Top 3 Reasons Why You Should Do Credit Card Arbitrage

1) The cash can be excellent if you treat it seriously. I’ve read articles in mainstream magazines and newspapers about doing arbitrage with only a card or two. Yes, it probably won’t be worth your time if you treat is as a “neat trick” by only using the occasional 0% APR card offer that comes in the mail. But there is good money to be made if you manage it as a organized side-hobby. There are people with six-figures in online banking accounts using this strategy. This does not even take into account sign-up bonuses for cards, which can add up to hundreds or even thousand dollars per year.

And thing that is great about credit card arbitrage is that it scales well. Managing $100,000 does not take much longer than managing $10,000.

There is also a snow-ball effect as time goes on. One of the many variables that banks use when the calculate whether to increase your credit line is your current total. In essence, credit begets more credit. Many arbitrageurs are able to obtain a credit line at a multiple of their household income after several years because of this.

2) Massive credit line. As previously mentioned, arbitrageurs frequently are able to obtain credit lines the size of a multiple of their household income. Having a huge credit line is a benefit that will last years down the road, even if you’ve stopped doing arbitrage.

• This credit can be critical in starting a business. One of the main reasons people don’t act on the entrepreneurial urges is the lack of startup capital. Getting a business loan without any prior experience is almost impossible. Credit cards don’t have the best interest rate but businesses that were started on them are not uncommon - read the Forbes 400. Also, one of the most frequent causes of the failure of business is undercapitalization. For business owners, it might be wise to stock up on personal credit to use if an unforeseen cost arises.
• 30% of a credit score is based on credit utilization percentage. So by increasing your credit line, you’ll make your credit score more “durable” to future increase in debt.
• I have a friend who is a financial adviser at Merrill Lynch. One of his suggestions that many of his wealthy clients choose to act on is opening a home equity line of credit (HELOC) for emergencies. If a large sum of cash is immediately needed, the client is able to tap his or hers home equity instead of initiating a fire sale of stock and bond assets. Of course, HELOCs have a lower interest rate than credit cards. But HELOCs are limited to the amount of home equity one has and have fees. Ideally, this emergency line of credit would never be used.

3) Become knowledgeable about credit and get your financial life in order. Credit scores are increasingly important - not only do they affect what one pays for loans but credit checks are now being used to screen tenants and job applicants. The financial illiteracy of the typical American is frightening. A side benefit of playing the arbitrage game is that you learn what should have been taught to you in high school.

The game requires you to meticulous about payments therefore forcing you to get your financial life in order. I’m a lot more organized about money after playing this game.