What is balance transfer leverage?
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.