Lazy Man and Money

Credit Cards For Those Who Carry A Balance… or Who Like 5% Cash Back Rewards

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It isn’t often that I write about credit cards. I have a couple of credit cards that I’ve had for about 5 years with really good cash back rewards. I get 4-6% off of almost everything that I buy from groceries, gas, and restaurants to home improvement and office supply stores. Unfortunately, those cards are no longer offered, and it is pretty hard to find something as good in today’s credit environment. However, I think I might have found something that’s pretty close.

As always, with credit cards, I recommend that you pay off the balance each month. It’s not a reward if end up paying fees. However, for those who already have a balance, I have a little help for you today in the form of two cards that may help you through a balance transfer:

Discover: No Balance Transfer Fee Card

If you carry a credit card balance and are paying interest on it…. stop! You can transfer your balance to Discover’s No Balance Transfer Fee Card . Many cards have a 5% balance transfer fee and then give you some time with a 0% APR rate before they bring it up to the typical (high) rates. That 5% balance transfer fee can scorch you for $200 on a $4000 balance. However, this card has no balance transfer fee and a 0% APR interest rate for a whole year. If you are carrying a balance, this is a great way to save some money while you pay it off.

As an extra bonus new purchases for the first 12 months also have a 0% APR. However, remember, the plan here is get rid of the balance, not add to it.

This offer is available for a limited time, so as Beyoncé says, “Put a Ring on It.”

Discover: 24 Month Balance 0% APR Transfer Card

I don’t like this deal as much as the one above. Why? Well it has a 5% balance transfer fee (or $10 whichever is higher). What do you get with that fee? You get 24 months a 0% APR interest rate. Over the last few years, I’ve successfully killed most of my mathy brain cells with beer (so please correct me in the comments), but it seems like this would be equal to taking your current credit card balance and only paying 2.5% interest per year over two years on it. Given the annual rates on credit cards, locking yourself into this for two years would seem to be quite helpful while you are digging out of a debt hole.

In addition to that, new purchases for the first 6 months also have a 0% APR. As I said with the other card, stop buying stuff until you pay the balance off :-).

If this sounds like something that could help you out, sign up for the Discover: 24 Month Balance 0% APR Transfer Card now.

Discover Rewards

As I mentioned at the beginning of the article, there are rewards for these cards as well. You get 5% cash back on the following:

  • January”“March – Travel and Restaurants
  • March – Grocery and Drug Stores
  • April – June Home and Fashion
  • July – September – Gas, Hotels, Movies and Theme Parks
  • October – December – Restaurants and Fashion

That’s a nice perk. It isn’t exactly a game changer since deals change each month and I find few retailers take Discover. However, that July – September 5% cash back just screams vacation to me (maybe as a reward for paying off 75% of the balance you transferred). Road trip to Disney World or Disney Land anyone?

Death of the Balance Transfer Arbitrager

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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.