This money generating method was recently passed on to me by a member of my mailing list, it is important to stress that this method involves the use of credit cards and takes advantage of the options that they offer you. It is no way illegal and I am not recommending that everyone uses this method but if used correctly it can generate a short term source of income to help your business.
What usually happens is that the 0% card is used to transfer the debt from your credit card that is charging you interest so that the payments you make pay off more of the debt on the new credit card as the interest rate is 0% for so many months. What you should be looking for is a credit card that offers the facility to balance transfer money into your bank account instead of just being able to pay off another credit card. The benefit being that you can then pay off other, non credit card related, debts. This process is going to be referred to as Adaptable Balance Transfers (ABT's), my terminolgy not the credit card companies.
Let me use some examples:
You are looking to start selling DVD's and need £1,000 to start up with and you are planning to use either a bank loan or your overdraft to provide the funding. Using either of these methods will incur interest payments every month ranging from 5% to 21% and as you can imagine this will eat quite heavily into your profit and hence any working capital that you have.
Another option would be to use a 0% credit card that offers the option to do an ABT, what would then happen is you would apply for the 0% credit card and then transfer £1,000 into your bank account and then this debt would be spread over the 0% offer period (usually 6-9 months) and as such not incur any interest payments thus giving you a little bit more of an edge when you are starting out.
Another example that can be used is that you owe your suppliers £2,000 but your cash flow is tied up elsewhere for the moment and your supplier will not supply you with anymore stock until the bill is paid. You can either wait until your cash flow is back to normal which may be weeks and your business could suffer long term damage or you could use a credit card ABT to transfer the money into your bank account so you can settle your bill and then when your cash flow is corrected pay off the credit card debt as it will not have gone up as the credit card rate is 0%.
It is important to note that you need to find a credit card that will offer the option of an ABT as not all do because they just offer the opportunity to transfer existing debt. There are a number of credit card companies that offer this service but what you will find, which is a slight drawback, is that the majority charge a fee for doing the balance transfer from the credit card to your bank account. This is usually 1-2% of the transferred balance which is still far less than you would be paying on a loan or overdraft.
The best way to determine if the credit card offers the opportunity of an ABT is to ask them, it is imperative that you do this as an ABT is not the same as a cash withdrawel. The majority of credit cards offer this and it is at a high interest rate and is something that you should avoid. The key to this is to always ask the question, ring up if you are unsure and the double check before you sign up, this will ensure that you are able to take adavantage of the method described above.
Mike - webmaster at Online Auction Trader
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