Updated: Mar 10, 2021
To fully appreciate this article, it's important to understand what arbitrage is. Arbitrage is the practice of taking advantage of the difference in prices of assets within two or more markets. By buying and selling these assets simulataneously, you can profit off the difference in these prices. Arbitrage opportunities can be found anywhere. If you pay attention, you can find various ways to exploit them and make passive income.
You can do an arbitrage with nearly any asset including currencies, securities and commodities. For instance, let's say Bitcoin is selling for $21,300 on an American exchange and for $21,900 on a South Korean exchange. Do you see the opportunity here? You can simply buy bitcoin on the American exchange, and quickly sell it on the Korean exchange before the price fluke disappears. If you do it fast enough, you can have a $600 profit.
What is Credit Card Arbitrage?
Credit card arbitrage is a way to take advantage of the difference in available interest rates out there. It refers to the process of borrowing money from a credit card with low to zero interest rate and then investing that money elsewhere to generate a higher rate of return. The difference is your profit.
Best Credit Card Offers
Credit card companies are always offering intro rate deals. This is the number one way they reel in customers. Below is a list of the best deals currently being offered by top credit card companies.
1) Citi Diamond Preferred Card offers 0% for 18 months on purchases and balance transfers.
2) Blue Cash Everyday Card from American Express offers 0% on purchases for 15 months.
3) Bank of America Cash Rewards credit card offers 0% Introductory APR on purchases for 12 billing cycles.
4) Capital One Quicksilver Cash Rewards Credit Card offers 0% intro on purchases for 15 months.
5) Citi Rewards+℠ Card offers 0% for 15 months on purchases and balance transfers.
Credit Card Arbitrage Strategies
There are countless ways to invest free money for potential profit. However, most of them are risky and not worth trying unless you have adequate knowledge of what you're getting yourself into. Others are safe like savings and CD accounts, but don't offer much upside in regards to ROI. Instead, try the alternative investments listed below. They are not only profitable, but also low risk.
1) Lend Money through P2P platform. Peer-to-peer lending offers investors the potential for higher returns from a diversified pool of borrowers. The P2P lending platforms like Prosper and LendingClub work as mediator between the borrowers and the investors.
2) Invest in Worthy Bonds. Worthybonds is a legitimate alternative investment earning a fixed 5% interest on every $10 invested in a Worthy Bond. Investing in Worthy Bonds supports small businesses without the volatility of public trading markets, resulting in a lot less risk.
3) Non-Traded, Private REITs. Private Real Estate Investment Trusts, like those offered on Fundrise, Diversyfund and Realtymogul, are an even better investment than public REITs if you're looking for consistent, reliable passive income.
4) DeFi (Decentralized Finance). Enables anyone with the internet to have traditional financial products, like savings accounts but with far greater liquidity and seamless automation. Not to mention yields that are dramatically larger than anything a typical bank can offer today.
Risks of Credit Card Arbitrage
There are always risks with investing. However, arbitrage risks are unique in that they revolve around time. For instance, if you borrow $9000 from a credit card at a 0% intro rate but fail to make minimum monthly payments on time, a higher interest rate will kick in before the special offer is up. In addition, many companies will charge you a late fee on top of that higher interest rate. This would dramatically eat into any profits you were seeking elsewhere. Credit card companies are hoping you screw up so they can make money off of you. Instead, let's make money off of them for a change.