Paid off My Last 0% Balance Transfer
And it could be the end of my credit card arbitrage game.
I applied and was approved for a Citi Driver’s Edge card in early 2008. The reason for me to get that card wasn’t for the rewards it offers, but solely for the purpose of getting an interest free loan from the card and using the money to pay off our loan, at that time at $16,306 remaining balance with a 4.90% APR. The car loan was indeed paid off last February after receiving a $17,000 check from Citi with 0% interest rate for 12 months.
In the past 12 months, I have been making a monthly payment of $640 to the credit card, far more than the requried minimum as if I were still paying the car loan because I didn’t want to have a much bigger bill when the balance transfer expires, which is now. Last week, I sent a check of a little over $10,000 to Citibank to pay off the remaining balance of the free loan. The check was cleared and we are now officially having only one debt to pay: the mortgage.
And for three reasons, it could also mark the end of credit card arbitrage that I have played for years to earn free money from 0% balance transfer offers from credit card companies. First, credit card arbitrage is more profitable when banks are paying 4+% yield. I didn’t spend the money I received from card issuers when I got the balance transfer. Instead I put it in an online savings account to earn me interests during the offer period (usually 12 months). Now that interest rates of online banks are going down fast, it doesn’t make too much sense if I can only get a little over 3% return from an online bank of the money I borrowed. Secondly, credit card issuers are tightening the rule. As we all know, credit card companies have become very cautious when giving out credits. Not only the APR has increased, sometimes without any reason, but also fees for balance transfers have been imposed. When I got the Driver’s Edge card, I still had no fee offer, but Citi has already charged 3% balance transfer fee for most, if not all, of its cards. Chase, another issuer from which I got several 0% APR cards in the past, recently started to charge a $120 annula fee for low-APR promotional offer. All these changes make it hard to play the game going forward. Finally, credit card companies are very aggressive in closing unused cards. Most of the cards I got in recent years are for balance transfer only. After the promotion was over, I usually just threw the card in the drawer and never touched it again. It was fine in the past when I can let the card idle for years, but not now. Recently, I got card cancellation letters from both Citi and Chase for my inactive cards. It won’t do my credit score any good if I keep opening and closing new accounts.
All these considered, I am going to stay away from any new card from now. I don’t know for how long, but at least until the conditions get better, if ever.
BTW, I recently checked my FICO credit score and I am that close to the 800 mark. Maybe I can finally get over it after paying off the $10,000 balance on my card
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