Balance transfer leverage is also referred to as credit card arbitrage. This is a legal mechanism that allows you to borrow money from a credit card and invest the funds. The intention is to yield higher returns than the interest rates, from the investment so as service your loan. Ordinarily, when you get the funds from the card, you will invest it in a savings account, CD account or any other thing that offers a higher interest rate. You will make minimum payments for the promotional period and when it ends, you will pay the balance in full from the profits yielded.

While the balance transfer leverage appears like an easier way to make money, there are a number of potential risks that are involved. It takes a whole lot to make a wise investment decision today. As such, the only people who seem to succeed in this scheme are the investment experts. This is also seen as a way to cultivate bad financial habits in that you would abandon the exceeding the credit card utilization limit and carry debts often. This will have a negative impact on your credit score.

All the rates and fees are availed in the disclosure documents. The fees that you should pay keen attention to are the balance transfer fee, annual fee and the revert APR. The ideal situation is when these fees are much lower than the potential savings that you will make from the balance transfer credit card. Compute all these rates and get the total cost of the card before placing the application. As much as the car may come with an APR of 0%, you are expected to make minimum payments every month so as to reduce your balance and hopefully pay it off before the promotional period, comes to an end.

When the introductory period comes to an end, the APR will revert to the high rates. This applies to any balance that is not paid off plus the original balance. It would be of great benefit if you can pay off your balance during the promotional period.