permits this, Mr. or Ms. Smart Card Holder deposits the check into a high yield savings account or a high yield money market account. The minimum credit card payments are made while the money is on deposit at the bank. Just before the teaser rate expires, the credit card balance is paid off with the funds on deposit in the high yield savings account. The profit is the spread between the interest earned on the balance transfer amount in the high yield savings and the payoff amount less the fees, if any, on the balance transfer.