Leveraging Debt

In my previous post, “How Has Debt Changed You?”, I spoke about leveraging debt when you have money.  In this case, I’m going to discuss exactly how I plan to do that with those Chase checks they are always sending me in the mail.

Clarify The Fine Print

I had called a Chase representative once I was convinced I wanted to take advantage of the opportunity and wanted to be sure I understood the fine print as there was some language that I wasn’t quite clear on regarding the below text around lost of your interest-free period.  

I was able to get more information on exactly how these checks work regarding the option I was planning to use which was write myself a check and deposit it into my checking account.  She assisted with what I needed to do in order to get the 0% promotional APR until March of next year.  There is 3% transfer fee, which sucks, but Chase has to make some money right!  They are betting that I will slip up and they get 16.49% interest out of me, but I have the money to back this so let’s see who makes out better.  

No Spending On Sapphire for 10 Months

I will need to put my Chase Sapphire Preferred on the shelf for the next 10 months once I start this.  I also must ensure that I have a zero balance and no new purchases that will get posted to my balance during this time.  So, it’s essential to stop any auto-pay and subscription services for the next 10 months.  Luckily, my wife has the Chase Sapphire Reserve and I have other premium credit cards I can use and I can still continue to use my Chase Freedom Unlimited to get 1.5 Ultimate Rewards points per dollar spent. 

The Plan

So again, the plan is to cash the check into my account after I have verified all current balances are paid off and no new balance will be added, except for, the amount I plan to borrow up to my available credit.  Chase is giving an interest free loan and I am going to use the money for options trading for the next 10 months where I have potential to make money regardless if the stock market is up, down, or sideways.  I expect to make anywhere from $1200 – $4000 over that time.  That is potentially a 444% ($1200/$270 (where $270 is 3% transfer fee) return on investment on the low end of that range.  I will funnel the premiums received from secured put/covered calls into my long term portfolio where I  purchase either of two of the motifs (Os ETF 87/13 Allocation and Os Own What You Love) I have created on Motif Investing or stocks on Loyal3(now FolioFirst).

Chase Checks

The Exit

I can pay the balance off in it’s entirety at anytime, but I will be waiting to the very end of the promotion period, where I will liquidate any stock I have in my Options House account or simple return the cash to Chase by paying back the loan with their money.  There is some downside to doing this; namely, my credit score will be impacted because I will be having max utilization on this card for the next 1o months.  I should note that I have simulated how this will impact my credit score using a tool on Credit Karma I mentioned in blog, “Free FICO Score and Credit Report Services” as this is going to run a higher utilization and I saw I will go from 817 score to 789.  I’m ok with that for next 10 months as that is still in the excellent range.

In Closing

In this post, I am describing how I am leveraging 3 things, other people’s money, my knowledge of options, and my credit score in order to make more money and increase my assets.  Using the rule of 72 (72/7% (where 7% is annual rate of return)) and a conservative 7% return, that $1200 will double every 10.3 years.  This is money I wouldn’t have had otherwise and this is what I mean by leveraging debt if it makes you money.  If Chase continues to offer this, I will do this every year until they stop offering.  This is an opportunity for me and I’m using my financial literacy to take advantage.  If you find this is something you can do, perhaps you can take same approach.   

Note:  If you want to get into investing and it makes your head spin, you can follow my lead where I am investing money and purchase the below diversified motifs I mentioned above.