Credit Card Arbitrage

Hmm, seems the credit card arbitrage game is catching on in the personal finance blogger, even nickel did a post about it. I originally heard about it fromt he Fatwallet Finance forums, which is where I believed they originated. Credit card arbitrage is basically getting 0% promotion offers, usually for 12 months and sticking them into high yield savings account and then paying back all the balances in full at the end of 12 months.

Here are some misconceptions that people generally have about this:

1. The drop in your fico score is only for the duration for the loans. Once you pay them off, most likely your score will be even better than it was at the beginning. So doing an AOR has only a temporary effect.
2. It’s only arbitrage if you stick it in a high yield savings account. If you decide to invest with it, you’re basically getting an interest free loan and accepting some risk for more potential gain.
3. Some people say it isn’t worth the time to do this. If you’re organized about your finances and disciplined you’ll basically have zero risk and for a couple hours worth of work, you’ll make a couple grand (depending on what credit lines you’re able to attain). If making 5-10 grand extra a year for free with no risk a couple hours of work isn’t worth it to you, then I congratulate you.