Wednesday, November 28, 2007

Finally, a PF post

It has been a while since I've blogged a real personal finance post, so I'm going to try this again.

Recently, I've finally put into place my free and no-risk interest income from debt.

Having read enough of these posts on other blogs, I know its going to start off looking like another convoluted get-rich quick scheme. It is not. This is neither quick nor easy.

  1. First off, you need to have good to excellent credit.
  2. Second, credit companies or banks must be willing to lend you money at no interest for anywhere between 6-12 months.
  3. Third, you have to know a bank willing to give you a reasonable 3-5% interest rate.
  4. Finally, you need to be able to handle a sizable debt load without any large debt needs in the near future.
This is how it works:
  1. Credit card company X sends you a letter: "You can get $Y amount of money to pay off your other credit card bills for Z months for 0%"
  2. Say you are given a $10,000 line of credit for 6 months at 0%.
  3. You find a bank willing to give 4% APY.
  4. You take credit card company X's loan and deposit into the bank for 6 months.
  5. At the end of 6 months, you have collected $200 in interest.
  6. You empty your bank account, pay back the $10,000, and keep the $200 for yourself.
Of course, you have to be sure to pay it all back before your 6 months is up, or you'll be hit by massive interest rates (probably 25% or more).

Ironically, as you take on more debt load, you'll get even more debt offers. These interest payments start small, but it is not unheard of for the debt load to go up to $100,000 to $200,000 at a time.

Given the same 4% APY for 12 months on $200K, that's $8,000 a year for free.

Now who can't use $8,000 a year more?

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