Earning Extra 3% with Credit Cards

General
1

This is just a thought experiment, haven’t done this but trying to gauge if its legal or illegal…

  1. IDFC bank is offering WOW Credit Cards backed by FD, nothing new but killer point it gives ATM cash withdrawal with 45 Days of interest free period. (Charges fixed 199/withdrawal)
  2. Use this money to book FD for one month which will give 6/12=0.5%/month
  3. Repeat this for 12 months = additional 6%, making it half so that we adjust for fees and charges if any
  4. Total = 7%(Base FD Credit Card)+3%(Monthly FD)= 10% per year!!

Is this theory practical, legal & achievable? or any rules against it?

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2

@pyarlath, there is no limit set on cash withdrawals? Cash withdrawals doesn’t lower your credit score?

3

@pyarlath I checked on paisabaazar, and it shows no withdrawal limit.

Given, say yu have 1 lakh FD, and the ATM lets yu withdraw all 1 lakh in a single go and park this on FD, the interest rate for 30 to 45 days is 3% short FD, yu barely make 600 after 199 per withdrawal charges.

If any GST on 199, that’s 234. You wil make just 15 a month, 180 annually.

AFAIK not breaking any rules and dunno how cash withdrawal will be treated on credit score…Too much effort involved.

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4

Please factor-in ATM transaction amount limits.

What’s the largest amount of cash
an IDFC bank ATM would allow one to withdraw in a single ATM transaction?
( “other bank ATMs” will already likely cap this to 10K per transaction for 3rd-party bank cards. )

With ATMs applying transaction amount limits
that are between 10K INR - 50K INR per withdrawal transaction,
the withdrawal fees on the credit card (199 INR + GST?)
will amount to anywhere between 2% - 0.4% (+ GST?) each transaction each month.

Not much arbitrage left after that. :sweat_smile:

Though the lack of any significant profit should be reason enough to not pursue this “scheme” further,
please check the Credit card offer T&C for any additional restrictions.

1 Like
5

@cvs good point on ATM withdrawal limit…
They shld allow us to do Credit Card to Banks transfers also… but not mentioned anywhere…

Are these limits not controlled by customer or they are capped to max 50K by banking org’s?

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Thats a CC backed with FD, i am not sure if CIBIL comes into picture for secured loans?

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@pyarlath Even though it’s a secured loan, your credit utilization percentage affects the CIBIL. I think it is suggested one use around 30% of the total credit limit.

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Hmmm… do find out if allowed on this Credit-card,
and the fees applicable for such :slight_smile:

Well, yes, the bank sets these limits.
Not soft limits though, but physical limits on the ATM.

Most ATMs cannot disperse more than N notes,
(with N=40 being the most common anecdotally).
That combined with the largest notes in circulation being 500 INR these days,
leads to a per-transaction withdrawal-limit of 20K INR at most ATMs.