Zero percent balance transfer credit cards offers are back. In the past few months, I’ve talked about how to best use a balance transfer, and I’ve offered tips for how to responsibly use 0% balance transfer credit cards to get out of debt. But there’s another way in which you can use a 0% APR balance transfer to your benefit.
Although the best use for a 0% balance transfer is to pay off an existing balance with a high annual percentage rate, you can also use the balance transfer for cash as an emergency fund, earn interest in a savings account like ING Direct or a money market account, or temporarily pad your bank account. But in order to move forward with these options, you’ll have to turn that APR offer into cash. How is this done?
Below are three ways to turn a 0% balance transfer credit card offer to actual cash you can use.
1. Deposit “Access” Checks
The easiest way to turn a balance transfer into cash is to use the special checks that credit card companies usually send with offers or with the monthly statement. These checks can simply be deposited into your checking or savings accounts. Though there are times when the bank will place a temporary “hold” on the funds, the hold usually does not last more than a few business days. I always check with my credit card company first to confirm whether or not the checks can be used for a deposit.
2. Transfer and Refund
Another way to turn a balance transfer into cash is to request a balance transfer that is greater than the existing balance. To clarify, let’s say you have a balance of $325 on Credit Card A, but you get a 0% APR balance transfer offer from Credit Card B. You could then request a balance transfer of $6,250, giving you a credit of $5,925 on your Credit Card A balance. You can then call up the customer service representative at Credit Card A and request a refund. Sometimes the customer service rep will give you a bit of a hard time, depending on the amount of the overpayment; however, it’s usually not a problem for them to issue the refund. I have found that Chase Bank is the easiest to work with when attempting to get a refund, and Bank of America and Discover will sometimes even directly deposit your credit refund directly into your checking account.
It is important to avoid transferring a balance to a card that you have never used or have a $0 balance on. In the early years, it was possible to request a balance transfer to a card with no current balance. I once transferred $10k to a credit card with no balance and then requested (and received) the entire $10K refund. But recently, banks have gotten wise to this and if there is no existing balance, many will simply refuse to accept the balance transfer. Even a minimal balance of $5 can be the difference between a successful and unsuccessful balance transfer.
3. Transfer and Spend
Instead of requesting a refund, many people simply spend down the balance transfer overpayment. For instance, if you transfer $4,000 from Credit Card A for an overpayment of $3,750 on Credit Card B, you can use Credit Card B without having to make a payment to that card until the balance is gone. However, be forewarned that this technique can be a slippery slope as a credit card balance is extremely easy to spend, especially since it holds the allure of being “free money.” But if you only spend the money that you would normally utilize within your monthly budget and long term financial goals, you will slowly build a surplus in your bank account. Keep in mind that it is only free money for twelve months – and even that only holds true so long as you pay on time.
Remember that the 0% introductory APR balance transfer game can be risky if you have a history of compulsive shopping and spending, keeping poor records, or making late payments. If you are guilty of any of those faults, taking advantage of the balance transfer game is not for you.
Have you ever experimented with balance transfers to get a free loan for a year? I actually have a lot of experience in this area so feel free to ask any questions regarding making money from balance transfers offers in the comments below.
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