Author Topic: Convenience Checks Arbitrage  (Read 23369 times)

rawraw

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Convenience Checks Arbitrage
« on: April 11, 2013, 05:57:26 PM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

« Last Edit: April 11, 2013, 06:15:40 PM by rawraw »

Fred

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Re: Convenience Checks Arbitrage
« Reply #1 on: April 11, 2013, 07:06:23 PM »
But I should make around a $1000 spread for the 1.4 years.

Why not?  ;D

A friend of mine plays this zero-percent game all the time; and he was able to save quite some money.

Just make sure you close your position at least 2 weeks before the due date.  Last time I got charged from them claiming that my check did not arrive in time (even though I made sure I sent it early), and the due date was a holiday.  I fought and I won; but I am not a player anymore.

You might also be interested in this: http://www.bankrate.com/finance/credit-cards/tips-0-credit-card.aspx

rawraw

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Re: Convenience Checks Arbitrage
« Reply #2 on: April 13, 2013, 10:17:04 AM »
Thanks for the link!

Started today.  The bank almost put 7 extra days of hold on my money because of the type of check it was.  Good thing I have knowledge of Reg CC, so they didn't screw it up and cost me float.

Cries

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Re: Convenience Checks Arbitrage
« Reply #3 on: April 13, 2013, 10:06:32 PM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014. 

rawraw

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Re: Convenience Checks Arbitrage
« Reply #4 on: April 13, 2013, 10:21:59 PM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014.
US Bank.  It's attached to the best rewards card currently available (although its getting modified downward soon).  If you don't have it and are into rewards cards, check it out.  I've made $700 in 3 months with this reward structure (Currently getting 6.50% cash back on restaurants and hotels.  I travel frequently for work)

https://cashplus.usbank.com/


Cries

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Re: Convenience Checks Arbitrage
« Reply #5 on: April 13, 2013, 11:21:53 PM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014.
US Bank.  It's attached to the best rewards card currently available (although its getting modified downward soon).  If you don't have it and are into rewards cards, check it out.  I've made $700 in 3 months with this reward structure (Currently getting 6.50% cash back on restaurants and hotels.  I travel frequently for work)

https://cashplus.usbank.com/

Didnt they charge you a huge amount in transaction fees upfront?  Looks like most of these are structured to charge you between 1% and 5% of the check.

rawraw

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Re: Convenience Checks Arbitrage
« Reply #6 on: April 14, 2013, 08:38:17 AM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014.
US Bank.  It's attached to the best rewards card currently available (although its getting modified downward soon).  If you don't have it and are into rewards cards, check it out.  I've made $700 in 3 months with this reward structure (Currently getting 6.50% cash back on restaurants and hotels.  I travel frequently for work)

https://cashplus.usbank.com/

Didnt they charge you a huge amount in transaction fees upfront?  Looks like most of these are structured to charge you between 1% and 5% of the check.
4% fee up front.   Spread over 1.4 years, pretty great for an unsecured loan.

Zach

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Re: Convenience Checks Arbitrage
« Reply #7 on: April 14, 2013, 09:54:12 AM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014.
US Bank.  It's attached to the best rewards card currently available (although its getting modified downward soon).  If you don't have it and are into rewards cards, check it out.  I've made $700 in 3 months with this reward structure (Currently getting 6.50% cash back on restaurants and hotels.  I travel frequently for work)

https://cashplus.usbank.com/

Didnt they charge you a huge amount in transaction fees upfront?  Looks like most of these are structured to charge you between 1% and 5% of the check.
4% fee up front.   Spread over 1.4 years, pretty great for an unsecured loan.

You could just open a new LC account and use the paypal/credit card funding option and not pay any fee, while probably getting to earn cash back on your purchases...

rawraw

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Re: Convenience Checks Arbitrage
« Reply #8 on: April 14, 2013, 12:29:59 PM »
I received some convenience checks today from one of my credit cards.  It has 0 APR until October 2014 and a 4% fee.  I'm planning on taking about half of my credit line and deploying the funds in LC.  The financing comes out to a very cheap unsecured debt as long as I can close the position out by the end of October or November of 2014.  Anyone else employed this strategy?

The amount I'm investing I already have in cash in the bank, in case I need to cancel the position immediately.  But I should make around a $1000 spread for the 1.4 years.

Rawraw, which bank offered you this deal?  I bank with BAML, Capital One, and JPM.  None of them have offered me 0APR for 18months, although I have received several offers for 0APR til january 2014.
US Bank.  It's attached to the best rewards card currently available (although its getting modified downward soon).  If you don't have it and are into rewards cards, check it out.  I've made $700 in 3 months with this reward structure (Currently getting 6.50% cash back on restaurants and hotels.  I travel frequently for work)

https://cashplus.usbank.com/

Didnt they charge you a huge amount in transaction fees upfront?  Looks like most of these are structured to charge you between 1% and 5% of the check.
4% fee up front.   Spread over 1.4 years, pretty great for an unsecured loan.

You could just open a new LC account and use the paypal/credit card funding option and not pay any fee, while probably getting to earn cash back on your purchases...
Credit card isn't 0 APR.  This is a different kind of balance under the credit card, which is 0 APR.  But that is an interesting idea -- if the next rewards card I get is a 0 APR for 12 months deal, I may have to do that. 
« Last Edit: April 14, 2013, 12:35:55 PM by rawraw »

rawraw

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Re: Convenience Checks Arbitrage
« Reply #9 on: April 16, 2013, 07:15:58 PM »
Figured I might as well update with this thread on my strategy.  I decided on using $7,500 from my Credit Card Limit to fund Lending Club.  I wanted to stay with an amount that I had enough cash to close the position if needed.  Given I'm a young one, I never know what life may throw at me.

I transferred the first $5,000 into LC today.  I'm going to transfer the rest on Friday, when the hold expires.

Cries

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Re: Convenience Checks Arbitrage
« Reply #10 on: April 16, 2013, 10:16:44 PM »
I'd love to hear how quickly you can get fully invested. 

Please update us with what size notes you're buying ($25, $50, etc) and how many weeks it takes. 

rawraw

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Re: Convenience Checks Arbitrage
« Reply #11 on: April 19, 2013, 04:19:54 PM »
The first $5,000 is in my account today.  I'll update how long it takes to get fully invested.

brycemason

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Re: Convenience Checks Arbitrage
« Reply #12 on: April 19, 2013, 04:38:39 PM »
Go go leverage! It's hard to execute this strategy long-term because presumably you'll have to make payments on the CC. I suppose you could use principal + interest payments to make the payments, as the 3-year LC term is less than the CC minimum payments... Front-load interest for the win!

New Jersey Guy

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Re: Convenience Checks Arbitrage
« Reply #13 on: April 19, 2013, 05:09:06 PM »
After all the discussions about borrowing money to fund LC notes, your approach spooked me.  I might be aggressive, but I like being aggressive with money I actually own.

Good Luck Buddy! You're opening new doors.  Keep us posted!

(Oh, by the way.  Let us know if your credit score ends up taking a smack, especially if you exceed that 33% utilization mark.  This could be one downside to your strategy.)
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Fred

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Re: Convenience Checks Arbitrage
« Reply #14 on: April 19, 2013, 07:08:30 PM »
Let the game begin ....

I honestly think this is a good arbitrage risk to take, as long as you have enough money to pay back your CC company by the end of the 0% APR term.