Occasionally the CC company will send me an offer of a loan for very low interest for a year. I run the numbers, and if it looks good, I'll take the loan and invest the money, and pay it back at the end of the term.
The CC company, of course, is hoping I'll miss payments so they can charge me 30% interest. I disappoint them.
Being aware of the time value of money is essential for managing your finances in your own best interest.
> Occasionally the CC company will send me an offer of a loan for very low interest for a year. I run the numbers, and if it looks good, I'll take the loan and invest the money, and pay it back at the end of the term.
How do you keep that from negatively impacting your credit rating?
I’m not OP, but it I do this. Sometimes it negatively impacts a little but it’s worth it (800 vs 795 doesn’t matter too much) but usually it’s a wash because it’s $5 down in one account and $5k more in another.
But when you have $100k of available balance and $10k of debt, the credit bureaus don’t change much when you have $100k of available balance and $20k of debt for 15 months (or whatever the term is).
Now you can easily get 5% returns in money market accounts so if you take a 0% loan with a 3 percent transfer fee on $10k you can basically get $200 for “free” for the juggling. You have to determine if it’s worth it, but if you have larger amounts maybe it’s $500-2k for effectively setting some reminders and not screwing up.
Even if the amounts aren't that large, it's good practice.
I once read an article on how Amazon made money selling items at wholesale prices. The answer is astute money management. When you bought an item, Amazon charges your credit card immediately, and they get the funds right away. Amazon does not pay the vendor, however, until 90 days have elapsed.
This means they have the use of the money for 90 days, and (of course) they invest the money. Multiply this over millions of purchases, and you're making a boatload of moolah.
I do the same thing, it's just on a very small scale. It's called working the float.
Banks do it, too. Ever notice that when you get a cashier's check, your account is debited immediately? But if you deposit a cashier's check, you have to wait a day or two for the credit. The bank is doing the same thing.
Of course, banks make a lot of money on pennies because of scale. None of this is new.
I do agree that being your own bank is really smart, that's why I like DeFi so much... it makes it super easy, without any impact on your credit score.
That said, doing it at a small scale doesn't really seem like it is worth the hassle. $200 isn't worth the time or dings on your credit score. When I've done it before, other cards notice and also start to cancel you or lower your available credit as well.
I have "excellent" credit (780+), a fairly large credit line across several cards (~$100k+) and I never get those year long offers for 0% (or anything less than current interest rates) any more. Those dried up years ago. I don't see how anyone is making this work.
> How do you keep that from negatively impacting your credit rating?
It has, my credit score isn't the greatest. But I don't care. I don't take out loans to buy things because of the high interest rates. Instead, I pay for things with investments.
Borrowing money to buy things is a trap. Borrowing money to buy a new car is financially inept. Buy a beater for cash, invest what you would have spent towards a new car, and eventually the growth in that investment will provide enough to buy that new car. You'll be much better off.
