Most of us find temptation once per week or so in the form of a “zero percent balance transfer” offer that comes to us from one credit card company or another. The offer is usually tempting, particularly if you are carrying a balance.
One man, according to this article, has taken the 0% interest offer to a new level. He is intentionally opening up credit card after credit card with the sole plan of not paying off his balance (of $40,000+) so that he can keep the cash (which he has!) and invest it.
In theory, this is brilliant — the credit card companies are not charging him any interest and his money is appreciating due to various investments. But there are a ton of risks to this strategy:
…most zero percent deals are salted with land mines. Make a payment late, for example, and the sky-high go-to rate may kick in immediately.
The reader argues he comes out ahead by earning 8 percent to 9 percent on his investments. But to do that, one generally has to take some risk - by investing in stocks or stock mutual funds, for example.
What if the market plunges? The reader might be left with too little to pay off the card debt.
…the reader’s strategy overlooks the fact that the credit rating agencies know what he’s doing - they see everything.
Opening numerous card accounts, and frequently shifting money among cards without reducing the overall debt is a red flag that could hurt his ability to borrow money in the future.
After all, the card issuers don’t value customers who don’t pay interest. And lenders know from experience that people who use transfer after transfer after transfer to postpone paying off their debts often end up in a box and never pay what they owe. So lenders don’t want this kind of borrower.
It’s an interesting concept, but it makes you play with fire. That’s a big risk to take. Take those kinds of risks at your own peril.
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