The good surprise was that I was charged no fee to use the balance transfer cheque. Whoo-hoo!
As I expected, I will have to do a minimum payment each month, which for this month is $105. This is not too bad, at 2.1% of the current balance.
I will pay this out of my regular income, as if I was putting money aside for investment. However, this means that if I had wanted to run this with no impact on my regular cash flow, I would have to put aside a part of the initial amount for these monthly payments. This could be segmented by 3-month periods (since ING Direct offers GICs for 90, 180 and 270 days).
The exact run-down of this, with a $1000 arbitrage for 12 months (to keep things simple and make it easy to multiply the amount), would be something like:
- Leave $62 in the regular savings account -- this will cover the first 3 monthly payments.
- Put $57 in a 90-day GIC -- to cover minimum payments for the next 3 months.
- Put $54 in a 180-day GIC -- minimum payments for months 7 to 9.
- Put $51 in a 270-day GIC -- for the last 3 minimum payments.
- Put $776 in a 1-year GIC -- this will be the final balance at the end.
All of this assumes that the minimum payment is based on the running balance of the account.
Of course, this would somewhat reduce the total interest gained for the arbitrage. But like I said, this would eliminate the impact of the arbitrage on my regular cash flow.