Balance Transfer Arbitrage

An App-O-Rama (also abbreviated AOR, or AOR arbitrage) is when you apply for a lot of cards in a very short period of time. It’s a term coined in the finance forums of Fatwallet and one that has since stuck with arbitragers because it’s both catchy and appropriate. The key to an App-O-Rama is that you apply for so many in such a short period of time.

When you apply for credit, the credit card company will request your credit score and history to make a determination of whether they should extend credit. If they decide you are credit worthy, they then decide how much credit to give you. After that determination, they issue you a card for that amount. When a company requests your score and history, it’s recorded as an inquiry on your report. Each inquiry will be reported in a relatively short period of time and the more inquiries the less likely you will receive credit. As you may expect, someone who wants a lot of credit probably shouldn’t be getting it (they may be desperate for money, which is bad for payback prospects, etc.).

By apply for a lot of cards very quickly, you don’t give the credit bureaus an opportunity to catch up with listing those inquiries. That means you are more likely to get those cards and at higher limits, which is key to arbitrage. After you’ve done the arbitrage process once, going through an AOR is the next step if you want to take it to the next level. It’s a scary thought to have twenty credit cards all at once but when you consider you’re earning 4-5% interest on the balances, it’s actually pretty exciting.

Again, there are risks to this as with arbitrage in general. An AOR is not any riskier in the sense that there are more risks, it’s the normal risks with arbitrage simply magnified since the stakes are bigger. Everything that’s positive will be even more positive, everything that’s negative will be even more negative.

theficus at Fatwallet Finance Forums reported that Bank of America flagged his account after a recent App-O-Rama (AOR). In his AOR, he deposited quite a large sum of money which BOA decided looked fraudulent. The post is very enlightening and should be a warning to balance transfer arbitragers that your bank may not look kindly to your large deposits. Now, theficus, who I think did absolutely nothing wrong, also indicated that racial slurs were used, which simply isn’t cool.

One of the more enlightening things about the post was that this had happened to other people with accounts at BoA (glockophile) and even at Citi (DjPiLL).

Check out the post, it’s very enlightening.