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Reduce Debt With a DIY Balance Transfer

Written by Nickel - 46 Comments

It’s no secret that we’re in the midst of a credit crunch. Banks aren’t lending, foreclosures are on the rise, card issuers are reducing credit limits, and the juiciest credit card offers have all but disappeared. Gone are the days when everyone (and their uncle!) was offering lengthy 0% balance transfers with no transfer fee.

Getting Creative

So what’s a savvy debt reducer to do? Get creative. Building on an idea that I first wrote about over at Credit Addict, you can create your own fee-free balance transfer with any card that offers 0% APR on purchases. There are still a number of such cards available, many with promo periods of up to 12 months.

Once you have your card, simply drop by the US Mint and buy cash with your credit card. That’s right, you can buy $1 coins straight from the Mint, and you can pay with a credit card. They come in boxes of 250 coins, with a limit of two boxes per order, and shipping is free. Thus, you can buy up to $500 per order.

Once your coins arrive, simply deposit them at the bank and use the proceeds to pay down your high interest debt. Bip, bop, bam. You’ve just turn that “0% on purchases” promo into a 0% balance transfer. And best of all, there are no fees.

Miscellaneous Notes

While there’s no explicit limit on the number of orders that an individual can place, it’s possible that the Mint will wise up and limit your transactions if you try to do too much. Also note that shipping initially shows up as $4.95, but it’s deducted on a subsequent page. Oh, and since this is technically a purchase, you should also earn rewards on these transactions. Here again, if you do too much too fast, your credit card company might wise up and limit your transactions.

Finally, I should note that I do realize that the ethics of this trick are somewhat questionable. The goal of the Mint is to get these coins out into circulation, and depositing them at your bank technically does that. Nonetheless, that’s not really in the spirit of what the Mint is trying to accomplish, and you’ll be generating unnecessary credit card processing fees. If you’re not comfortable with this, then don’t do it. But if you are, you can save a good bit of money.

Published on March 17th, 2009 - 46 Comments
Filed under: Credit Cards, Debt Reduction

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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46 Responses to “Reduce Debt With a DIY Balance Transfer”

  1. 1
    SmBizMan Says:

    do you ever feel bad/awkward bringing a box of coins into your bank to deposit?

  2. 2
    Nickel Says:

    I haven’t done it yet, but… No, I wouldn’t feel awkward depositing a box of coins. It’s legal tender, so it wouldn’t bother me in the least.

  3. 3
    stephen Says:

    Why wouldn’t you just put all your day to day purchases on the card and pay off the high interest card by the amount you put on the new 0% card. Seems a lot easier than buying coins… I guess you are limited to the amount of spending you do in a month…

  4. 4
    DDFD at DivorcedDadFrugalDad Says:

    Money is money and legal is legal — no law is violated so who cares! This is a very creative way to beat the credit card companies!

  5. 5
    Nickel Says:

    Stephen: That’s one option, but it would take time to transfer the balance from one card to another via normal spending, and the clock is ticking as soon as you get the 0% card (you only have 12 months). This approach allows you to get the money moved across much more quickly.

  6. 6
    BCB Says:

    In case this type of coin becomes available again you can order more. “Orders are limited to twenty boxes ($5000) per coin issue.” http://catalog.usmint.gov/weba.....y_rn=27238

  7. 7
    Michael Says:

    Would it not be better to focus on eliminating unnecessary monthly expenses, and then using that money to pay down your debt? It seems it would put you in a much better frame of mind to stop spending more than you can afford, which is many people’s problem.

    Are credit cards not offering free balance transfers anymore?

  8. 8
    Nickel Says:

    BCB: Yep, but that one is currently out of stock (and has been for awhile). Otherwise, it would greatly simplify the process.

    Michael: The importance of reducing your spending should go without saying. This is just a method for further accelerating your debt repayments. And no, there are not very many free balance transfers left. Moreover, those that are out there are typically shorter term (e.g., six months).

  9. 9
    Brad Says:

    This has got to be the dumbest idea I have ever heard. Here’s a better idea: HOW ABOUT YOU STOP BUYING CRAP YOU CAN”T AFFORD ON CREDIT CARDS!!!

    Or another good one:
    Pay off the stupid credit cards and quit using them.

    Why is everyone looking for the easy way out these days, rather than just working hard and cleaning up their own mess?

  10. 10
    Nickel Says:

    Brad: This is intended for people who have already screwed up, and it supports your other “good one” in that it helps them pay off their cards more quickly. This is just another tool for people to use when “cleaning up their own mess.”

  11. 11
    Andrew Says:

    This is terrible advice if your credit card interest is higher than the loan. You’re making the assumption you can pay off the credit card debt in the extra time you’ve gained – but this article is for people who carry debt!

  12. 12
    Manny Fleurmond Says:

    This is only really good if you’re like me: with multiple credit cards and their subsequent bills. This is just a round about way of consolidating your credit card debt into one low interest bill.

  13. 13
    RB @ recessionsblow Says:

    I think it’s a great suggestion. Basically for a little time and effort you can avoid finance charges for the debt that you are forced to carry. Obviously you wouldn’t do this if you didn’t have to carry balances on your cards, but for a lot of people they have balances that they can’t just pay off whenever they want.

  14. 14
    Laura Says:

    The one with the $5000 limit is back in stock. So jump on it if you are interested.

  15. 15
    Henry Says:

    This is pretty innovative and interesting, but people have to be very careful of the fine print of your blog post – check transaction fees, because you could just go about doing this system only to find that you’ve broken even.

  16. 16
    sr. lopez Says:

    Worrying about the ethics of shafting a credit card company? I think that your worrying is itself unethical

  17. 17
    Nickel Says:

    I’m not worried about the credit card company in the least. It’s the Mint that’s getting the shaft in this case.

  18. 18
    Danielle Says:

    Eh, its a good enough idea. I still get an occasional 0% offer and some 2.9% etc.

    With the amount of time I would be carrying this debt (maybe 8 months left to CC Debt payoff) I would probably just accept 1 balance transfer fee or go for a 2.9% with no bal transfer fee.

    Currently on two 0% deals, one expiring in August, and one in December.

    Good luck to everyone who is like me still paying off this type of debt!

  19. 19
    Maximizing Money Says:

    I think this is a great idea and a clever way to get a quick chunk of cash to pay off high-interest debt.

    My only question would be the likelihood that someone who currently has a lot of debt on other credit cards would be approved for a new credit card with a long-term 0% APR offer on purchases, considering the current credit card market climate and the restrictions on approvals of new applicants.

    Unfortunately, or fortunately depending on how you view it, the only people that can qualify for credit cards right now are likely to be able to afford to pay off their debt without taking such measures.

    Very innovative idea. Thanks for the tip on the coins as well.

  20. 20
    corey Says:

    GENIUS!!

    unethical ? whiggah paleeeze!
    The (bank) CC co’s have more ways to screw you as you are trying to get things under control… come on! 24% just because… they decide to? (yes, read the fine print they can, and do, do that) while (cc owning) banks pay you 2% on your money?!?! Who’s dickin who here?

    This is a great way to work the system to get things back in control.

  21. 21
    lor Says:

    this seems like a good deal for those who have no debt, have a credit card, can make rewards income assuming the purchase is not seen as a cash advance.

    the other issue is the security and weight needed to transport $5,000 worth of coins from your address to the bank. its not like you can carry them in your hands. maybe two bricks at a time, but you’d need a dolly to carry these. plus you need security so no one jacks you while you take them to the bank.

  22. 22
    Will Says:

    I agree with the misc. notes – just get a rewards card, and start making some money. At 1%, you’ll be making $50 for each purchase (presuming you purchase $5000 worth). As long as you actually use the money to pay off your credit card, you don’t have to worry about interest fees.

    The only thing to check would be how your rewards get doled out. Some companies that do cash rewards will only give out money a couple of times a year.

  23. 23
    Gary Says:

    Anyone do this yet? I’m wondering if you get hit up with a cash advance fee or not. Please post your results.

  24. 24
    Kball Says:

    I think the problem with this scheme is physical, rather than ethical. :-)

    If you don’t mind lugging over 89 pounds worth of coinage into your local bank, then disregard. But whether you do this all at once, or in chunks, we’re talking about some significant manpower.

    (My data comes from the US Mint website, which lists $1 coins at 8.1 grams each. 5,000 coins comes to over 89 lbs.)

    Course, maybe you can count extra savings by canceling your gym membership as a result of your “dollar coin muscle tone regimen”.

  25. 25
    lor Says:

    I talked to my bank. They said each roll of coins need to be labelled with your bank account number. Coins can not be loose pieces. Based on the pictures on the US Mint web site, the coins look bank deposit ready (e.g. pre-rolled). Yes, 5,000 coins would about 90 lbs + ~10 lbs for packaging and boxes. If you have a dolly and put your coin boxes in a concealed bag, you further minimize a security risk.

  26. 26
    Stephanie PTY Says:

    89 pounds, eh? Guess I won’t be using the drive-up window!

  27. 27
    GoingLikeSixty Says:

    #23. Gary:
    Small town bank where I am a customer said no problem, they would just take a week to process. They will break open the rolls and count them and then call me with the deposit.

    Chase Visa said this would be considered a cash advance and likened it to ATM, therefore subject to their fees.

    I questioned about coin collectors and he said they pay cash because of this reason. If dealing with legal tender, then Chase Visa wants a fee.

    I talked to Chase “security” in Oommpaloompa and they didnt’ have a clue who or what the U.S. Mint is.

    I think this might work? But very risky. What if it doesn’t? You going to spend hours with your credit card company to work out that you tried to do an end run and got caught?

    (BTW: I just wanted it for the Southwest Air credits – 3 transactions +/- = free ticket.)

  28. 28
    lor Says:

    This scheme depends on your credit card company and whether they will categorize the transaction as a cash advance or not. Even if it works for you, it may not for another person. Proceed with caution. If you are serious, I’d suggest buying only $500 worth of coins and see what your paper statement looks like before you go for $5,000.

  29. 29
    thomas Says:

    I’ve read the buying coins before to beef up your credit card purchases, but this takes it to the next level. This is a very good idea. Only problem is the interest rate you get on cash these days almost makes it not worth the effort. If you have debt to pay off, this might be better for you (if you don’t screw up).

  30. 30
    Joseph Ehrenreich Says:

    I did this a few months back basically to get the 1.5% rewards on my AMEX Blue Cash CC. I was not charged any fees by AMEX and when I went to the bank, I told them my brother owed me $500 and this is how he paid me back.

  31. 31
    kevin Says:

    Just went to order and there is a $4.95 fee?

    I know it’s not much, but it doesn’t work out to be a “free” transfer if that’s the case?

    Anyone seeing that? Or am I just the lucky one :)

  32. 32
    kevin Says:

    never mind, read too quickly…sorry!

  33. 33
    Wow! Says:

    This is one of the most ridiculous pieces of ‘reducing debt’ garbage I’ve ever seen. Just stop using credit cards, pay off the debt you owe, and don’t get into debt again. It isn’t rocket science! :)

  34. 34
    Tim Says:

    Assuming you have a 0% APR card, isn’t this essentially the same thing as borrowing cash at 0%. I mean, is there anything with system that would prevent you from depositing the money from a 0% CC into your brokerage account and trading with what is essentially margin borrowed for free?

  35. 35
    kevin Says:

    I’ve been doing this for a few weeks now, but not to transfer balances, just to rack up points/cash back…you should see the funny looks I get from the tellers at the bank :)

    I don’t know what banks you guys use, but BB&T takes them right away, doesn’t make me break each roll, or label, or any of the stuff you guys mention. AND it shows up in my account almost instantaneously.

    Oh, and my credit card does NOT see it as a cash advance…

    So far, I’ve put about $12,000 of these coins into circulation. Actually the US Mint should be paying ME for doing this for them!!

  36. 36
    Sun Says:

    So, assuming you get 1% back on your purchases, was all the effort you put in for $12,000 worth it to make $120?

  37. 37
    kevin Says:

    You’re correct on the 1%, but I also temporarily hold the money in a money market account to earn interest on top of cash savings I already have…

    So, to answer your question, yes, to me, it’s worth it to make close to a couple hundred dollars a month as a result of a few keystrokes and a little bit of heavy lifting going from the 2nd floor of my building to the lobby to deposit the coins…I certainly don’t make money that quickly at my job. ;)

  38. 38
    Sun Says:

    If $500 is max per transaction, do you consolidate your shipments until a critical mass like $5,000 before going to the bank?

  39. 39
    Kevin Says:

    Not sure where ur seeing a $500 limit, I just recently ordered $6500 worth as recently as last week.

    They may split up ur order during shipping but u can definitely order larger amounts.

  40. 40
    Cara Says:

    If you are in credit card debt, how are you able to buy $6500 worth of coins?

  41. 41
    Kevin Says:

    Cara – I’m not in credit card debt.

  42. 42
    Turtle Says:

    The spirit of the idea for a way to work down the credit card debt quickly is excellent. With a 0% interest credit card offer, buying coins and re-depositing would seem to work. After reading all the posts, I was wondering, isn’t there an easier way to do this? I checked out Paypal, but there is almost a 3% fee, similar to that of a BT fee.

    The better way is to fund a new checking account with the 0% interest card. The funding should (need to verify it first) count as a purchase. You could easily do $2,000 or more funding, claim the new account bonus and reward points. Of course, then you’re supposed to pay off your high interest accounts with the new check.

  43. 43
    Sun Says:

    I found out, you can deposit $1 coins at some self-service checkout businesses like Home Depot and groceries. You deposit these coins in excess (like $25 f coins for $1 bananas) and receive the change back as bills.

  44. 44
    jamey kincaid Says:

    us mint describes: The immediate bank deposit of $1 Coins ordered through this Program does not result in their introduction into circulation and, therefore, does not comply with the intended purpose of the Program.

    need to know legal implications. is non-compliance considered, in any way, a legal infraction?

    thanks for info.

  45. 45
    Gavin Says:

    Kevin,

    I was just wondering if you were still doing this? Your last post was in December of last year.

    Thanks.

  46. 46
    Kevin Says:

    Not anymore, the mint put a stop to it earlier this year. Sorry bud.

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