Are the common credit card arbitrage schemes still viable? (investing during the grace period or during a zero percentage balance transfer period)
Haven't the credit card companies figured this out and changed their policies yet?
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Here in the UK it's certainly possible. We call it stoozing.
The basic steps are
I guess people get away with this because the number of people with the skills/diligance to do it right and who can be bothered with the hassle is fairly small.
It's still possible, but current money market and other guaranteed rates are so low that it's usually not worth the time and energy. However, even if interest rates were higher and it possibly would be worth it, it's not something that credit card companies worry about. They don't care if you're making money on the side. All they care about is that they make a profit. They make a profit on every purchase you make with that card, and on any future interest you might pay if you don't pay it off in full.
Not long ago my wife received a credit card offer that was 0% interest for 12 months with a 0% balance transfer fee. I did a double take but confirmed it to be true. But still, we tossed it in the trash with the rest of them because it wasn't worth our time...
Update: Just received another balance transfer offer for 0% for 14 months, with 0% fee. Here's a picture of it since it's kind of hard to believe:
The fact that it is and has been possible is not because the credit card companies hadn't figured out people were doing it, it was because most people were NOT doing it or made mistakes and ended up losing money as they did it.
I had a professor in college who did this as a hobby. He borrowed cash back from credit cards with 0% interest on cash advances and invested it, then shifted the debt around from credit card to credit card that allowed him to do this without charging. He spent a lot of time researching these cards and was constantly signing up for new ones. Ultimately he said he probably made about minimum waged on this. You do have to check the fine print carefully because there are frequently non-obvious fees that wipe out your profit.
Though credit cards with no fees for cash advances are not common, I would think the limiting factor for this to be an arbitrage would be the opportunity for a risk-free investment that earns enough money for it to be worth it. At current interest rates, risk-free investing is not a very attractive proposition.