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Borrow money at 0%.
Invest at 5%+ guaranteed.
Profit.
Playing the Spread with 0% credit card offers
Paying off credit cards each and every month is important and smart. Unless of course the spread between the risk-free investment rate and the credit card borrowing rate is large, as it is presently.
This summer our physical mail box was inundated with 0% credit card offers. I dropped most of them in the shredder, but the corporate sales teams were annoyingly relentless. This was especially the case with Discover.
So come August I decided to reward their persistence by allowing them to give me free money. That night I applied for his/her Discover it® Cash Back Credit Cards, which yielded $17,000 in combined credit limit (Discover has since increased this by $2.5k to $19.5k.)
This card is nice:
- no annual fee
- pays 5% cash back each quarter on certain categories (e.g. Amazon.com and Target from Oct – Dec)
- pays 1% on all other spend,
- currently pays DOUBLE that cash back for the first year (effectively paying 10% / 2%)
- offers 0% interest on all purchases for 18 months (reduced to 15(?) months for current applicants.)
For the past 3+ months we have been using this as our primary card for most everything, particularly the 5% categories. We then pay the minimum payment each month and invest the different in short-term US treasuries.
18 months later I will pay off the balances in full and we will have pocketed over $2,000 in mostly tax-free profit.
Investment Example
Here is a snapshot of my most recent statement
I have a balance of nearly $10k but will have to make the minimum payment of just $193.
Instead of paying this balance in full, I held on to the cash and bought some short-term treasuries. One recent purchase was for twelve $1k bills yielding ~5.3%. This gooses the yield a bit over my brokerage core account which is currently yielding 5.0%.
“How did you spend so much on credit cards in such a short time period?”
In the example above I spent more than $10k on my card in just a few months (and another $6k or so on Winnie’s card.) Plus we have other cards going. Is our life really so expensive?
Yes and no. I do put everything possible onto cards to maximize cash back / points. Typically I pay $4k – $6k to zero out balances each month, so this is on trend.
But it isn’t always the case that natural spending will get the maximum ROI, so some of this spending is pre-payment.
When Target had a promotion for a $500 gift card for $450, I paid for that on the Discover card offering 5% cash back on Target purchases (10% this year.) That target gc is mostly untouched but will definitely be spent in the coming months. I made a similar purchase of an Amazon gift card to max out that 5% 10% category, which has already been depleted.
See this post for other ideas: Award Travel Series: Meeting Minimum Spend Requirements
ROI
What kind of ROI are we getting overall on this endeavor?
It took me maybe 4 months to get from zero to maxing out $19.5k worth of credit limit. That leaves 14 months to enjoy the maximum benefits of 0% interest.
At 5% yield that means direct cash benefit of $1,137.50 ($19.5k * 5% * 14/12) plus maybe half of that rate for the initial 4 months for another $162.50 ($19.5k / 2 * 5% * 4/12.)
Then there is the cash back. Just the 5% 10% categories yield $150/quarter per card (on max $1500 spend) for a total of $600 to date. The remaining $13.5k of spend earned 2% for an additional $270.
All of the cash back is completely tax free. Interest from treasuries is tax-free at the State level (and we pay 0% at the federal level.)
Additionally… there are bonuses if the “cash back” is exchanged for certain gift cards. The only redemption I have done so far is during the dessert round at Olive Garden. I pulled open the Discover app and traded $45 worth of potential cash back for a $50 OG gift card.
We are easily looking at a total return of well over $2,000, which is $2,000 of stock I won’t sell and can keep invested for another year.
In the big picture, this is probably just a rounding error, but it is a helluva lot easier than delivering packages like I did at this time last year.
This is not a bad hourly rate – it took me 10 minutes to apply for the cards, 5 minutes to buy an amazon gift card, 5 minutes to buy a Target gift card, and a few minutes each month to check on things when I do the bills each month.
“But what about your credit score?!”
A lot of people care about credit score. I don’t, but probably because I am an “exceptional borrower.” See: I Couldn’t Care Less About My Credit Score
But… Discover also has a nice credit score reporting feature. This is what has happened to my score since loading up these cards, as reported in my most recent statement. (It’s gone down a smidgen.)
Note that anything above 750 is completely useless and even then it is only important if you want to take on new debt.
Sales Pitch
If you don’t have a Discover it® Cash Back Credit Card on hand it is a good card to have.
Now is a great time to take advantage of the spread between 0% credit cards and 5%+/- short-term treasuries. Double cash back for the first year is also very nice.
And long term… with no annual fee, it can just be used from time to time when a 5% category lines up with natural spending.
But wait, there is MORE!
If you apply now using our referral link, you will get $100 after making your first purchase (within 3 months.) (I will also get $100 for the first 5 referrals.)
(If you do this and are approved, please let me know in the comments and include YOUR referral link so others can use it.)
Summary
To reward Discover for bombarding my mail box with 0% offers, I let them lend me nearly $20,000 for 18 months. I invested this in short-term treasuries yielding 5%+.
I’ve also made some small effort to max out the 5% bonus categories each quarter. With DOUBLE cash back for the first year, that is 10% off category spending for things like Amazon.com (Q42023) or anything spent via Apple Pay (Q32023.)
All together I should profit over $2,000 for very little effort.
Long term it is a good card to keep in the arsenal, since it has no annual fee and routinely has convenient 5% cash back categories.
Now is a good time for anybody and everybody to take advantage of the large spread between 0% credit card offers and the 5%+ yield on short-term treasuries.
Use our referral link to get an extra $100 on your Discover card application.
We hit our referral limit – please pick one of the referral links shared in the comments.
Have you Played the Spread?
Addendum 1:
Darin mentioned you can do something similar with the card_name
Addendum 2: “How do I buy T-bills?”
You can buy through Treasury Direct (ughhh) or Harry Sit / The Finance Buff has an excellent article on the process via all of the major brokerages:
How To Buy Treasury Bills & Notes Without Fee at Online Brokers
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Played the Spread as well — Chase Freedom Unlimited offered 0% for a similar 15-18 months along with 5% on all grocery for the first year and 1.5% on everything else. Ran everything through this card, and used the available cash to lock in 5%+ returns across that cash — Totally worth it on all fronts give the amount of time invested! Thanks for the great writeup!
Where do you buy a US Treasury bill from?
https://www.treasurydirect.gov/marketable-securities/buying-a-marketable-security/
You can often buy through your investment brokerage or directly at treasurydirect.gov
https://treasurydirect.gov
Look at the addendum at the end of the post. I included a link to an article that goes through the process at all of the major brokerages.
Signed up! Looks like I can’t get into the site to share my referral code until I actually receive the card though – I’ll post it once I have it.
Here’s my referral link if anybody needs one:
https://refer.discover.com/ontheroaderic!73cb117640!a
Just signed up with your link.
Referral link if anyone needs it https://refer.discover.com/keithjkay!6f3deee8f6!a
Here’s my referral link for those interested!
https://refer.discover.com/embresmith!e943e2f236!a
It’s a solid strategy! Over the next few months, I’ll be wrapping up my second round of doing this. Will almost surely do it again later this year.
For sure, the money earned isn’t life changing but it’s very minimal effort. And you can do it while watching sports. :-)
Good timing, was shopping for a new ccard. Thanks for the link. Another $100 coming your way J.
Thanks man!
Do you have the Ink Business Unlimited? $900 welcome bonus ending Jan 18 at 9 am… let me know, I can share a link
Can you share the link for the Ink Business Unlimited?
I shared a link in the reply to Andrew and also added links to addendum 3 in the post above.
Thanks Jeremy! Just curious…I don’t have an actual “business” but from what I’ve heard side hustles (I drive for UberEats occasionally and sell items on Ebay once in awhile) allow to claim as a sole proprietor. Is this true? If so, wondering if there are any stipulations (i.e. minimum $ sales, etc for them to accept) because I don’t do either very much. And if I do get approved do the expenses I charge on the card have to go toward these hustles (car maintenance, shipping supplies) or can I just use it as I do my normal credit cards (groceries, personal entertainment, personal travel, etc)? Also, not sure if it would change anything when filing my taxes (single, not married)? I have an 820 credit score currently and pay all credit cards in full every month so that won’t be an issue but just wondering on the rest and how business credit cards work. Thanks in advance for any wisdom and guidance. Maybe I’m overthinking things but just looking for knowledge. Thanks again for all of your content!
Definitely overthinking it, lol :) I think this thought process is normal for everyone before applying for their first business card.
Irregular Ubereats delivery and occasional ebay sales is a business. You can put anything on these cards… it’s just a normal credit card. Nobody polices the transactions.
This won’t change your taxes.
See this post for more details: Award Travel Series: Business Credit Cards and Why You Should Apply
I’ll check it out. Please share. thx.
The card_name and the card_name both have $900 welcome bonuses after $6k in 3 months minimum spend requirements. Neither card has an annual fee, and they both offer 0% interest on purchases for 12 months so they are a good option for playing the spread. These are affiliate links.
Referral link if anyone still needs one: https://refer.discover.com/andrew_royal8!02cac9148b!a
Good stuff. I have been doing the same thing the past year and half, but buying bitcoin instead. Just a little leverage play. One of my Capital One 0% cards recently met its offer expiration, so got a citi card and did a 21 month balance transfer for 3% that won’t be due till mid 2025. Already 160%+ gains since starting this and essentially paid for a whole year of expenses. The balance transfer was for $16,500 when bitcoin was at 25k, so my bitcoin is now worth almost double that, instead of paying the down the debt. My credit score has taken a rather large hit though going from 800s to 690 cause i have quite a few cards nearly maxed out. Will pay off all debt at the middle to end of 2025.
What will you do if bitcoin is down when the debt is due?
99.9% that won’t happen with where we are at in the 4 year cycle, the halving upcoming in April, and ETFs being approved this week, but I guess there’s always a chance! It’s more likely it’s over 150k in 2025. But, if that were to happen, then I would sell at a loss, pay back the debt, and have some large capital losses. No biggie. I know the risks.
What service do you use to on-ramp using credit cards? This is pretty compelling. thanks for sharing.
I like this idea based on the fact that you don’t owe interest and can save your money in a 5% APY savings account, though kind of like balance transfer promotions, it only works if you have good discipline and won’t spend that money elsewhere.
I know some cards offer 60,000 points or something once you spend $6,000 in the first 3 months, but if your discretionary spending is well below that you might find yourself spending more just to get the bonus.
I signed up, thank you!
Here is my referral link https://refer.discover.com/s35o5l!7554cbb98b!a
If I keep my cash in high yield savings already at 5%, how can I play the spread? Cash advance is 30% immediately.
I’m not sure how to explain this differently than I did in the post.
If your cost of living is greater than zero, put all of that spend on the 0% credit card (groceries, restaurants, gasoline, toilet paper…) Instead of paying the credit card bill in full, pay the minimum. Now you have more cash than you would have otherwise.
Mike, you aren’t taking cash advances on the card. You are just putting all your regular purchases on the card and only paying the minimum payment for the term of the zero percent. Then you put the amount you’d normally pay monthly to the credit card in a savings account or treasury.
Great explanation. I also have been doing this the past year with cards with Capital one and Wells Fargo. Capital one quicksilver is offering 1.5 percent back on all purchases, a $200 sign up bonus, no annual fee, and zero percent for 15 months. I have a referral link for anyone interested.
https://i.capitalone.com/JiK131a6c
I have low monthly spend, so I’m hoping to get approved for a new card soon in order to put an overpayment down on my federal taxes, which will cost me a fee but then it will get refunded when I file. I will also be putting the money in my HYSA or treasuries.
Here is my referral link
https://refer.discover.com/martman23!4864f8cb6d!a
I did something similar using a Fidelity offer. Fidelity cc earns 2% on all, no annual fee and the offer was 18 months of 0% interest. I need to pay for a new roof so I used up 2/3s of the credit limit with one swipe.
Nice!
I was cynical about this the first time I heard it as there are huge risks due to lack of discipline. On the other hand, like investing instead of paying down a mortgage, it can only be good to have the money liquid instead of paid to a bank already. Also, my P2 and I are over 5/24 so this gives us nearly as good a return as churning high SUB cards that aren’t available to us now.
Got my $100 statement credit from GCC link! Here’s my link for anyone else who wants $100 for only one spend on the card! https://refer.discover.com/peg2326!6a0a20d108!a
Using this referral code, thanks!
Another referral link Get your @Discover Card from my link and we’ll each get a $100 statement credit when you make a purchase in the first 3 months. https://refer.discover.com/s/rorlowski70?advocate.partner_share_id=9875527631
Great article! I’m definitely going to try this strategy out. The idea of making $2,000 easily by playing the interest rate spread is incredible. I’ve been looking for ways to earn some extra cash and this seems like a no-brainer. Thanks for sharing!
Here is a referral link if you need one:
https://refer.discover.com/michaelheil68!c422863f9a!a
Another referral link for those interested.
Get your @Discover Card from my link and we’ll each get a $100 statement credit when you make a purchase in the first 3 months. https://refer.discover.com/s/lukeevans386?advocate.partner_share_id=832544998