Update: My Risky Balance Transfer Strategy Strikes Out

A little over a month ago I detailed a complex (and risky) strategy to earn more miles here on the Blog.  It involved a two step system for earning miles; Charge up my American Express card, and pay it off with a  card offering $0 fees for balance transfers.  This Balance transfer card could then be paid off at Walmart for miles, or to liquidate GC.

Today I’m updating with experiences and caution for those of you who might want to try this for yourself.

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One, Two, Three Strikes You’re Out…

I initially wanted to utilize as much of my balance as possible, and I also wanted to pre-pay the BT card at Walmart so that the balance didn’t sit for more than a day or two earning interest.  This plan worked perfectly–the payment at Walmart was as easy to make as any other.  That afternoon I called to initiate a Balance transfer, and unfortunately forgot that my bank was located on the east coast, 3 hours ahead of me.

Strike One. 

This didn’t really cause any issues–but it did leave me nervous overnight. Would the payment post before I had time to process a balance transfer?  In the end the worry wasn’t necessary. I called in the morning to process the BT and the payment hadn’t yet shown up.  The agent I spoke with helped me process my large Balance Transfer, and informed me of the fact that interest would be charged immediately, but that the check would be mailed out to American Express and may not be reflected on my balance for a week (or more).  A week turnaround seriously hamstrings my ability to churn on this card.

Strike Two.

Waiting a week to pay off the American Express isn’t awful–I could just initiate another payment, pay off the line, and then charge it up again a few days before the Balance transfer is set to hit. In fact this is what I did.  Paying off the card with a standard online bill payment is exactly what I wanted to avoid in this setup. By ending up doing that there was no net gain to the strategy.

Strike Three. 

Sure, a few days later when the Balance transfer hit the card was then paid off–but I’m not convinced that doing so would have helped me to actually increase the number of miles I’m manufacturing.

Rolling Payments Could be a Solution Even Bigger Problem

The strategy works, it just doesn’t work fast enough.  I got to thinking: if you had a few $0 BT cards you could set up a rolling transfer, where every 3-4 days payments hit your Amex account and in between you charged the card up, and prepay the Balance Transfers. Something like this:

  1. Monday 9/29: Prepay BT Card ‘A’, initiate BT #1 to Amex
  2. Tuesday 9/30:  Charge up Amex to 1/4 of limit
  3. Wed 10/1: Charge up Amex to 1/2 of limit,
  4. Thurs 10/2: Charge up Amex to 3/4 of limit. Prepay BT Card ‘B’,  initiate BT #2 to Amex
  5. Friday 10/3: Charge up Amex to limit.
  6. Monday 10/6: BT #1 hits Amex, resets Credit Line. Charge up Amex to 1/4 of Limit
  7. Tuesday 10/7: Charge up Amex to 1/2 of Limit
  8. Wed 10/8: Charge up Amex to 3/4 of Limit, Prepay BT Card ‘A’, initiate BT #3 to Amex
  9. Thurs 10/9: BT #2 hits Amex, resets Credit Line. Charge up Amex to 1/4 of limit….

And so on.  The problem with this strategy is that it is way too complicated.  Such a schedule is not one I could consistently repeat, nor would I want to.  And any hiccup (like a bank holiday) runs the risk of either your BT Card or your Amex going negative, and in a big way.  Such Negative balances can be risky, and draw undue attention.

Who Should Use This Strategy.

It turns out that this strategy is no better at earning miles than just buying Money Orders, a fact MilesAbound mentioned in the comments of the original post. This is true if you have an easy way of buying and depositing MO (perhaps at the branch nearest your MOPO). If you are unable to buy MO this could be a strategy that works for you.

However…

As a method of increasing my spending it has been a failure. The strategy works best if you’re using no more than your total credit line in a month. If that’s you, and you have access to a $0 BT, you should have be able to use this strategy to pay the Balance Transfer card, and then BT your Amex.  But again, there’s no net benefit over just buying MOs and depositing them and paying the Amex.  The increased cost of the MO’s versus one large bill payment would be offset by the 1-2 days worth of interest you’ll likely be charged on the BT itself. And if you’re churning more than your Limit this could actually cripple you and limit your spending. 🙁

Oh well:

I move forward/
the only direction/
can’t be scared to fail/
Search for perfection/
Got to keep it fresh/
Even when we spendin/
but don’t be mad at him/
when he’s on to the next one…
on to the next one

(H/T to MarathonMan, the king of these)