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Credit Card Arbitrage

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I'm not one to believe in fate or signs, but it's hard to not believe that something is conspiring against me in trying to do my credit card arbitrage plan. If I can't get a credit card to begin with, it's just not going to end up well. The problems I've had with them go back over a month now and it's taken me more than 5 separate calls to realize that it's not going happen.

Their first call was pretty quick and to the point. They couldn't verify my phone number to my new address and they couldn't verify my employment. It makes sense, since I picked up the phone (Vonage) and just moved across the country. This is one of the reasons why people get Internet phones to begin with. Even though I update the address with Vonage, it doesn't seem to get updated in the public records.

Verifying my employment should have been easy. It's simply giving my company's phone number to Discover and letting look it up in their records. Well either their records are incomplete or my company didn't register the phone number under their current name, because it doesn't verify. Considering that my company is a start up in Silicon Valley, with about 35 people, I'm not surprised.

I was told that the solution to both problems was to fax a recent pay stub. I'm thinking, "This is fantastic. I even get to prove that my income is what I say it is and it's not just me checking a box on an application. Surely, this will be bullet proof." I faxed the pay stub and called them up to make sure they got it. They did and said they'd have a ruling on it, within a couple of days. I waited two weeks for my new credit card to show up. Perhaps, I should have checked back, but I had other things going on. The card never came.

It's time for another call to find out what the status is. I made this on Friday of last week. It seems my application has been archived since it's been over a month since I originally applied. The person pulls it out of the archives, and says she'll look at it and I should call back tomorrow. I remind her that it's Saturday, and she tells me that they'll still be open, but that I need to call a different number. I'm really glad that I reminded her it was Saturday.

Saturday morning comes and it's time to make that call. After the usual verification of 5 pieces of information (their 15-digit reference number, my name, date of birth, address, mother's maiden name), we can finally discuss the issue. After explaining the issue from the beginning (I guess they don't believe in either take or reading account notes), she sees the pay stub and says that it works for the employment verification, but since it doesn't have my address on it, it won't work for that. Here's how the rest of the conversation went:

Me: What do I need for that verification?

Discover: A bank statement or utility bill with your name and address on it.

Me: I don't have a utility bill. I've paid it and shredded it. Do you have an e-mail address where I can forward a PDF of my bank statement?

Discover: Umm, no you can not do that.

Me: I have electronic statements, so I'll just print off a copy and fax it in.

Discover: Umm, we can't take something that comes from a printer.

Me: (Thinking, "They'd never know the difference anyway, but I'm going to see how far I can take this...") So what would you suggest then?

Discover: We'd recommend that you go to your bank and have them print out a copy.

Me: (Wondering, "Should I claim that my bank doesn't have branches - like my fiancee's, USAA?") You are serious about this. It would have been nice if you could have mentioned it in any of the previous 5 phone calls.

It went on a little longer, but she did mention that my address is verified on my credit report. However, since I haven't lived here "long enough" (a timespan that is a Discover secret she couldn't disclose), it doesn't count. In the end, she was just trying to prevent identity theft. It's a noble goal, but at what point is too much. An identity thief would have to:

  • Verify my mother's maiden name and social security number (I used that on other calls where I didn't have my reference number handy) as well as my date of birth. This isn't the hardest thing to do, but it's certainly not common.
  • Change my address on my credit report. I've heard of mistakes on a credit report before, but I don't know if they've gotten an address wrong.
  • Obtain my most recent pay stub.

I can't believe they'd make it so difficult, especially when they send me no fewer than 4 applications a month in the mail. In the future I should spend more time reading these credit card reviews.

Last updated on October 27, 2008.

This post deals with: ... and focuses on:

Credit Cards

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15 Responses to “Credit Card Arbitrage”

  1. HMiller says:

    I absolutely agree that the way they handled verification is RIDICULOUS! That issue could have been cleared up in 1 phone call.

    However, the fact that they are requesting that information is not unreasonable. Since the Patriot Act, banks are required to obtain AND verify physical & mailing addresses, ssn, dob, name, ect. They are required to get information derectly from official sources (post office, cc companies, other banks) and thats why they were not able to take a statement printed from the computer. They would no longer be complying with the Patriot Act if they accepted that as a source.

    How they handled it was ridiculous though. All they had to do was call your bank WITH you on the phone, have you give security info to your bank and then have your bank verify your address & other info. One call would have handled it all for you. Unfortunately, the reps you talked to weren’t willing to go the extra mile.

  2. Foobarista says:

    As a fellow Valley denizen and fan of electronic banking, I often have the same problem with other areas. They expect everyone to work at a Fortune 500 company, write monthly checks to pay their electric bill like Grandma used to, and have paper bank statements that are carefully saved somewhere – and not on a keychain drive. One would think that someone in their bizdev unit would have figured out that this model started to die out around the time the Berlin Wall fell…

  3. […] The End Of My Credit Card Arbitrage (Or Why I Hate Discover) This is exactly why credit card arbitrage is dangerous – you’re adding a lot of risk and sometimes when you take on risk things outside your control happen even if you cover everything you possibly can. (@ lazy man and money) […]

  4. […] like too! The share function supports Digg, Reddit, StumbleUpon, and many more.Thanks for visiting!credit card arbitrage – lazy man is giving up on Discover. Will you continue with your arbitrage […]

  5. […] The End of My Credit Card Arbitrage – Lazy Man has had a hard time with Discover. Is someone trying to put the kibosh on his arbitrage? “¢ del.icio.us “¢ Digg it “¢ Netscape “¢ reddit “¢ […]

  6. As I see it, the problem isn’t the interest rate you are paying, or the way that credit cards are offered, or that your card hasn’t been issued yet. The real problem is that you aren’t addressing the root cause of the problem, your behavior. The problem is that you are spending more than you make and are expecting to prosper from it.

    (Editor’s note: My debt is incurred from an engagement ring purchase. Such purchase has made it possible for me and my fiancee to move in and save much more on costs of living. We’ve even moved together and both obtained high paying jobs and make extraordinary more money than we spend each month. I choose to keep this debt because I’m willing to spend 8% in order prefer to make a risk-adjusted 13% via Prosper. I will admit it made more sense when I could deduct the interest on my HELOC).

    The truth is that credit card companies are particularly good at two things: marketing and statistics. The statistics say that they are going to make money from you, one way or the other. In Vegas, the casinos make far more money from people who think they can count cards than they lose from people who actually can. Don’t think that the actuaries haven’t figured out that some people are going to try and play this game. Credic card companies make a lot of profit, and they don’t make it by giving money away.

    (Editor’s note: The difference between the two is that a person can ensure themselves a 95% chance of winning in the credit card game if they are willing to work and play by the rules. The best at the casino is somewhere around 50%. I was looking to take advantage of the 95% chance of winning because I’ve now played by the rules (paying on time etc.) for 14 years now. However, the “average” person doesn’t do this, which is where credit card companies make the money.)

    Look and see how long the rates last and if the entire balance is covered. Also, look at the fees (can be as high as 3%) and calculate the real costs. Seem OK? Now, look at the fine print and see if their is a universal default provision, where they can raise your rates arbitrarily for any reason whatsoever (such as a change in FICO). Now, consider that it is entirely possible that you could lose your job, have a major healthcare event, or something worse while this debt is owed. Yuck!

    (Editor’s note: Yes, I’ve looked at all these and applied for a card that other people have had success with. Also, I could always shift and use my HELOC to pay off the credit card in a major event. That would put me back where I was before… In the worst case, I would be no worse off, just wasted time.)

    Think of it this way … even at 0% you are losing the 5% you could be getting on your monthly payments by putting them into a good savings account, or the 10-12% you could be getting in the stock market. With your existing income, you should be able to pay off your debt very quickly, then start folding the money into your 401K or a Roth IRA. Build long term wealth, don’t just shift your debt around.

    (Editor’s note: I was trying to get their 0% rate so that I could pay off the 8% HELOC. That’s a guaranteed 8% savings to me, which is better than 5% in a good savings account. I wouldn’t put the money in the stock market, but even so, 10-12% is a high-end estimated percentage – I like to go with 8-9%. The stock market carries risk, so I wouldn’t put the free loaned money from the credit card company there. I’d take the sure 8% savings. I suggest reading How to Create a Money Farm to understand that I wasn’t just attempting to just shift debt around. I was building long term wealth. Arbitrage is a common way that people and many companies do that.)

    Peace and Blessings!

  7. Terri says:

    Good luck! Just 10 minutes ago I called Discover to close my brand new “transfer” card. I applied online, got “approved” message in my email the next day, and received the card, 2 days later. 3 days! When I opened it up the credit limit was $1000 less than the current CC account balance, which I had requested be transfered over. I called them up and was told that because I had not had a history with them for 6 months they would not up the limit; however, I should keep the card for 6 months and then they would up the limit, and I’d still have access to the 0% transfer for 6 months. I told the very polite young man on the other end of the phone that the whole purpose of my transfering was because the current company would not reduce my rate by 2% and waiting 6 months to take advantage of 6 months worth of 0% transfer was not acceptable to me either since I would be losing out on 6 months. He tried again to talk me into staying but eventually agreed to close the account with a promise of an “account closed” letter in the mail in a few days.

  8. hmmm…thats really strange. Its used to be a lot easier.

    I guess you’ll have to wait for a few months until your address is ‘seasoned’.

  9. […] Man And Money has The End of My Credit Card Arbitrage (or Why I Hate Discover). Stories like these are the reason why I don’t like trying new merchant relationships out. You […]

  10. […] The End of My Credit Card Arbitrage (or Why I Hate Discover) by Lazy @ Lazy Man and Money. Lazy rants about his (unsuccessful) attempt to get a Discover card for arbitrage purposes. I don’t know why Discover handled this in such an idiotic manner. Anyways, with Citibank removing the upper limit on balance transfers fees, (probably most other credit card providers will start doing it now), the future is not looking very bright for credit card arbitrage. […]

  11. Tim says:

    i know what you mean. you would figure that if you are “pre-approved” this would presumably mean that they verified some information already. “pre-approved” is complete b.s. and is just a marketing scheme. i applied for discover under the guise of “pre-approved” and it still required up to 30 days to approve. figure that one out. ridiculous. i wouldn’t use discover ever, but i’m being lured in by arbitrage as well.

    i’m thinking of stopping arbitrage all together, simply because i’m getting to uncomfortable with the debt portion of the balance sheet which is all arbitrage.

  12. […] balance transfers a lot harder through increased fees. It’s yet another reason why I ended my credit card arbitrage […]

  13. […] I used one more 0% balance transfer offer from Bank of America last week, Lazy Man at Lazy Man and Money is quiting the credit car arbitrage game, which has been fun so far for me in terms of the free loan I received. But if it comes with a high […]

  14. I keep reading about all this profit making on arbitrage, but does it really work all that well? I recently tried it and the experience wasn’t that great. I almost lost money instead of made money. It seems risky in that credit files are loaded up with credit capacity that takes a long time to disappear, and there is the risk that you’ll somehow end up paying credit-card interest rates. Maybe you guys are able to find better credit card deals than us Canadians.

  15. Maria says:

    Do yourself a favor and get rid of your Discover Card. Take this as a warning. They will use anything to up your interest rate. Even if you have other cards with amounts due. They wanted to raise my rate to 17.99% because I had other cards. Little did they know all my cards were PAID OFF IN FULL. Shread the card ASAP if you have one.

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