In September last year, I started an experiment in credit card arbitrage. Yesterday I received my last statement for the credit card I used to run the experiment.
In early August, as soon as the GIC came to an end, I used the money to pay back the credit card. I didn't wait for them to send me that last statement, because I was worried that they would begin accruing interest as soon as the interest-free period ended.
So here I am, with the credit card paid back in full. I got $160 in interest from the experiment, and invested about 2-3 hours total. Not bad.
Only thing that will be left to do is cancel the credit card I used for the experiment.
Would I do this again? Probably not. As I mentioned before, credit card arbitrage can have an impact on your credit score. Not a big impact, but I think that running this repeatedly could have a cumulative effect, and I'm not willing to run this risk since my mortgage is due to be renewed next year.
To really make it worth my while, I would need to raise the amount borrowed over $10-20K. Which is too risky for me. Still, that was a good learning experience.
Subscribe to:
Post Comments (Atom)
4 comments:
Is $160 pre-tax?
It's even less attractive if you consider deducting the marginal tax rates from $160 (say 30~40%)
I totally agree, to make it worthwhile, you either
1. have a BIG limit
2. take a BIG risk for higher % return investments (like Income Trust, Stocks, etc..) that may drop in value
Yes, the $160 is pre-tax. However, one good thing is that when all the deductions are applied (RRSP, student loan interests, etc.), my actual tax rate falls to about 20%.
I initially thought about putting the money into dividend-paying stocks, but this felt too risky for an experiment. Income thrust pay more, but their tax treament is not any better (most of the distributions are taxed as interest). Then there's the matter of timing -- you want to be able to buy low, but don't want to let the money sit doing nothing while the interest-free period melts away.
And as we've seen in the last year, short-term the market is unpredictable.
Remember, you should not put money in the stock market if you are looking at a short-term investment! That's gambling, not investing.
Frog
Which credit card did you use?
As I mentioned in the original postings, I used a MasterCard Citi Gold credit card for the experiment. I found the 0% on balance transfer on the www.redflagdeals.com web site.
There were some hoops to jump through, and you have to be very careful with the small print and which cheques to use. See my original posting (the reference is linked in this posting) for more details on the experiment.
Cheers,
Frog
Post a Comment