Ben Bernanke’s In My MailBox and I’m Borrowing All His Money

by JT McGee

Ben Bernanke is in my mailbox with promotional APRs.Have you noticed Ben Bernanke in your mailbox lately?

I have.

In the past month I’ve received no fewer than 20 zero-interest credit card offers for new cards. At the same time, I’ve also received new balance transfer options from my existing lines of credit. Three of them, to be exact.

These are the available opportunities, in order of their receipt:

  1. 0% for six months, plus a 3% balance transfer fee. (This one hit the trash can quickly.)
  2. 0% for 18 months, plus a 3% balance transfer fee. (This one got used.)
  3. 3.99% for 24 months, plus 3% balance transfer fee. (Trash can.)

So I took advantage of #2. I was able to borrow several thousand dollars (I always write these bad boys for the whole of the credit line) for an effective APR of 2% per year. I mean, you gotta be kidding me! Two percent per year?

Making Use of Cheap Capital

How am I going to deploy this newfound cash? Well…

I have enough saved to pay for college at any given time, and my expenses are equal to about 1/4th of my total income. I’m asset rich, but cash poor, really, since probably 90% of my net worth is tied up in my own business.

Even still, cash flow usually isn’t a problem. But, in borrowing cash for 2% per year, I’m getting a hell of a deal. For one, I get to push off my college expenses, and finance them with credit that can be discharged should worse come to worst.

Stafford loans at 6.2% or private loans at 4% (which usually want a cosigner, F that) or credit card balance transfers at 2%? That’s not a tough decision at all.

Leveraging Up

Recently, I mentioned that I would be pursuing a new entrepreneurial endeavor, and this cash will come in handy. In the past week I spent $1200 toward that end, and future capital infusions will be certainty.

However, I’m looking at an ROI of at least 300% per year on my $1200 investment, which is way more than 2%. This infusion of cash also allows for long-run cost savings in direct capital investment into my business. It’s a deal made in heaven. Cash flows will pay this credit card off in no time, though I’ll wait until the last month to pay in full.

I told my mom about my finances (bad move) and she Dave Ramsey’d me. Go figure. “OMG YOU USED ONE OF THOSE CHECKS THEY SEND YOU?!?!”

“Hell yeah, mom. It’s free money!”

This is why I dislike the disliking of credit cards. I mean, they’re giving me practically free money after inflation adjustment, and I’m not going to be (entirely) wreckless with the money. So why not borrow capital for 2% per year? The 1-year LIBOR sits at .72%. My credit card company isn’t getting rich giving me this money; they’re hoping I’ll screw up.

Wrong guy, Mr. Credit Card.

Readers,

Ben Bernanke is in your mailbox, no doubt about it. Are you making use of these low rates?

Or are you passing up one of the best financing opportunities available (no recourse consumer debts) at zero real interest rates?

Even if you don’t earn 2% per year on the money, would you take it for the liquidity?

{ 14 comments… read them below or add one }

Dave @ Money In The 20s July 7, 2011 at 05:35

I recently got an offer from one of my existing credit cards for 0% balance transfer for 12 months with a 3% fee ($5 minimum fee) and 0% on all new purchases for 12 months. I transferred $167 to the card so my fee was only $5 and I am enjoying the 0% on new purchases for 12 months!

I love taking advantage of credit card offers when there is a good one.

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JT McGee July 7, 2011 at 13:30

Zero percent credit cards for 12 month offers are great. I like taking advantage of credit card offers when I get a good one, although I should probably cut back on the search for new credit lines. 😉

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101 Centavos July 7, 2011 at 06:35

I personally wouldn’t do it, but GREAT post title! That guy is everywhere….

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JT McGee July 9, 2011 at 07:51

Sure is. Everywhere you find 0% interest rates, it’s guaranteed the Bernanke is hiding close by.

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aaron July 7, 2011 at 08:43

HELL YEAH!

two months ago i had to replace my central heating and a.c. it set me back $4500. it wasn’t my most exciting purchase, but it gave me some satisfaction when i paid with one credit card then immediately switched the balance to another credit card that offered 0% for 18 months with a 4% transfer. it would be great to have just paid cash or paid the credit card off immediately, but some of us aren’t that rich (yet!)

p.s. damn you guys for getting 3% =b

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JT McGee July 7, 2011 at 13:31

Even 4% isn’t too shabby for 18 months. I’m kinda peeved at how 3% fee offers are going the way of the dinosaur since the passage of the CARD Act. 4-5% are becoming the new normal, which isn’t nearly as exciting as a 3% offer.

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No Debt MBA July 7, 2011 at 09:06

I’d take advantage of the offer if I had a safe investment that beat the fee by a good amount. I haven’t seen any 18 mo CDs for more than 1.5% so I’m out for now even for paying for grad school. If I were interested in deferring costs I could take out subsidized Staffords with no interest while in school and a 1% origination fee but over my two years I might net $100-150 over paying cash and it would be a lot of time and hassle. Cash for me, for now.

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JT McGee July 9, 2011 at 07:52

Yeah, the whole borrow cheap with balance transfers for CD arbitrage is gone for good, I think. Still, I like low interest balance transfers for cheap liquidity, if for no other reason.

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Jonathan July 7, 2011 at 10:10

I’d consider it if I could get a whole lot more than my credit lines would allow. As it is, though, our real estate purchases still have to be financed, and the banks don’t want to see your down payment coming from a credit card transfer. I have little interest in messing around with a transfer like that for a few thousand dollars. Call me when it’s $200k :).

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JT McGee July 7, 2011 at 13:28

I can definitely understand this. I’ll be sure to call when it’s $200k, because I’m pretty sure I’ll never have to make that call, LOL.

From a business and personal perspective, lenders are tight unless they get their name on a title to real property. The easy money of the boom era is gone, at least in the sense that it isn’t available to individuals.

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Financial Uproar July 7, 2011 at 15:13

I’m doing this in a slightly different way.

I have a variable rate mortgage, which is a 5 year term at prime minus 0.6%, meaning I’m paying 2.4%. I’m not going nuts paying down my mortgage because the rate is really low.

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JT McGee July 9, 2011 at 07:53

Wow. Yeah, I wouldn’t be too interested in paying that debt off. I bet you could find at least 325800340 other blogs that might recommend you do, but why bother? 2.4% per year is hardly a debt; it’s more like free money.

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Greg July 9, 2011 at 10:14

It is free money when you consider inflation!

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JT McGee July 9, 2011 at 23:25

Absolutely. It’s hard to turn down money that’s so inexpensive. Adjusted for CPI it’s probably a negative real rate.

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