Credit Card Shifting A Road To Riches Or A Bad Idea?

By now you should know that my wife and I hate credit cards. In our opinion they are ticking plastic timebombs just waiting to go off.

However the term “credit card shifting” keeps getting mentioned to me. Not knowing what this meant I did some research and now I can report back to you.

Credit card shifting is the process of making Free Money off your credit card. Particularly a credit card that charges 0% interest.

Here is how it works:

1.    You have a credit card with 0% interest for 12 months. With a limit of $10,000.

2.    You borrow $10,000 on the credit card which you put into a high interest bank account (earning say 5% p.a. return).

3.    Over 11 months you earn $468 on the $10,000 borrowed in the bank account.

4.    At the 11 month point you pay off the credit card in full, thus paying it back before any interest is due.

This might seem like a quick and easy way to make $468. However let’s look at some of the downsides or alternatives.

1. You would have a yearly credit card fee. For example it might be $100. This would have to be taken off your profit. This would bring your profit down to $368.

2. You would have to add the interest when you do your taxes. This interest would be counted as your wage. For example if you are on $50,000 a year, in Australia your tax rate would be 17%. So the government would charge you 17% of your total profit. This would bring down your profit to $288.

3. There is a risk that your credit card company could change the interest rate on you. When you sign up for a credit card the contract is nearly as wordy as the yellow pages. The bottom line is they can do whatever they like.

4. Bank accounts are normally not free. You know all those extra monthly fees just to leave your money in there. You would need to take this into account as well and take it off your profit.

5.    $288, surely you can think of a better way to save or make $288. Even some of the suggestions in this newletter would be a better option than making risks on transferring money from one account to a different account.

6.    You can’t just take out the money from your 0% interest credit card. Sure on purchases you will receive 0% interest. However when you do a withdrawal you start paying interest on credit cards right away. And you need the money to put in the bank account.  

In my opinion if you do this you are playing with fire. Any number of things could go wrong. There are reports that some people are doing this with 8 plus credit cards.  Save yourself the hassle and find other ways to make or save money.