I talked briefly in the past about how I was considering playing the arbitrage game for some of our big purchases for the new house. We had the opportunity to get no payments and no interest for one year on two of our big purchases. We are going to take advantage of that and try to earn a few more bucks for ourselves.
We had saved the money for both of these purchases, but instead of paying them off right away, we are going to invest the money for part of the time in a 6 month CD, and for the remainder of the time in a money market or high-yield savings (whichever looks better at the time).
We have approximately $6000 we are going to invest for this.
Now, we’re only doing this because we already have the money and we are not getting things outside of what we had planned for. We have developed the discipline not to go spending this cash when we know we are holding debt. If I didn’t feel disciplined enough I probably wouldn’t be trying this.
We used Bankrate.com to determine where we could get the most money. In this case, Countrywide was the top but required a minimum investment of $10,000. The second best was E-Trade at 5.25% and the minimum was $1000 which we qualified for.
If we were more risk-takers, we might consider investing in the stock market. However, with the possibility of the investment losing money and leaving us with debt that wasn’t really an option. We didn’t feel like taking that risk where others might be more than happy to take that risk.
The yield from the 6 month CD would be $160. Not a huge sum of money, but nothing to scoff at either. That’s a summertime electric bill. You can find calculators for CDs at Bankrate.com too.
The remainder of the time (5 months) we’ll put the money in the E-Trade savings account which is currently paying 4.93% and is compounded daily. There are higher interest rates, but weighing more accounts vs. getting a good (but not the best) rate where I already have an account made us decide to keep the money at E-Trade.
So, taking the $6160 and investing it for those 5 months at 4.93% interest compounded daily yields $6209 or another $49.
So overall we’ll have over $200 we’ve earned and we’ll still be paying off the debt a full month early. Again, not a huge amount of money, but there is a lot you can do with $200.
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