Hey everyone, thanks for joining me for another Friday Finance with Josh! Today, I’m going to talk about one of my favorite credit card based topics, balance transfer credit cards. Balance transfer credit cards seem to be a hot topic in the personal finance blog realm and, they have been for several years now. This comes as no surprise to me as, I completely understand the benefits and pitfalls associated with this option. However, what does come as a surprise to me is how many people are talking about making money using these cards.
As a personal finance blogger, I often find myself on other blogs doing research, reading for fun or looking for something that I simply don’t have the answer to. I seem to be coming across more and more comments on posts asking if it’s possible to use balance transfer credit cards to make money or if this was something that is only able to be accomplished using cash back credit cards.
Where Is This All Coming From?
Years ago, balance transfer credit card lenders would be willing to send the money that consumers had available just about anywhere. The would send the funds to credit card companies to pay off debt or, if the consumer asked politely, the lender would just transfer the funds to a checking or savings account. Knowing that most balance transfer credit cards come with a 0% promotional interest rate, it’s easy to see how this could be profitable.
Essentially, all you would have to do is send some of that 0% interest money to a savings account that earned interest and pay off the balance before the promotional period expired. In doing so, you would have free money sitting in your savings account doing nothing but earning money for you.
Sounds like a good idea right? Of course, anyone would want to do this. The bottom line is, the best way to invest is using other peoples money. It’s the same principle that allows lenders to make so much money doing what they do best, lending consumers someone else’s money! In turn, the lender earns interest from the loans they have given helping them to become a more profitable lender.
There’s Only One Problem With This Concept
Of course, if I could get my hands on a few thousand dollars of other peoples money and earn free interest while they allowed me to borrow it, I would. But, who in their right minds would do this? Let’s be honest, if lenders didn’t think they were going to get a return, they wouldn’t have lent you the money anyway, right?
Although, lenders did allow consumers to send the money from balance transfer credit cards to savings accounts, checking accounts and more, this was really only in the beginning of balance transfer cards. You know, the beta-testing phase. During this time, lenders realized what consumers were doing with the money that was being sent to them. It wasn’t going to pay off a debt at all and, they knew it! That’s why balance transfer credit cards don’t give the option for money to be transferred to a checking or savings account anymore. The bottom line is, it’s just not advantageous for them to do so.
So, It’s Not Possible To Make Money Using Credit Cards?
Well, that’s not exactly the case either. It is possible to make money using credit cards, it’s just important that you use the right tools for the job. Balance transfer credit cards are great tools but, they were not designed for this job, therefore, they will not work very well. On the other hand, cash back credit cards were designed specifically to reward consumers with cash for using their cards. These would be the types of credit cards that you would want to use if you’re looking for a credit card that will allow you to earn money. Of course, there are some serious pitfalls to these too so, read up on cash back credit cards before trying them out! You could find yourself paying a very expensive game if you’re not quite sure what you’re doing.
Balance transfer credit cards are generally great offers that give consumers very unique perks. However, as with any other credit card, they were designed to meet the needs of specific individuals looking to achieve specific goals. That being said, making money is not one of the goals they were designed to help consumers accomplish. I hope that you’ve enjoyed my article today! If you have any questions or concerns, please feel free to leave a comment below! I always respond! Also, come read more on my site, CNAFinance.com!