Credit Card Arbitrage
Jonathan over at mymoneyblog has a great three part QA where he answers questions about 0% balance transfer arbitrage.
part 1
part 2
part 3.
This reminded me of my earlier post where I made a spreadsheet to see how much money I'd make doing CC arbitrage. A lot has changed since Jan-06, so it's time for an update.
Using citicards as an example, I assume the following: 
I take a look at how the balances progress over the course of a year. Every month I pay the minimum payment on the current credit card balance from my online bank account. This decreases the amount of interest I earn.
After one year, I would expect to make about $1,424. Most likely, however, I would pay the balance off early. So I took a look at what kind of APY that translate into:
Not bad. The minimum payments will only cost me 78 basis points if I pay the balance off one month early. Not too shabby.
If I assume that the minimum payment is now 2% (which is typically the case for most credit cards), then after 11 months I would expect to make $1,278 for a cost of 89 basis points. Once again, not too shabby. I only wish that I could lever up more than my current level. However, from the $100 gift cards to the interest income this is generating, I'm not complaining too much :).
Tags: personal finance
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