No. of Recommendations: 7

You wrote, The longer the 0% loan, the greater the risk that you miss a payment and then all the promotional terms of the loan are withdrawn and you are stuck with a high interest rate over a long period of time.

I find that automatic bill pay at the bank is pretty good. Just set up a repayment schedule and forget about it. Or have the creditor pull the payments if you don't trust your own bank.

It's really not hard to eliminate most of the risk here. And getting an interest-free loan on a bunch of money often makes it worthwhile. In fact usually the larger the loan the better.

Consider a $10,000 load at 0%. Let's say you get that for 3 years. You can currently get 1.50% on a savings account. That's $225 in interest earned for the trouble of setting up the repayment schedule when you take out the loan. And $225 is probably the minimum you would earn since rates are on the rise. And savings rates should be north of 2% by the end of 2018.

BTW, before the Great Recession you poo-pooed me taking 0% BT offers. But back then I could get 0% BT offers with no transfer fees and 4% APY on savings. I twice exercised an offer from MBNA and the terms were more like $35 minimum payments on a $28K balance for 16 months.

Each time I exercised that offer, I netted something like $1,400! And you poo-pooed that! I mean come on! I made a lot less back then than I do now and that much additional income was material! And what risk did I assume? That my bank's bill payer wouldn't follow the schedule I set up in advance?

I mean I had the cash to pay it off. A mistake at most could cost a few days in interest. Basically the down-side was a mistake would wipe out some or all of the gains and I'd done it all for nothing. But the up-side was basically a small paycheck!

I think if you can play an interest rate arbitrage game at a bank's expense and make enough money to make it worth your time, you should seriously consider doing it. Just be sure to consider all the risks you're taking, be sure the rewards are worthwhile and that you have an exit plan if things go south.

These days I don't do 0% offers because the math (transfer fees and the like) generally doesn't work out for me. But last year I took 2 bank deposit offers, 1 credit card offer and 2 brokerage offers. I netted $2,450 - I think that's a personal record. This year I've taken one deposit offer for $400 and I expect to take one or two more before year-end. But if I have a 0% loan offer in front of me - BT or for a large purchase I was going to make anyway - and I think I can profit from it, I'm likely to take it.

- Joel
With all that said, debt-laden readers shouldn't fool themselves into believing that debt is smart simply because it's 0%...
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