Credit Card Arbitrage

[dczech09]

Hey everyone. I would like your opinion:

I work in a job where I travel a lot and incur travel expenses on my credit card (currently 0% until October 2010). I will be getting a nice reimbursement check from my business and was wondering it it would be wise to take the money and invest shortly in an undervalued stock and try to capture a return before paying off the balance.

I understand that this "arbitrage" technique is very risky and could end up biting me back, but it could also be a good way of capturing some quick cash that I could then contribute to my Roth IRA.

I am in a position where paying off the credit card balance before the teaser rate goes under is not going to be an issue. Would this be a good move? Or am I better off just paying off the balance right away (even though I have 0% for several months to go)? Thanks!

[disneysteve]

Are you serious? No, I would not take money needed to pay off a credit card and invest it in the stock market for a short period of time. I would put that money in an interest-bearing account and earn a few bucks until I need it to pay the balance on the card.

[safari]

I agree with Steve, it's a terrible idea. This would be like going to a casino and playing roulette. The money you will need in the short term have no business being in the stock market.

[disneysteve]

I agree with Steve, it's a terrible idea. This would be like going to a casino and playing roulette.

True. Much better to play blackjack - better odds.

[PaydayLoner]

What everyone else said. What happens if the stock goes down instead of up, in the short term? Even if you could pay off the credit card with other funds, you wouldn't have gained anything with the time value of your money. Better to invest in something that will pay a guaranteed return, even if it's not much.

[dczech09]

Thanks for the advice. My mantra has always been to use the stock market for long-term investments and not short-term but I figured I'd see what others thought. I do have a higher-interest bearing account that I could get a guaranteed return off of. Thanks again!