Balance Transfer Arbitrage

There are three steps to a successful balance transfer arbitrage:

1. Step 1: Apply for and be accepted for unsecured credit. In our case, this will be an unsecured credit card.
2. Step 2: Open a high yield savings account at a bank such as ING Direct.
3. Step 3: Request a balance transfer from your unsecured credit card and deposit it to your high yield savings account.

There you go, the three simple steps to balance transfer arbitrage.

Now, there are caveats that you must adhere to if you want this to be a profitable venture. Here are some basic rules to balance transfer arbitrage.

• Your interest rate for the balance transfer must be less than the interest rate of the savings account, otherwise you’ll be losing money.
• When considering balance transfer offers, you must take into account any balance transfer fees. A no fee 0% interest balance transfer is the ideal line of credit and they are plentiful, so unless you exhaust all those avenues you should be getting a no fee 0% balance transfer.
• You must not deviate from the three steps above. Do not use the credit for anything else such as a new television. Do not put the credit at risk by trying to get more in interest, such as by putting it into the stock market.
• Be diligent and remember when the balance transfer promotional interest rate will expire and pay off the debt before any interest is assessed. A month of high interest can put a significant damper on your arbitrage play.

Balance transfer arbitrage is very easy and very safe if you follow those simple rules. If you decide you want to outsmart the system, that’s when you get into trouble.