Using Their Money

By Leni Parrish on October 3, 2007

Something I’ve always considered doing, and what I KNOW some people already do successfully, is use “their money” to make money.

Who’s money?

The credit card companies and low interest loans… any place that gives you no or low interest money for 6 months or more.  When credit cards offer promotional offers like 0% interest on cash advances (or the checks you can write, which is basically the same thing as an advance), why couldn’t you deposit that money into a high yield CD or Money market account of some sort and earn interest on it?!  Same thing with really low interest loans… if you were able to get a sizeable amount of money through a loan with extremely low interest, and put it into an account that earns high interest- you would then make some money off someone elses money.  Wouldn’t you?

Let’s use the following example, and assume you’ve got an offer that

gives you $5,000 interest free for 12 months.

  • Put $5,000 into a 12 month CD with a 4.9% APY, compounded monthly. 
  • Let’s assume your federal tax bracket is 25% and state tax rate is 6.8%
  • Total interest earned over 12 months would be $251
  • You would owe approximately $80 in taxes on that money
  • Total amount you earn on someone elses money?  $171

So of course- $171 doesn’t sound like a lot for a year, but that’s $171 you didn’t do anything except deposit someone elses money to earn, right?  At the end of the 12 month term, you would then withdraw the original $5,000 to return to the company you borrowed it from, and put the $171 into a high interest savings account, like Ing Direct, to earn 4-5% APY on that money!

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