Plain Numbers
Credit cards

0% APR savings arbitrage

Charge expenses to a 0% intro APR card, keep the cash earning interest, make the minimum payments from savings, and pay off the rest the month the promo ends.

Inputs

$
mo
%
Assumed constant for the whole period.
%
Check your card’s terms. Set to 0 to ignore minimums.
$
Most cards require the greater of a % or a flat amount.
$
Annual fee, if any.
%
Net gain
$0
Interest earned (pre-tax)
Tax on interest
Paid in minimums
Payoff when promo ends
Average cash balance
Return on amount charged
Interest vs. the no-minimums ideal ()

This will hurt your credit score for a while

  • Hard inquiry: applying for the card adds a hard pull to your credit report.
  • New account: opening it lowers the average age of your accounts.
  • High utilization: carrying a large balance (often near the card’s limit) for the whole promo period is the biggest hit, and it lasts until the balance is paid down.

Don’t do this in the months before applying for a mortgage, car loan, or other credit.

Two-player mode

This works best with a spouse or partner: one person opens the card and runs the play while the other keeps a clean, high score for any credit you need in the meantime. Don’t add the other person as an authorized user, because the card and its balance may then show up on their report too. For a joint loan application, like most mortgages, lenders usually look at both of your scores.

Month by month

MonthInterest earnedCard paymentCard balanceCash balance

How it’s calculated

  • The full amount goes into savings (or T-bills) on day one. Interest is credited monthly at the monthly equivalent of the yield: (1 + yield)1/12 − 1.
  • Each month after interest is credited, the minimum payment (the greater of the % of the current card balance or the floor) moves from cash to the card.
  • In the last promo month, the remaining card balance is paid off in full. What’s left is exactly the interest you earned.
  • The comparison assumes you would otherwise have paid for these purchases out of the same cash on day one.

Savings account or T-bills?

Savings interest is taxed by your state. Treasury bill interest isn’t, so in a high-tax state T-bills can come out ahead even at a slightly lower yield. Holding bills means rolling them over and selling some each month to cover minimums, so keep a little in savings for that.

Things that can wipe out the gain

  • Deferred interest: store cards that say “no interest if paid in full” charge all the back interest if any balance remains. A true 0% intro APR card doesn’t.
  • A missed or late payment can end the promo rate early. Set up autopay for at least the minimum.
  • Rate cuts: savings yields are variable; a drop partway through lowers the result.
  • Credit limit: you can only charge up to your approved limit, and only for purchases you’d make anyway.