Seeking CC help/suggestions - Specific conditions

Thank you, xerty. I have struggled to understand your post, but it is beyond my ken. To wit:

The one month (actually a few days less) float is nice regardless the term of the CD one purchases. One is essentially using the bank’s money, during that interval, to pay for the CD. This is nothing new.

The notion of using maturing CD funds to finance new CD purchases is also a routine aspect of this side hustle. Nothing new there.

But the YTM available to practitioners here is wholly dependent on the multiplier, in accord (roughly) with the following:

YTM ≈ (credit card reward percentage) * multiplier

And the multiplier is determined as follows:

multiplier = 12 ÷ (term of CD in months)

(for those unfamiliar, the wiggly equal sign ( ≈ ) in the above is an approximately equal sign)

Hence YTM maximization is achieved by buying the shortest CDs one is able to locate in the CD marketplace. While it is true purchase of even six month CDs will result in much higher YTMs than those available with conventional CDs, three month CDs are nevertheless (roughly) twice as profitable.

This is a form of manufactured spending and I (up thread) have always compared this current rather poor, second rate, approach using CDs to the REAL manufactured spending professionals . . . which I am not. They make a fortune turning their money over in days, or at most a week or two. They have no use for such as myself satisfied with the eternity of three month turnovers. But I like being able to do everything from home, on the net, and without having to go into a store or enter a financial institution. So it all comes down to personal preference, I guess.

I edited that to try to make it more clear with specific dates, so you might take another look. I wasn’t careful enough with my example, but the numbers and multiplier were correct.

I used to do this nearly two decades ago and thought about it fairly carefully back when I had less money and more time. The right formula, if you can use the float, is:

multiplier = 12 ÷ [ (term of CD in months) -1]

Term(mo) Multiplier Your_Multiple
12 12/11=1.09 1
6 12/5=2.4 2
3 12/2=6 4
1 12/0= ∞ 12

Which, in the limiting case of a 1 month CD, makes the multiplier infinite so the YTM is infinite. This is because if you buy the CD with the CC company’s money, pay it off with the maturity proceeds at the end of month 1, and repeat, you never put up any of your own money and the yield = (your dollars earned in a year) / (your dollars invested) with the latter being zero. Before my time, BofA allowed this maybe 20 years ago. Of course you can’t do this with an infinite amount of money because you’re limited by your total CL of CC’s with a sufficiently worthwhile rewards.

For YTM, I also had a more elegant formula, but that was for a more civilized age when CDs paid interest and the IRS definitely didn’t care about your points.

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Thanks, xerty. That’s an interesting analysis. Maybe I’m making more money with this hustle than I thought! :grin:

But for my own situation I stand by my earlier, perhaps more conservative, analysis. This is owing to practical considerations as much as anything else. I do not impose on myself the discipline it would take to eek out every last cent of profit. That would take much of the fun away for me. I also try hard, with my charging, to intersperse as many non-hustle charges into the various charge records as I’m able. For me personally these non-hustle charges, to my cards, are too few in number to allow perfected (as to timing) hustle charges.

It’s entirely possible I’m over cautious. But as reported (far, far) up thread, I lost two credit cards, from two different unrelated issuers, to which I was making primarily hustle related charges. They shut me down; cancelled my cards. So today right or wrong I try hard to mix hustle and non-hustle charges to the cards I’m using now, and this impacts timing of CD purchases to where it’s often not possible to achieve theoretical optimums. I am pleased to report that since losing those two cards, a couple of years ago, it has been clear sailing ever since with no additional cards lost.

While I’ve always been aware, as mentioned far up thread, that the credit card issuers are financing a portion of my activity, I’ve never factored that benefit into my profit calculations. Instead, I look upon that aspect as “gravy”. I’m satisfied to settle for the 8% APY to 12% APY which is readily available here without unwanted reinvestment timing pressures. I am retired, after all, and just doing this as a hobby. :slightly_smiling_face:

Update

In response to external events (i.e., inflation) I am stepping up my side hustle operation in order to increase income from this activity. Just yesterday I brought another credit card, not new but previously inactive, into the play. This gives me now five cards active continuously in addition to my two Bank of America cards which are active only on a quarterly basis.

That set of cards is purchasing CDs from among four reliable counterparties, all credit unions. I do have one new counterparty in the works. Not certain that CU will work out, but you can never have too many counterparties so no harm in working on this.

My minimum APY of 7.2% is now scarcely above the rate of inflation. But that is only for one card. All the others are at 8% APY or higher. Still, this side hustle is no longer providing the return margin over inflation that it did only short months ago.

New CapOne premium travel card, Venture X:

Summary from NerdWallet:

  • Welcome bonus: The Venture X has a sign-up offer of 100,000 bonus miles after spending $10,000 on purchases in the first six months from account opening. For a limited time, cardholders can also get up to $200 in statement credits for vacation rental purchases like Airbnb and Vrbo charged to their account within the first year.
  • Earning: The Venture X earns 10 miles per dollar on hotels and car rentals booked via Capital One Travel, 5 miles per dollar on flights booked via Capital One Travel and an unlimited 2 miles per dollar on everything else.
  • Statement credit: Up to $300 back in statement credit annually for bookings made through Capital One Travel.
  • Anniversary bonus: 10,000 bonus miles every account anniversary, starting on your first anniversary (worth $100 toward travel).
  • Lounge access: Complimentary access for cardholders, authorized users and up to two guests per visit to Capital One Lounges and to more than 1,300 Priority Pass lounges worldwide.
  • Authorized users: Up to four authorized users can be added at no charge, and they also get Capital One Lounge access with up to two guests.
  • Global Entry or TSA PreCheck: Up to $100 in statement credits for either TSA PreCheck or Global Entry.
  • Annual fee: $395.

If anyone has an existing Venture card with a referral offer, feel free to send it my way.

I don’t like this trend of restricting bonus categories to the issuing bank’s travel portal. Chase has also started to do this with their Sapphire line. It’s freakin annoying because dealing with third party reservations for air and hotel are a huge PITA should anything go wrong.

That said, this is very OT to shinobi’s original discussion around CCs for CD purchases.

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Oops, I meant to post in the “Best cards” thread. I’ll repost there.

Eta: Not even right for that thread, made a new one.

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Just for the record, the above try failed. It fell flat.

That CU treats charges to credit cards, for purpose of opening new CDs. as cash advances!

If you’re thinking about playing the “buy CDs with a CC” MS game, be careful not to fall into the cash advance trap.

Note: “MS” stands for “manufactured spending”

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While correct, I’d like to point out that NO Legal Hustle, (including employment), is providing the return margin over inflation that it did only short months ago.

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So true. Sadly

This post will be of interest only to a very small number of participants here. Specifically:

  1. You must be an IRMAA victim
  2. You must be a person who engages in MS (manufactured spending)

I happen to qualify on both criteria because the side hustle under discussion here is a form of MS. So here goes:

I just received, from Social Security, my payment amount for 2022. Of course there, as always, is a really significant IRMAA gouge. But reading through what they sent something occurred to me for the first time. To wit:

You need at the outset to realize the size of your IRMAA hit is a function of your MAGI, or modified adjusted gross income. As one example of this, for many people their MAGI includes all of their routine taxable income PLUS all of their income from (supposedly) tax free municipal bonds.

MSers also have income similar to that which is, however and unlike tax-free bond income, off the books. What is the takeaway?

So far income from manufactured spending has not been a priority for the IRS. That is something I can easily envision changing with the hiring of all the new agents Biden wants. If the IRS begins to track MS income, not only will your taxes jump but, if you are an IRMAA victim, so will your IRMAA bite.

Keep a weather eye. A requirement to add MS income into your MAGI could become expensive and would not be a good thing at all.

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I see my last side hustle update here was several months ago. And this isn’t exactly an update. The side hustle is going along pretty much as before. Instead:

In pursuit of my side hustle I am engaging constantly and incessantly with financial institutions. Such contacts are never ending as CDs are opened, run to maturity, and then are closed. As such, I can report:

The financial institutions are noticeably feeling the impact of COVID. One I contacted yesterday played an on-hold message saying they had twenty-five openings in their call center. OUCH!!

And I’m feeling the COVID impact in other ways as well. Service across the board is off. Items I submit for processing are not timely acted upon whereas, in the past, there was never any trouble. I’m in process of adjusting by allowing more time than in the past. Also, completed credit card transactions do not always result in a CD added to my accounts lists, owing to processing follow-up servicing shortfalls at the financial institutions. I have to do the follow-up personally and oftentimes must contact the financial institutions to prompt action which was routine prior and required no input from me.

So bottom line I am experiencing outcomes of financial institution short staffing right across the board. This causes my side hustle to run less smoothly than in the past. However, experience helps me anticipate the problem areas, matters continue to roll along despite everything, and money continues to be made.

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(I apologize in advance am unable to share details here)

Happy day for this side hustle :grinning:

Not much new comes out of this endeavour. So I’m mostly silent. But today significant progress was made, which frankly is as unusual as it is most welcome:

I have unearthed a new counterparty, and guys these things are not all that easy to locate. What is more, it is a credit union where I’m already a member, albeit a dormant one for the last couple of years. I keep a lot of such memberships alive because you never know what is going to come along. Well, something came along! :wink:

A counterparty, for the sake of this hustle, is a financial institution willing to sell me short CDs and let me fund the new accounts with a credit card. Obviously all such CDs, even though short, are Federally insured, so there is no risk of loss. Typical annual yields continue to run (mostly) between 8% and 10%, the latter using Alliant Visa Signature with a 2.5% reward. I do not pay tax on the rewards so am able almost to keep up with inflation.

But the more counterparties you have the better it is. Enables you to spread out the charges on any given card and that is a good thing. So bottom line a good day today for this old side hustle. Wish every day brought progress like this. But truth is it has been a long while since I’ve been able to add a counterparty.

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I kinow you wont share their names, and underatandably so. But what’s the typical size of the CDs at your various counterparties?

I have a total now of five counterparties. Max allowed CD sizes are as follows:

  • $2.5k - 2

  • $3k - 1

  • $5k - 2

It works out. In the old days of this operation, when I was opening CDs of $10k and $20k like a madman, it attracted too much attention from my credit card providers and I ended up having a couple of cards cancelled.

It’s better to go in with a lighter footprint. I’m able to work with the above limits quite easily and meet my goals without undue stress anywhere in the system.

It is nice that this latest counterparty is offering me a $5k limit. I just opened a test CD for $500, which is their minimum. Everything looks good but it never hurts to “trust but verify”. :wink:

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I’m guessing the size limit is due to the funding method? Does this also mean you’re limited to one CD at a time?

Dunno. Probably.

I don’t think so. But I’m not sure. It’s because I do not try to double up at the same place on the same day. I have options and I use 'em. Two large charges to the same counterparty on the same day (or on days not well spaced out in time) on the same card might trigger review. I do my best to avoid that. In fact:

I make an effort to rotate charges among my counterparty options over time, and intersperse those charges with non-hustle charges to the best of my ability. Hence you can see why I’m so happy to have a new counterparty option.

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Why else would they put such low limits on CDs? Anything else doesn’t make sense to me.

I’m impressed. None of mine are over 2.5k, and most are 2k.

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It’s the funding method. Cant speak to his targets since I dont know what he uses, but any I’ve seen have different maximums for different funding methods.

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