For example, I have two credit cards. I’d withdraw my max limit from 1 card and deposit into a high yield money market account. Every 21 days I’d pay off one card with the other.
Related posts:
- Can You Get Money Out Of A High Yield Savings Account?
- How Reliable And Safe Is It To Invest My Money In Emigrant Or Another Online High Yield Savings Account?
- What Is The Best High Yield Savings Account To Put 10k Into?
- I Am Thinking About Putting Money In A High Yield Savings Account. Any Ideas On Where I Should Put It?
- Where Can I Find A Good High Yield Savings Account?
Your specific plan wouldn’t work. The transaction fees and the fact that credit card companies don’t allow a grace period for cash advances make this a sure loser.
However, a similar idea has indeed made money for me through the years. Basically you need to find a credit card that is offering a zero percent teaser rate for six months or a year on balance transfers. Most companies will allow you to deposit the balance transfer into your checking account. From there you transfer it to the highest yielding account you can find and earn interest until the teaser rate expires.
Be forewarned that virtually all cards change some sort of balance transfer fee, so even a zero percent offer isn’t really free money. Also, you will have to pay taxes on the interest you earn. Unfortunately, the balance transfer fees have mostly gone up dramatically in the past year. It’s no longer unusual to get charged 3% of the balance transfer amount in fees up front, which makes it difficult to find a sufficiently high yielding account to make a profit. Nevertheless, if you can make enough interest to offset the taxes and fees, you will make a small profit on the deal. Just make sure that you don’t miss a payment and get hit with penalties.
It could, so long as the transaction costs with your credit cards are less than the interest you’d earn. The withdrawals would be cash advances, which often carry a fee of 1%-3%. Let’s assume the minimum of 1%. Over the course of a year, you’d have 17 cash advances. That’d chew up 17% of your money right there. So you’d have to find an account yielding over 17% just to break even.
And, roughly speaking, if you have two credit cards, each with a $20,000 limit, and found some savings account paying 20% interest, at the end of the year you’d have made $600.
That’s a lot of work for a not-so-great return.
Most credit cards charge interest on cash advances from the advance date. So while you are earning 3% to 5% on your money you are probably paying at least 7% to 10% on the money you borrowed. It doesn’t take a genius to figure out that this is a losing strategy. Even if you figured out a way to make it work it’s not likely you’ll make much money from it. The first time you make a late payment all your profit and more will be gone.
In the annals of really bad ideas this one is probably near the top.
Just remember high yield also means higher risk. You could really be screwed in the end.