DISQUS

J at IHB and HFF · 2 years ago

Hello. I have seen only 0% balance-transfer offers, and most people's balances are for past purchases of goods and services. How do people do the credit-card arbitrage without buying anything? Are there any 0% offers on cash advances? Do arbitragers pay the typically hefty price to incur a cash advance and then transfer to another card? Thank you.

Flexo · 2 years ago

J: When you do a balance transfer, you tell the new credit card how much to pay the old credit card. Say the old credit card doesn't have a balance. The new card pays a check (or ACH) to the old credit card creating a credit balance (money owed to you) on the old credit card.

The individual then requests a refund check for the credit balance.

That's how 0% balance transfer arbitrage works. You end up with the cash. It's basically a cash advance, but not executed as such, which is why some credit cards won't allow you to request refund checks for credit balances.

Modern Worker · 2 years ago

76% of all statistics are made up anyways... :-p

J at IHB and HFF · 2 years ago

I knew the arbitrage exploited teaser rates but I did not know that it involved fraud. Thank you.

Flexo · 2 years ago

Where does fraud come into play? There is nothing fraudulent about balance transfer offers or the participation in such offers. The credit cards don't care if your balance transfer check pays off an actual balance. If they were concerned, they would verify the balance before sending the check. Some cards are concerned about supplying checks back to the customer for credit balances, as I've discovered, so as not to appear involved in illegal money laundering, but there's nothing illegal about balance transfer arbitrage.

J at IHB and HFF · 2 years ago

Hello. I was thinking of your example where there is no balance to transfer.

I am assuming that a "balance transfer" is supposed to pay for a balance, like a "home mortgage" is supposed to pay for home.

In both cases, a bank is paying a stated value of the balance/home (stated by the applicant).

Does anyone arbitrage with accurately-stated balances? If so, how do the costs of generating the initial balance affect the ROI?

Thank you.

The Happy Rock · 2 years ago

Statistics are often misused and misquoted. I like nay discussion that helps up to practice thinking critically about any statistics.

I do agree that $9,300 could be misleading. If a few 'rich' people carry 200k in credit card debt the average could be skewed much higher than normal person's debt. Sometimes the median helps give us some perspective on that type of skewing.

Nice discussion.

equipmentleasing · 2 years ago

I personally don't trust surveys unless they were done with lie detectors (im not even sure of that). Who will validate them anyway? It's a matter of believe it or not really.

Besides, if not all most don't want to tell how bad their credit is.

The 0% balance transfer info is new to me.. thanks for sharing!