Most people will tell you that debts are bad, but it’s becoming clearer that not all debts are bad. Because banks and lenders are operating in one of the most competitive markets in the world, they’ll do a lot to get your custom, and one consequence of this is to offer you a limited time of free debt. There are a number of ways that you can manipulate this debt to make money and as a basic rule the more debts you take out, the more money you will make.
It must be noted that there is significant risk attached to manipulating credit card debt, and the more debt you take on, the more risk there is. First of all, having outstanding debts can adversely affect your credit score, which means you will be more likely to be turned down for credit. Secondly, don't try it if you haven’t got a very fine eye for detail and you’re not well organised. As well as knowing your financial products, you need a degree of ingenuity and skill.
How to Do It
This article will explain how to manipulate 0% card debt by using the best products. To maximise your basic profit you’ll need a bank account with a high 0% interest overdraft facility, a credit card with 0% on balance transfers that allows you to transfer to current accounts, and a high interest fixed rate bond. Make sure you note that cheap loans will be very difficult to profit from because of the high interest rate. RBS offer low rates on loans of 7.4% APR, but this will actually make you a loss.
Current account – There are currently a few bank accounts that allow you to take out a large free overdraft. If you’re a recent graduate without a lot of debt (an unlikely story) then you’ll be able to switch providers and get a free overdraft facility. Natwest offer graduate current accounts with free interest overdrafts of up to £2000. However, a more likely scenario is that you’re not a recent graduate without debt, but there is an answer. Alliance and Leicester’s Premier current accounts allow a 0% overdraft of up to £2500 for 12 months. This is an excellent amount of money for your cause, and it will be free of charge.
0% credit card – If you earn around the national average salary of £22000 and you have a good credit score, then there shouldn’t be a problem of you getting a 0% credit card with a limit of £5000. However, there are only a few credit card providers that allow you to transfer to your current account. MBNA is one of the providers, and Virgin Money also use this card. An added benefit of this card is that it also gives you a 15 month period for 0% on balance transfers, so you’ll have a three month safety net on a one year investment.
Apply for one of these cards and you’ll be able to transfer your credit card’s limit to your A and L current account for around a 3% fee. Even if your opening balance was £0, you’ll now have £7350 to put into a savings account.
Make sure you pay the minimum amount on your credit card with a direct debit. This is crucial; if you fail to do this you will lose the card benefits, damage your credit score, and potentially lose £150 or more.
High Interest Fixed Rate Bond – There’s a lot to be said about putting the money acquired from the free debt into a savings account, but there’s actually a better way. Because most savings accounts don’t have fixed rates of interest you can’t guarantee a good profit, and with the likelihood interest rate cuts over the coming year, you’ll want something fixed. Even with a tax free ISA, your profit may be limited by changes in the base rate. Instead go for a one year fixed rate bond. This is risk free, although you won’t be able to withdraw money for one year after your initial deposit. One of the best rates is by Anglo Irish Bank, who offer 6.75% gross for one year, making 5.4% after tax. This is guaranteed.
The Profit
After you’ve deposited the money into the Anglo Irish bond, you’ll get a return of £396.90 in one year on top of the initial £7350 investment. That’s a net profit of £249.90. Use £2500 of your money to pay off the interest free overdraft (which expires after the year term), then deposit the rest of the money into an easily accessed savings account. You’ll still have a couple of month’s interest to gain before you have to pay off your credit card in full. Alternatively you could get a new 0% card and start the whole process again! ASDA currently offer 0% credit cards along with a host of other providers.
