American Express Blue Cash Review: Can You Really Make Money on This Balance Transfer?

In my previous balance transfer card arbitrage article, we reviewed some of the things that consumers need to watch out for when trying to make money with this balance transfer arbitrage strategy. It wasn't a comprehensive guide, but it was more than enough to make it crystal clear that you have to pay attention to the details of the offer, in order to profit from balance transfer arbitrage.

Today, we're going to examine the terms & conditions from an actual balance transfer offer to determine if it is good enough to make some free money with if for taking the issuer's credit card. I recently received an offer from American Express for its Blue Cash card, so we are going to take a look at the terms & conditions for Blue Cash.

Here's What We're Looking For

We need to know the following when screening balance transfer offers for this credit card arbitrage tactic:

(1) The APR for the balance transfer;

(2) The transaction fee to transfer the balance and the caps;

(3) The annual fees; and

(4) The length of time for the promotional interest rate.

In reviewing at the terms & conditions for the American Express Blue Cash card, I noticed the following:

(a) There's a 4.99% APR for the life of the balance on balance transfer requests submitted with the credit card application - any subsequent balance transfers will be subject to the substantially higher, standard purchase APR;

(b) There's no balance transfer fee for the offer, but subsequent balance transfers may be subject to a balance transfer fee that is unknown;

(c) There's no annual fee; and

(d) The 4.99% APR on balance transfers is good for only 6 months.

Here are a few other details: American Express has its own bank, American Express Bank FSB, and by accepting their offer to transfer credit card balances to their bank, you authorize the bank to forward the balance transfer check to the credit card company the balance is being transferred from.

The card also offers up to 5% cash back on purchases and has a 0% APR on purchases for the first 6 months of membership, but after that the purchase APR rises significantly. Depending upon your credit history, the purchase APR, which is a variable one, could range from 13.24%, 15.24% or 18.24%.

The Verdict

If you've read my previous balance transfer arbitrage articles, you already know that the objective of the arbitrage strategy is to make a profit on the spread between what it costs you to borrow the money and the net interest you pocket on the borrowed money after you pay off the card balance. The greater the spread, the greater the opportunity to make a profit. The narrower the spread, the less of an opportunity to make a profit.

Based upon its terms & conditions of the American Express Blue Cash card offer is an extremely poor candidate for the arbitrage tactic and I'm tossing the offer in my round circular file. For the purpose of helping you understand why, look at the following details:

(1) The cost of funds, the 4.99% balance transfer APR, is too high to overcome. Your focus should be offers where the balance transfer APR is 0%;

(2) The 6 month promotional rate period is too short of a time frame to maximize the interest you can earn on the balance transfer funds. Ideally, you want a promotional rate period of 12 to 15 months;

(3) The balance transfer check can't be issued to the card holder. By accepting the offer, a card holder authorizes American Express Bank FSB to issue and forward the balance transfer check to his or her old credit card issuer. This completely knocks out any opportunity to make money with this balance transfer card arbitrage strategy!

The offer must permit a card holder to write a check to himself/herself or for the balance transfer check to be made payable to the card holder, and must be able to do so without the check being treated as a cash advance.

By continuing to thoroughly review the terms & conditions of offers you receive, you will be able to spot opportunities to make money with the balance transfer card arbitrage strategy and avoid the traps the credit card companies are hoping you will fall for.

2006 Ray E. Harris. All rights reserved.