Jim writes about personal finance at Blueprint for Financial Prosperity.
A couple years ago, you couldn’t cross the street without being hit with an offer of free money from a credit card. My list of no fee 0% balance transfers was so long I left some cards off simply because I was too Lazy to add them. A housing slump, some credit “concerns,” and two years and the spigot of easy credit has slowed to a trickle. Now, 0% APY balance transfers with no fee are extinct along with the animal it created – the Balance Transfer Arbitrager.
I remember when people first started doing them. You had stories of consumers getting dozens of cards (the term App-o-rama referred to the act of applying for a lot of cards in a short period of time, so quickly that the cards never made it onto the report until after the App-o-rama) just to get the balance transfers. I even got in on the game, getting about $15,000 in credit card debt and earning a little interest on the side (made for some interesting blogging fodder). However, as the deals slowly dried up, so did the easy money.
What does this mean for arbitragers? Enjoy whatever terms you have right now because that’s the end of it. Like an addict, you could move on to cards offering 0% on purchases but that easy balance transfer is done for at least a little while. You won’t find a no fee offer but if you look hard enough you can find ones with a 3% fee and a cap, making it a pretty good deal (relative to the ones with no cap).
That being said, I think balance transfer arbitrage is dead in the long run. Even the best high yield saving accounts are offering 3.50% APY and 3.75% APY interest rates and that leaves you a slim margin of half to three-quarters percent (or more depending on how much credit you get, but it’s not going to be much). Is that even worth the effort? No way.
You have to love capitalism though… the arbitrager made his money while he could (most knew this wasn’t sustainable). The credit card companies also made their money (they earn plenty on transaction fees and the interest of those who didn’t pay off the bill). Everyone is happy (mostly!).
Jim writes about personal finance at Blueprint for Financial Prosperity and is a huge fan of capitalism, even the capitalism that lets Canadians sell tickets to tourists to club baby seals.