Credit Card Arbitrage: Look before You Leap

Personal Finance

Many enthusiastic ad shrewd investors seem to have made good profits by utilizing the attractive offers of the credit card companies. However, credit card arbitrage may offer easy money; it must be used only when you are sure of the pros and cons.

All of us like to make some quick bucks or save some extra money and hence get drawn to methods that seem like an easy way to accumulate wealth. However, as is often said, nothing comes free in this world and it is unlikely that you will be able to make a lot of money without any efforts. This includes things like credit card arbitrage that promises fund at almost a zero cost, but before you jump at the extremely tempting offer, it’s important to understand what it means and how it works. Failing to do this will not only erode your profits, but in fact cost you much more than you can imagine affording.

Well, there are many people who make profit using credit card arbitrage and hence feel that this is a good way to get funds at low or no cost at all and make good profits. But is it really so? For a lot of people this may just mean a road to accumulate more debt and that too at a pretty expensive rate. You may not just end up paying through your nose, but also hurt your credit score badly. Therefore, make sure you understand carefully what you are getting into when you opt for this route to earn some quick profit.

How does it work?

The credit card arbitrage process is aimed at getting profits by using the low cost cash advance or balance transfer funds for investments in an option that gives good returns over and above any costs that you may incur. As arbitrage involves making a profit from the price differential of buying and selling an investment, to achieve a successful credit card arbitrage you will have to invest the money in an option that gives a return at substantially higher rates of interest that what you will be paying for. Therefore, you must find out some option that pays a considerable high interest rate so that you can invest the money into it during your initial offer period and when that expires, you can withdraw the money and repay the credit card debt and keep the rest balance as your profit.

Sounds great, doesn’t it? Well, yes, but the situation is quite hypothetical, especially in today’s economic world. Though people favoring this method feel that this provides capital at very nominal costs, finding reliable investment options that are likely to offer returns higher than credit card charges are not so common these days. Well, if the borrower does get a chance to pay back on time and make a profit, then it will be beneficial as he can boost his credit score also.  However, this can be a big gamble and can prove very risky. Let us take a look at some of the dangers associated with this method.

Leave a Reply