Consumerism Commentary - Latest Comments in CitiBank’s New Fee: Forget About Credit Card Arbitrage

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

vectro — Thu, 12 Jul 2007 16:13:22 -0000

Also, the interest payments on the credit card should be deductible as investment interest expense on line 13 of Schedule A, assuming that you itemize.

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

Jonathan — Fri, 30 Mar 2007 02:29:09 -0000

I got this update to on a couple of my cards. This is for your existing account, and hasn't changed the actual intro offers yet on most Citi cards.

Also, you can choose to simply decline the change in terms and your current agreement will stay in place for 1 year. After that, they'll close your card. But if you just wanted the intro offer, you'll still get all of it.

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

Sean — Thu, 29 Mar 2007 11:32:57 -0000

Ah, it was the lack-o'-sleep thing... I just missed the $833/month paydown. I'll echo tinyhands -if you're playing arbitrage, paying it down with equal monthly payments wouldn't be playing the game effectively.

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

Harlan Landes — Thu, 29 Mar 2007 11:22:04 -0000

tinyhands: I'll check your strategy in my spreadsheet later to see how it works out, but that could significantly improve your chances of coming out on top -- it didn't occur to me to make minimum payments plus a balloon payment.

Sean: You wouldn't earn $505 because you're paying off the credit card from your savings every month. You could only earn $505 if you kept the entire balance in your savings for the full year.

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

Sean — Thu, 29 Mar 2007 11:12:15 -0000

I may have a serious case of lack-of-sleep going on, but wouldn't you earn $505 from $10k in an HSBC account in a year (slightly less if you're paying the monthly minimums out of that total)?

Of course, the cap removal still seriously lowers any potential gains, but at least it's still a gain:

$505 - 126.25 (aka 25%) => 378.75
$378.75 - 300.00 (transfer fee) => $78.75

Personally, tying up $10k on a credit card to earn $79 is definitely not worth it to me. But then, it wouldn't be worth it at $379 for me either...

Re: CitiBank’s New Fee: Forget About Credit Card Arbitrage

tinyhands — Thu, 29 Mar 2007 11:11:41 -0000

Question/quibble regarding your arbitrage strategy-
You mention paying off a $10,000 balance in 12 equal payments of $833. Why don't you make the minimum payment (2% of the balance) and then make a balloon payment at the end? If you keep the average daily balance higher (via the minimum+balloon strategy) you'll earn more interest. If I've made the right assumptions, almost double.

This, of course, has nothing to do with the new CitiFees or the tax bite.