Arbitrage is defined as the nearly simultaneous purchase and sale of securities or foreign exchange in different markets in order to profit from price discrepancies.  Of course, with banks in the US so willing to lend out tens of thousands of dollars at 0%, why bother going out on the forex market to do an arbitrage deal?

Today, I signed myself $24k from a balance transfer check and deposited into my bank account.  The goal here is to transfer the funds over to a high yield online account (e.g. HSBCDirect/Emigrant Direct) and earn the current prevailing rates of 5.05%+.  The balance transfer is only good for 6 months so I’ll earn 1/2 * (24,000 * 0.0505) = $606 assuming the rates don’t go any higher.  After paying a $75 fee for the transaction, I’ll net $531.

Although the amount gained here is relatively small, it is a step toward testing a more ambitious theory:  Is it possible to have a 0% to 3.99% mortgage using credit cards?  The stakes are high of course because a single late payment will usually rocket the rate to 20% and up but if you keep enough cash reserves it can easily be paid off.   We’ll see how the next 6 months unfolds with this arbitrage deal.

As an added bonus in using credit cards at 0% interest, I would be trading unsecured debt with a secured & protected asset.