I just wiped out most of my gains from the past 10 months of 0% balance transfer abritrage!

In the process of updating my excel spreadsheets for May I was checking my email and noticed that I had received an email from Bank of America letting me know my next statement was due.

I didn’t think anything of it except that I noticed that the minimal payment had jumped from $320 to over $800. Not a good sign! I quickly logged on and pulled up the most recent statement and confirmed that they had bumped my balance transfer rate from 0% to 19.99%. OWCH!.

I keep good records and I was sure that I had not initiated these transfers until July 2007 which I quickly confirmed. When I went back and read the details of the offer it was clearly stated that the offer ended in May 2008.

Apparently I should read some of my old posts more often. If you read the last line of this post, it is pretty clear that I knew that the balance transfer expired in May.

A phone call to customer service was to no avail.

For those that are keep track at home, the 2 results of my balance transfer arbitrage:

About $500 in interest

A much lower credit score!

I guess there is some truth to the rumors of doctors being bad with their money!

Even when I was at my personal finance low 2 years ago with over $14,000 in hard earned credit card debt, I never thought I would let my debt get to such levels.

The difference is that this $45,000 is now earning me about $180/month in pre-tax interest. After standing on the sidelines waiting for a good opportunity, Bank of America was very kind to me in July and sent me a 0% balance transfer offer. I quickly turned this offer into a $19,500 balance transfer.

That balance transfer wet my appetite for other convenient balance transfer offers. After reading a couple of other blogs I found a way for me to do this without applying for a large number of new credit cards:

• I first asked to have my credit limit increased on my other old BoA credit cards.
• I then had the credit limits from these two cards transfered over to the credit card with the 0% balance transfer offer.
• I then used this increased line of credit on my 0% BoA card and transfered this to my online savings account.

I now have just over $45,000 in credit card debt earing me cash for the next year. I think this is as far as I am willing to go unless another great offer falls in my lap. So far this has been a low effort, high reward way for me to earn a couple extra dollars each month.

After spending the past 2+ years aggressively paying down my credit card debt I have managed to eliminate the balances on all of my credit cards except one. Instead of closing my old accounts I selectively kept them open to help Improve my credit score.

These were cards that:

1. I have had for at least 5 years – They add history to my credit report
2. Have high credit limits – They keep my credit utilization ratio low

After watching many other bloggers and their success with this technique I was waiting for a opportunity to start with a minimal effect on my credit score.

Bank of America was the first to step up offering 0% on Access checks and balance transfers till May 2008 with a $75 balance transfer fee. Interestingly this was only offered on 1 of my 3 Bank of America credit cards. The other two were still offering 1.99% on balance transfers.

It couldn’t have been any easier. Now until May 2008 I just need to be vigilant about paying my bills on time and making sure I don’t get any universal default charges.

I was put through to an “account manager” after only 2 rings and she quickly activated my card and explained the problem with the computer system. Then she proceeds to attempt to persuade me to take advantage of my special low rate for balance transfers and access checks to pay off some of my high interest debt. This is pretty normal and I explained that I have paid off almost all my credit card debt and it was at 0% which was better than what they were offering.

Then she suggests that I instead take advantage of the offer to invest the money to get a higher rate of return. I was completely surprised. I know that these account managers likely get a commission of some sort for each person they get to sign up; but to have her suggest to basically take a loan against a credit card to invest in a better yielding asset just proves to me that the credit card companies are truly pushing hard to keep the average American maxed out.

I know that many individuals have been able to make this work to the tune of a couple hundred dollars of profit a month but I don’t feel that it is worth the effort. I have enough debt as it its and work in a field that helps me truly appreciated the uncertainty that there is in life.

One question that is soon to arise is whether to purge duplicate bank accounts.

Multiple other bloggers have written posts about this.(see joint accounts)  It is one of the common issues that arrises as people get married.

My wife and I decided for the time being that we will keep our separate checking accounts.  We will do this for the time being for a few reasons:

1. We both use the same bank with direct deposit and free checking so it doesn’t cost us anything to keep the accounts open.
2. We converted both of the accounts to joint accounts so both checking accounts show up when we logon to pay bills etc.. This makes for easy communication about where we need to move money if we need to. 
3. We will each send the (hopefully) extra money each month into a joint savings account. 

One account that we will use jointly however will be a credit card account.  This will allow us to accumalate points etc.. much more quickly than we did before.  This will also make it easier to track our spending with only one credit card statement to download and track.

I do think that a good reason to maintian some individual accounts is that if something were to happen unexpectanly to one of us, the other would not need to rebuild a credit history etc…

Any other thoughts on the subject?

They have evolved from basic debt instruments available to a select few to an essential tool of modern life that can be used for almost anything.

With an increased awareness of the costs of my debt, I found this to be an interesting article suggesting a creative way to use credit cards to save money. The article basically suggests using a balance transfer from a high interest home equity loan using a fixed 3.99% offer from a credit card.

This is the direct opposite of the advice you hear from most debt management professionals. All those “consolidate your credit card debt with a home equity loan” comercials make this counterintuitive. The numbers don’t lie however, and this could be a good way to save money on fees and interest.

Or I could just be trying to make myself feel better about my credit card debt.