Published 8/3/08 (Modified 3/8/11)
By MoneyBlueBook

I'm what you would call a credit card arbitrager. What that means is that one of my hobbies and passions is to seek out ways to maximize my money, particularly in the area of credit card reward programs. It's not just credit card sign up bonuses and cashback rewards that I aim to maximize either - it's also such credit card perks as balance transfer offers. 0% balance transfer credit cards are used by many, including myself for a variety of financial planning purposes. While some anti-credit card personal finance commentators frequently rally against the use of credit cards altogether, blaming them for the out of control credit card debt problem we have in this country, I personally cite the lack of proper financial education and abandonment of personal responsibility and accountability for the majority of credit card debt related troubles on the part of consumers.

Credit Cards Offer Valuable Benefits For Arbitrage Chasers, But They Should Be Used Wisely and Selectively

While not perfectly analogous, one can compare the benefits and utility of credit cards to that of an automobile. Both are powerful tools that can help people enhance their lives and get them to their target destination, whether real life or financial. However, both, if utilized improperly or irresponsibly, can potentially cause serious damage to oneself and to others. If you drive your vehicle while inebriated or intoxicated, or if you disregard the legal speed limit and swerve around the highways recklessly, you are bound to not only harm others, but injure yourself as well. However, if you stay within the legal boundaries, follow the directives of law enforcement officers, and learn to operate the vehicle safely by the book, having a vehicle can be an invaluable tool.

Likewise, credit cards, if utilized recklessly without careful regard for credit limits, monthly payment obligations, and knowledge about how to stay within the boundaries of one's own financial means, such usage can certainly result in financial disaster. However, if used properly and responsibly, credit cards can provide valuable financial benefits like free credit card bonuses and discount rebates for everyday purchases. Most credit cards also provide some type of extra consumer protection benefit for items purchased, such as extended credit card warranties for qualified goods like expensive laptops, and travel reward upgrades.

Some credit cards even provide balance transfer offers that can help consumers weather difficult personal financial storms and serve as temporary financial safety nets of sorts. I've personally utilized balance transfer credit cards during times when I was cash strapped and in desperate need of a temporary infusion of money to pay off unexpectedly large bills (the key word here is "temporary"). Like all initially good things in life, everything can ultimately be twisted and abused (even seemingly innocuous things like food, video games, and the Internet), so it's our own responsibility as adults not to misappropriate the useful tools we've been given, and to be extra selective when it comes to determining what is a good offer and what is a deal that's overly fraught with dangers. While there's usually a catch to every seemingly good credit card offer, there are often strategic ways to greatly minimize potential problems. It's usually just a matter of getting in the habit of reading the fine print and knowing what to look for.

Case In Point - Discover More's Promotional Offer For 0.99% APR On Balance Transfers For Life

I'm sure many of us periodically receive credit card junk mail. Oftentimes these pre-approval mailers are sent to us by credit card issuers like Citibank, Chase, American Express, and Discover Card whether we want them or not. While there are ways to affirmatively opt out of all future solicitations, it always seems like the opt outs expire at some point at which time the credit card junk mail letters continue to flow back into our mailboxes. Most of the time the pre-approved credit card offers I receive are useless, but once in a while I stumble across very attractive mail offers. While the majority of people usually throw the paper pre-approvals away on principle without even giving them a quick peek, savvy credit card arbitragers will usually give the offers a good, hard once-over before chucking them into the trash.

A few days ago I received a very enticing junk mailer from Discover Card (I call it junk because that's what it initially looked like). While the vast majority of such offers through the mail tend to be trash, this one in particular caught my eye. It was a Discover More credit card promotion for a 6 month 0% APR balance transfer period with a 0.99% APR offer on balance transfers for life thereafter. That's right, after the end of the initial 0% APR period, you get to enjoy a less than 1% annual percentage rate on balance transfers indefinitely.

Obviously there's a catch - there's always a catch. The caveat is that to maintain a permanent 0.99% APR on lifetime balance transfers after the end of the initial 0% balance transfer period, you'll need to make at least two purchases or cash transactions each month continuously for the life of the balance. You won't have to worry about your rate going higher while you pay your balance transfer minimums each month, but you'll need to make at least two purchases with the card to keep the promotion active. The obvious tightrope is one that novices and beginners to balance transfer arbitrage may not be familiar with. A close inspection of the fine print found in the credit card terms and conditions page reveals that Discover Card applies payments to balances with low introductory special APR's (such as special balance transfer and purchase APR's) prior to balances with standard APR's. It's disconcerting because standard purchase balances almost always have much higher interest rates - anywhere from 8% to 20% APR depending on the cardholder's individual credit score history. It's one of the many hidden dangers of balance transfers - the accidental addition of even small purchase balances at higher interest rates that can never be paid off until the existing, frequently much larger balance transfer amount at the lower promotional rate is completely paid off first. But then again, this is nothing new in the world of balance transfers as all balance transfer cards apply bill payments towards 0% balances before applying them to any existing high interest purchase balances. It may seem counter-intuitive, but that's how credit card companies make money - with these technical rule traps.

How To Maximize The Lifetime Balance Transfer Offer From Discover Card

Of course, in regards to the Discover Card lifetime balance transfer offer at 0.99%, the clever credit card arbitrage gamer can attempt to get around the mandatory 2 purchases per month at higher interest rates by making sure he or she spends those purchases on 2 incredibly low priced items. Ideally you'll want to swipe your card for 2 separate gumball or candy purchases of less than 25 cents each, or less if possible. That way, even with the addition of purchase balances at higher interest rates to your account, the interest payments for the transferred balance remain relatively insignificant, allowing you to carry the 0.99% balance for as long as possible. The money obtained from the lifetime balance transfer can be used by balance transfer arbitragers to make money from interest earned as a high interest savings account deposit, or it can be used to help pay down high interest credit card debt. Of course, at some point in the future, even small incremental purchases per month do slowly add up and the entire balance must ultimately be paid off. But if you are able to keep the 2 mandatory monthly purchases low, you may be able to drag out the 0.99% balance transfer for several years and still be in the money. Presumably by then, you'll have earned plenty of interest income to make the credit card arbitrage effort worthwhile.

Keep in mind, this particular balance transfer for life offer is one of those special rare credit card offers not available to the general public or through online links. You won't find them in any search engine as a custom invitation code is required to partake. Each custom invitation code sent to recipients is unique and must be used to access the special online application page to take advantage of the offer. Unfortunately, I only have one invitation code for the lifetime balance transfer offer and won't be able to list it here.

Some may recognize this particular Discover Card offer. It used to be a 0% balance transfer for life, but the credit crunch crisis seems to have forced Discover Card to downsize the offer by imposing a slight interest rate. While a 0% lifetime balance transfer deal would be ideal, 0.99% for life is still pretty good.