0 Percent Credit Transfer Card

Credit Card Ponzi Schemes: A Primer

Ponzi schemes are one of the oldest types of fraud in the books, and it’s a crime that can cost victims a great deal of money — as amply illustrated in the infamous case of hedge fund manager Bernie Madoff.

While Ponzi schemes usually involve con artists defrauding investors with promises of high returns on fake investments, there is also such a thing as credit card Ponzi schemes. And many cardholders are engaging in these schemes without knowing it.

According to a study by researchers Lucia Dunn and TaeHyung Kim of Ohio State University, as many as 11.5 percent of cardholders may engage in some type of credit card Ponzi scheme.

Are you engaging in a credit card Ponzi scheme without realizing it? Credit card Ponzi schemes typically fall into two categories: Intentional and unintentional. Many cardholders unwittingly get themselves into a credit card Ponzi scheme by slowly accumulating more credit card debt than they can manage.

To manage payments on previous debt, these cardholders apply for new credit cards to obtain extra credit and free up cash for monthly bill payments. In some cases, they may also take out a home equity loan or do a cash-out mortgage refinance to meet their mounting obligations.

Other cardholders deliberately engage in credit card Ponzi schemes in order to capitalize on promotional credit card offers and obtain a long-term inexpensive loan. In this scenario, cardholders take out a large 0 percent balance transfer offer on a credit card, and when the promotional period expires, they open up a new credit card account and switch the balance to the new card.

This kind of 0 percent APR arbitrage was particularly popular among financially savvy consumers before the Credit CARD Act of 2009 was enacted. Zero interest credit card offers for people with excellent credit would extend for 12 to 18 months, and they often came without high balance transfer fees. In extreme cases, cardholders playing this game would transfer as much as $50,000 or higher and then turn around and invest the money in an interest-bearing savings account, earning a 3 to 5 percent return on their interest-free loan.

But with balance transfer fees now ranging from 3 to 5 percent and interest on savings accounts less than 2 percent, this is no longer a feasible strategy. However, with long-term 0 percent APR offers returning, the temptation to take out a low interest loan by shifting the debt from card to card is still very real.

Top Credit Card Offers – American Express Chase Discover Capital ...

(Best Syndication News) Credit card rates were mixed with Low Interest and Cash Back cards lower and Balance Transfer Cards higher (see chart below).

Since our last survey the average interest rate on “low interest rate” cards declined four basis points to 10.99 percent.

The Capital One® Platinum Prestige Credit Card is an excellent example of this product. Their rate is variable with an APR between 10.9 percent and 18.9 percent. The bank offers an introductory rate of zero percent on all purchases and balance transfers until June 2012.

There is no annual fee. Customers are protected from card theft and fraud and there is free 24-hour roadside assistance with this card. Also, customers get free travel accident insurance.

The average balance transfer card interest rates increased one basis point to 12.63 percent.

So is the Discover® More® Card. This Discover credit card has a variable rate between 11.99 percent and 20.99 percent. They have an introductory rate of zero percent on balance transfers for 24 months.

The Slate Visa from Chase is an excellent card for balance transfers too.

The average Cash Back Card interest rate fell two basis points to 14.70 percent.

The Blue Cash® from American Express offers 5 percent cash back on every eligible purchase. The categories include “supermarkets, drug stores, and automobile gasoline station.” The company says that purchases from “superstores” and “warehouse clubs” are not eligible.

There is an introductory offer and no annual fee. After the introductory period the rate will be 17.24%, 19.24% or 21.24% variable.

By: Dan Wilson

Important: The material on Best Syndication is for informational purposes only and is not meant to be advice. Authors may have or will receive monetary compensation from the company's product/s mentioned. You should always seek professional advice before making any legal, financial or medical decisions and this website cannot substitute or replace any trained professional consultation.