easy money

[Junejer]

Also, for those who will read this in the future, as AmyBoo alluded to, what about the monthly payment that you have incurred that you didn't have before? Assuming that they are only asking for 1%. On $25M, that is $250 per month. $250 x 12 = $3M. Your gross profit = ($2M). Don't forget the 1099 INT that you will owe IRS that pizza mentioned. Not a good idea.

[haulingthescoreup]

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ByrdMan wrote:

Also, for those who will read this in the future, as AmyBoo alluded to, what about the monthly payment that you have incurred that you didn't have before? Assuming that they are only asking for 1%. On $25M, that is $250 per month. $250 x 12 = $3M. Your gross profit = ($2M). Don't forget the 1099 INT that you will owe IRS that pizza mentioned. Not a good idea.

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For those who just spat coffee all over their laptop screens, ByrdMan has a commercial banking background and uses M for "thousand", not for "million."

It makes for startling reading!

[treski]

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@haulingthescoreup wrote:

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@Junejer wrote:

Also, for those who will read this in the future, as AmyBoo alluded to, what about the monthly payment that you have incurred that you didn't have before? Assuming that they are only asking for 1%. On $25M, that is $250 per month. $250 x 12 = $3M. Your gross profit = ($2M). Don't forget the 1099 INT that you will owe IRS that pizza mentioned. Not a good idea.

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For those who just spat coffee all over their laptop screens, ByrdMan has a commercial banking background and uses M for "thousand", not for "million."

It makes for startling reading!

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I had to do a double-take.

[Junejer]

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haulingthescoreup wrote:

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ByrdMan wrote:

Also, for those who will read this in the future, as AmyBoo alluded to, what about the monthly payment that you have incurred that you didn't have before? Assuming that they are only asking for 1%. On $25M, that is $250 per month. $250 x 12 = $3M. Your gross profit = ($2M). Don't forget the 1099 INT that you will owe IRS that pizza mentioned. Not a good idea.

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For those who just spat coffee all over their laptop screens, ByrdMan has a commercial banking background and uses M for "thousand", not for "million."

It makes for startling reading!

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Correct, M is the roman numeral for a thousand, thus a million would either be MM or $1,000M. I personally prefer the MM variety. Sorry, I had some of you all worked up, but typing K, doesn't come naturally to me. I might try to work on it though.

[MidnightVoice]

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@Junejer wrote:

 Sorry, I had some of you all worked up, but typing K, doesn't come naturally to me. I might try to work on it though.

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When in Rome      

[Junejer]

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MidnightVoice wrote:

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@Junejer wrote:

 Sorry, I had some of you all worked up, but typing K, doesn't come naturally to me. I might try to work on it though.

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When in Rome      

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Wait a minute! When in Rome advice coming from the Master of Bucking the System. No thanks.

[Anonymous]

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mispoken1 wrote:
yes I can get a 0% cash advance through boa for the full amount. I can also get an apy of 4.25 on a 1 yr cd that is FDIC insured. Not quite the same as the lottery or dr pepper. I will have a monthly payment but at 0% just pay the minimum. Think this would kill my credit score?

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This sort of arbitrage (http://en.wikipedia.org/wiki/Arbitrage) could definitely work, but it certainly may have an effect on your credit score, so I'd consider how much your score "matters" in the near future.  If you don't need other credit in the near future then there may be enough time for your scores to recover, so this may be a profitable move for now.

A couple tricky things about holding the money in a CD, however:

#1 you need to have money to use for the monthly payments, which you may or may not be able to pull out of the CD if you put the full lump sum in there. 

#2 in order to avoid paying interest at the end of the 12 month zero percent term on the credit card, you may need to actually pay in full during the ELEVENTH month - check VERY carefully the terms to see exactly when the 0% expires. 

Even if you do have a full 12 calendar months at 0% apr, keep in mind it may take a few days to get the money from the cash advance and into the CD - the CD will then run the full 12 months - and then it may take a few days to get the money out of the CD and back onto the credit card.  You'd need to consider how those extra few days interest you may not be able to avoid accruing on the credit card (once the 0% expires) will affect your overall profitability numbers.

Also, double check if the 4.25% CD is still available at that rate - it certainly may be, but the CDs I was looking at a few days ago dropped rates on the 9th when the central banks cut interest rates, so that may slightly affect the numbers.

[Junejer]

I get arbitrage, I live it every day. The killer to me is that OP would create a monthly payment that wasn't there before and that must be accounted for somehow. Where is that money going to come from? A vehicle that could throw off more of a return, might cover that payment, otherwise the net effect seems like a negative number to me.

[Anonymous]

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ByrdMan wrote:
Also, for those who will read this in the future, as AmyBoo alluded to, what about the monthly payment that you have incurred that you didn't have before? Assuming that they are only asking for 1%. On $25M, that is $250 per month. $250 x 12 = $3M. Your gross profit = ($2M). Don't forget the 1099 INT that you will owe IRS that pizza mentioned. Not a good idea.

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I have to point out that the math just doesn't work here.  The minimum payment of $250 is PART of the $25000.  So sure, over the course of 12 months you have to pay back $250x12=$3000.  BUT you've used that $3K to pay down the $25K balance to $22K.

So you still end up paying $25K and getting the profit of around $1K - the profit would be slightly less, however, since each month you're earning interest on slightly less than $25K since you've had to pay some towards the minimum.  You'd still certainly end up ahead.

You would indeed want to set aside some of this $1K to pay taxes on the earned interest income, and there may be other fees and a few days' worth of interest as previously mentioned to consider, but the monthly payments don't cut into the profit quite that dramatically  

[Junejer]

The only way that this could make sense is if the OP held over that 3K (see I can do it) to make the payments or whatever the minimum is going to be, and not put it in a CD. Then recalc the return based off of $22,000. Otherwise, they have created a monthly debt of $250 or more just to earn less than $1,000. What if the minimum payment is 2%? That's 500 per month or 6,000 per year. To earn 4% on $19K. To each his own, but this doesn't make sense to me.

If that money isn't set aside to make the monthly nut, then what else could one do with $250 or $500 per month? Heck, invest that monthly amount in your company plan or IRA or in some put options or anything and get a better return on your money than that.

Wish I could debate further, but Fall + Saturday = Football (Spectating DS, Coaching (my 5th grade team), and cheering for the Wisconsin Badgers).

GL