Today, I received one of those blank checks in the mail from my credit card. I can get 0% interest for a year, and my limit is currently 8000.
Why shouldn’t I write an 8000 check to myself, put it in a high-yield savings account, make minimum payments, pay off the balance at the end of the year, and pocket the interest? It seems like it would be free money.
What am I missing
Read the terms. The 0% interest is likely for purchases only and does not cover cash advances which is what writing a check to yourself is. Cash advances start accumulating interest right away and at a higher rate than for purchases. There are usually fees involved even if it’s considered a balance transfer. Banks know what they are doing
Yup you guys are right. 4% fee. Thanks I figured there was a catch
LucyPiper said:
Yup you guys are right. 4% fee. Thanks I figured there was a catch
What if you put the money into Bask Bank’s HYSA 4.9-5.1 APY with them
LucyPiper said:
Yup you guys are right. 4% fee. Thanks I figured there was a catch
What if you put the money into Bask Bank’s HYSA 4.9-5.1 APY with them
Some people do this as interest rate arbitrage, but after taxes on the HYSA interest, it might be less than $100 which is not worth the hassle
@Flynt
Fair point. Not worth it unless it’s a $1000+ net yearly return
SarahBrown said:
@Flynt
Fair point. Not worth it unless it’s a $1000+ net yearly return
A lot of HYSAs are lowering rates as the feds cut rates. Those 5% banks are now at 4-4.5% and may drop even lower
@Grier
True. My HYSA bank just told me they were lowering the APY from 5.10% to 4.85% yesterday. Just saw the email
@Flynt
A couple of years ago, many banks offered 3% fee and 18 months. I maxed out my credit and put it in HYS that were stable and above 5%. With rates dropping, it doesn’t make sense now. Plus, you will temporarily drop your credit with high utilization. If you make over $1500 in interest income, you need to file a schedule B which is annoying
@Johnstone
Makes sense. Lower initial fee and longer 0% term would make it work
@Flynt
Yeah that’s what I’m thinking
@Flynt
Not an interest rate arbitrage since the rate is variable and will likely drop over the next nine months
LucyPiper said:
Yup you guys are right. 4% fee. Thanks I figured there was a catch
What if you put the money into Bask Bank’s HYSA 4.9-5.1 APY with them
Sometimes I do this when there’s an interesting checking offer like deposit 5000 for 3 months and get 400
LucyPiper said:
Yup you guys are right. 4% fee. Thanks I figured there was a catch
It’s good to ask about potentially advantageous offers. Before 2008, it was common to get 0% interest and 0% transfer fee offers. People would apply for multiple cards, write checks to themselves, and earn 5% interest on $100k+. This was referred to as app-o-rama on forums back then
Read the fine print. Those checks usually come with a 0% interest rate, but you may have to pay a cash advance fee of 3 to 5% upfront
Zahari said:
Read the fine print. Those checks usually come with a 0% interest rate, but you may have to pay a cash advance fee of 3 to 5% upfront
This is the answer. At 3% for 9 months, it might still be worth a small amount of money
Is there a balance transfer fee? These usually come with a 3-5% transfer fee so it’s not worth it
The fee can be higher than the interest
There’s usually a 5% fee for using those checks as cash
Taking cash out of a credit card is treated differently than making purchases on the card. Cash limits are often much lower than your credit limit. My main credit card has a limit of 20,000 but a cash advance limit of 6,000