How to make free $$$ when CD yeilds get High.

[xtriggerman]

On another forum I visit the idea of Credit Card rates came up and I wrote up a nice way of getting back at the rip off rates the banks charge on those CC's. I thought I would share the process with you guys since it worked so well for me back when a 12 month CD yield was over 4 percent. 
    It's an easy game to play the banks! When I got a new CC offer of 18 months 0 % APR in the mail, I would apply and as soon as I got that card, I would put EVERY purchase on that card no matter what it was for the next 5 months or until its credit limit was reached (Back then it was around 3K). The monies that would normally have gone to pay for all those bills such as food, gas, & house bills would be put aside during those first 5 months of the new cards 18 month zero APR. At the end of those 5 months, you go and take out a 4-5 percent, 12 month CD with that saved up cash. During that 12 month period, the new CC is side lined and you pay for all your stuff as you normally would have. Once the 12 month 4-5 % CD finishes up, you with draw it and then pay off the total balance on the new 18 month 0 APR, sidelined card (I called it the plastic Mule). All done within that 18 month Interest free period, just pay the minimums. This leaves you with the 4-5 percent CD yield left over.  I had made over a thousand dollars that way when CD's were high yield. Once they dipped to 4 percent, I quit doing it.  I ended up with a lot of cards. Problem you run into is after you get all the different 18 month APR new card accounts from various banks, they wont issue you another "new" 0 APR card if you all ready have an existing account despite the fact that I don't use any of them. I have a S*** load of CC accounts that never get used. The banks add up all that floating credit and figure your credit rating from it. I NEVER pay banks interest on ANY THING Nada Zero, Zip..... and they have me at just over 800 credit rating.  I cant wait for CD's to get up there again just so I can do em again, Im just going to have to close out 3 or 4 accounts so I'm eligible for "New" 0 APR's again.    Today I only use 3 cards out of my stack. A Sams card that gives 5% back on all gasoline purchases (pays for the 50 bucks membership and more over the year). City DBL cash back 2% back on every thing bought. and a Synchrony CC that is also 2% back on everything bought. No annual fees.... just money back.  Always pay CC monthly bill balances and turn the tables on them when CD yield rates get up there.

Edited August 29, 2019 by xtriggerman

[gregintenn]

So you’re getting wealthy with credit cards? Over a thousand dollars? How much time and effort did you have it into this scheme?

[jpx2rk]

While your credit rating may be over 800, if/when you go to a bank and apply for a mortgage or car loan and they see all of the open credit card accts, you MAY be declined due to the possibility of being over-extended, or at least the ability to be over-extended since all of those accts are open & active.  

At least you can pay the hospital ER room with 5-10 different CC's, good for you.

[peejman]

My credit score is over 800 and all I do is pay my bills on time.  

When you apply for a significant loan, banks look at a thing called "debt potential". Meaning, how much debt could you pile up quickly without them knowing about it.... i.e., credit card debt.  I can assure you having all those accounts open will be viewed negatively.  

When we applied for our current mortgage, the lender showed both of us old credit card accounts that we hadn't used in years (mostly store cards) that we'd forgotten about and assumed were closed but they weren't.  The sum of the credit lines was a rather big number.  The lender advised us that we'd get a better rate if we formally closed those accounts. We did and we did.  

[xtriggerman]

I wonder why when I put in for a home improvement loan a number of years ago, they gave me their lowest interest rate than they even quoted me because of my credit history? Completely contrary to what you guys are saying. I'v been told what you all are saying before, and have found no evidence of it with the few times I ever when to a Banker with my hat in my hands.  Getting Wealthy is a stretch LOL..... Its not time consuming at all really, I put more time into researching a new gun by far. Once you pocket a couple extra hundred bucks for just doing what you normally do with just a slightly different routine, piece of cake.  Oh well..... thought someone might appreciate a heads up on making a few extra bucks when the markets right. Then again, maybe not!

Edited August 30, 2019 by xtriggerman

[No_0ne]

When European and Asian bond yields are in negative territory, US treasuries at 2% and below, and the Fed beginning another rate cutting cycle, I don't think you're going to see any 4% CD's in the foreseeable future.  Having said that, I have no credit cards, no credit score, and no debt - I like it that way ...

[Ronald_55]

Some of the 0% offers I have seen require a minimum monthly payment or you revert to the 29% interest or whatever. 

[Erich]

OP did mention the min monthly payments, which are pretty standard. But like No_0ne mentioned, the 4% CD is not something you should expect to find, and they vary by geographic area. I haven't seen one for a while. Around here right now, money market accounts are doing better then CD's at around 2% compared to .5 to .75%. Why would you lock money into a CD with numbers like like. 

[jpx2rk]

OP;

Mind sharing when you started this game, and which bank/lending institution(s) you have used???

[GlockSpock]

As soon as the FED lowered the rate a few weeks ago, I put some money into a few 12 month CD's at Ally. I got 2.5%. Not a huge amount of money, not a killer interest rate, but it's something.

 

Something to mention is that even though the money is "locked in", the penalty is 60 days worth of interest. Which means, if you can make it 60 days into the CD, if you absolutely, 100% had to get that money out, you'd break even at the 60 day mark and come out ahead any point after that.

[gregintenn]

10 hours ago, No_0ne said:

When European and Asian bond yields are in negative territory, US treasuries at 2% and below, and the Fed beginning another rate cutting cycle, I don't think you're going to see any 4% CD's in the foreseeable future.  Having said that, I have no credit cards, no credit score, and no debt - I like it that way ...

Could anyone share the rationale of putting money into an investment vehicle with a negative interest rate? It seems to me one's money would be better off in a gun safe.

[DaveTN]

49 minutes ago, gregintenn said:

Could anyone share the rationale of putting money into an investment vehicle with a negative interest rate? It seems to me one's money would be better off in a gun safe.

No, because its not rational and it’s not done intentionally.

[Alleycat72]

You could just find a Nigerian prince and make free money that way.

[Magiccarpetrides]

Money has to be stored somewhere...it doesn't sound rational at all but many state and larger institutions are required to store X amount of dollars and the FDIC doesn't insure anywhere near the amount of money they have on hand.

 

Edit:  this is in reference to 0 and negative yields.

Edited August 30, 2019 by Magiccarpetrides

[MacGyver]

Everybody needs a hobby, I guess.

I've always watched people like the OP with a bit of amused curiosity at the amount of work they're willing to put into a return - kind of the same with travel hackers who are managing multiple cards for loyalty points or airline miles.

I don't know that I've got the bandwidth to commit to the active management it would take.  For most people, I'd be concerned about them wiping out their return and then some when they miss a payment or whatever.

But, if this is your thing - good luck and Godspeed. A little extra money is a little extra money.

 

[xtriggerman]

As the chart shows, I had a good run at this during that 7 year slot of 94-2001.  https://www.depositaccounts.com/blog/historical-cd-rates.html

Gez guys, this is easy stuff. Today, the easy money with CCs are those "spend 3K worth on this introductory offer in 90 days and get a 2-300 dollar bonus" . Yup. Iv done a few of those just to not be bored I guess.  The surprising thing to me is a credit card company will keep your card in good standing for like 3 or 4 years before they send you a letter closing the account because of no activity. They are like hungry Wolves waiting in the wings to slam some dude that just made the "wants" mistake and couldn't pay his monthly balance. It amazes me how much money they are willing to throw away on these bonus offers only to find a new payment slave. Sadly, my son is one of them! He's probably up to a bout 20K in CC debt by now. We don't talk about it any more. I think he has Oniomania.

[gregintenn]

I’m dull. I like real estate and mutual funds.

[Magiccarpetrides]

Lol you all act like the OP is doing some kind of VOODOO magic...yeah if you aren't disciplined (like he said his son isn't) you shouldn't do this...but for most people that have a brain and simple grasp of math its an easy way to make a few extra bucks...or heck skip the whole "CDs" and just hit up all the spend $500 get $150 back offers of which there are plenty.  I think he was just trying to be helpful and some people on here are missing that point.  

[jpx2rk]

4 hours ago, Magiccarpetrides said:

Money has to be stored somewhere...it doesn't sound rational at all but many state and larger institutions are required to store X amount of dollars and the FDIC doesn't insure anywhere near the amount of money they have on hand.

 

Edit:  this is in reference to 0 and negative yields.

Are you referring to the bank's liquidity ratio, or the cash held on hand (in the tellers window and vaults) to meet customer demand in their daily course of business.   Banks are required to keep/maintain certain levels of cash on hand, along with other liquid assets to meet various banking guidelines.

 

The FDIC insurance is for depositors funds which is considered a liability on the banks books.  Cash on hand is an asset for the bank.   The FDIC does not "insure" the cash on hand at a bank.  

[jpx2rk]

49 minutes ago, Magiccarpetrides said:

Lol you all act like the OP is doing some kind of VOODOO magic...yeah if you aren't disciplined (like he said his son isn't) you shouldn't do this...but for most people that have a brain and simple grasp of math its an easy way to make a few extra bucks...or heck skip the whole "CDs" and just hit up all the spend $500 get $150 back offers of which there are plenty.  I think he was just trying to be helpful and some people on here are missing that point.  

Never thought it was VOODOO magic in any form or fashion.  He's just taking advantage of the availability of easy CC offers, (aka gaming the system) with the rewards the various issuers provide or offer.  Most CC issuers are hoping enough people run up/max the CC balance, then can't pay the balance off at the end of the offer period, and have to pay the CC issuer the high interest rates to offset the ones who pay the balance off within the offer period.  No rocket science involved at all.  Just one of the many reasons people get into financial distress, their credit rating suffers because they overspent on numerous CC's, and then file for bankruptcy.

[MacGyver]

The odds are certainly in the house’s favor here, so to speak.  

Most people lack the discipline to do something like this - or they’re already leveraged up to their eyeballs anyway.

Regardless, you can certainly game the system and make a little money.  I’d guess you need to pay close attention to all of the various terms and conditions.  Likewise a change in your personal status could likely affect this negatively as well.

But, I’ve got friends who take multiple first class trips around the world each year on points travel hacking cards.  If this appeals to you, awesome.

 

[Erik88]

I haven't read this entire thread but I moved our emergency fund from Suntrust(who paid me 0%) to an online bank called Citizens Access. They are paying out around 2.2%. I feel like an idiot for leaving my money with Suntrust for all those years when I could have been earning interest. Since the recession I just assumed no one was paying out and never bothered to check. 

I find the first post to be too long to read but it sounds like he's discussing something called credit card churning. There is an entire sub-reddit devoted to this. Interesting stuff. 

I know people hate credit cards and refuse to have them. You're missing on on a lot of free money/rewards. Our points pay for a good chunk of our travel. If you don't trust yourself to pay off your card each month then I guess that's another story. 

[No_0ne]

11 hours ago, gregintenn said:

Could anyone share the rationale of putting money into an investment vehicle with a negative interest rate? It seems to me one's money would be better off in a gun safe.

 

4 hours ago, jpx2rk said:

Are you referring to the bank's liquidity ratio, or the cash held on hand (in the tellers window and vaults) to meet customer demand in their daily course of business.   Banks are required to keep/maintain certain levels of cash on hand, along with other liquid assets to meet various banking guidelines.

 

The FDIC insurance is for depositors funds which is considered a liability on the banks books.  Cash on hand is an asset for the bank.   The FDIC does not "insure" the cash on hand at a bank.  

There are a lot of pension funds, hedge funds, etc. which are required to store a certain percentage of their funds in the bond market.  As older bonds roll over, they must purchase new bonds to replace these.  With the low rates being charged by central banks, there is intense competition for the types of bonds these funds are required to own.  Thus when purchasing their requisite share, they are forced sometimes into paying prices that are greater than the total return on the bonds when held to maturity, thus the "negative" rates ...

[DaveTN]

I put everything on a credit card. I carry no credit card debt; I pay it off every month. Cash is not King. I like free money; some people don’t. (Unless of course you are buying guns in private sales and then it is.)

I used to have a GM card. I applied several thousand in rewards to a new truck Purchase and then a couple of thousand to a new car. When I thought I wasn’t going to be buying anymore new cars; I switched to a Sears Card. I get at least one and sometimes two $500 gift cards each year. I now need to find something else as Sears may be going out of business any day. 

With Edward Jones I get 2.75 on my 1 year CD’s and 3.1 on my 2 year. I don't know what they will be this time.

With Trump in charge and Edward Jones in the drivers seat my investments gained 23% last year. I was headed for that again this year, but this China issue could be a problem.

[A.J. Holst]

Having been in the money lending business for a long time:

Greater than 40% revolving usage does impact your FICO score.

It makes prime lenders nervous if you want or need to borrow more money

It does increase the probability of future bankruptcy, regardless of FICO score.

I primarily use two rewards cards (business and personal) and pay the balances monthly.

Need to keep some revolving activity to positively impact my FICO score.

It took me years of strict spending habits to eliminate cc debt incurred by my younger self.