Our Story Part III: the Moral

by Rocket Finance

This is the story of how my family reached the proverbial “end of our financial rope” and how I became a personal finance blogger. Today’s post is the third in the series and will be the final post on this topic for a while. You may also want to read Part I: the Perfect Storm and Part II: the Solution.

In order to make up a budget short fall last year, Mrs. Rocket and I earned over $5,000 in bank bonuses, credit card bonuses and balance transfer arbitrage. In essence, we traded our credit score of 748 at it’s highest point in exchange for favor from credit card companies. Here are some comments and warnings for you if you are planning a similar strategy to generate some extra cash.

  • Over the course of three months, our credit score dropped to 618 (depending on which score reporting agency we used), a drop of over 100 points.
  • We strove to use the extra money only for items that were already in our budget. But is very difficult to resist taking the family out to eat or buying some item of indulgence when you have a $100 bonus on the way.
  • We were not 100% successful in sticking to our budget, but we were well on the plus-side of the ledger.
  • We began all of this with some level of ignorance about the importance and value of a good credit score.
  • It is not wise to blatantly abuse your credit score as we did.
  • A credit card bonus of $50 is not worth the lost credit score points – unless you plan to earn major cash back with that card.
  • Department store credit card bonuses are never worth the credit score hit.
  • We were successful in not paying any interest during our arbitrage, but we did pay a few fees along the way.
  • A strategy like ours requires intense planning and good record keeping.
  • We do not plan to make this a long term lifestyle. We will pick up an easy bank bonus now and again, but we want to protect our credit score.
  • The only credit cards that we are currently using include the 3% cash back card,  Chase Freedom and airline miles card, Miles by Discover.
  • Most of our balance transfer arbitrage will be over in June. We do not plan to do it again – of course, if online savings rates go back up to 6% again we may discuss it . . . never say never.

The long term benefits from seeking “bonus income” is not the actual cash. The knowledge that I gained through this process will benefit us the most in the long run.

  • I now know a whole lot more about credit scores that ever before.
  • I know a great deal about credit cards and credit card companies.
  • For the past year, I have intensively managed our budget and developed a great budget spreadsheet that gives a whole lot of information about how financial decisions and habits will affect our family’s bottom line.
  • I have become a student of the markets, global finance, debt reduction and personal finance strategy.
  • Rocket Finance is a result of my journey. I hope that someday this blog can provide a reliable stream of income for our family.
  • I greatly value the relationships that I have been able to develop with other personal finance bloggers. I learn a great deal from all of the bloggers in my blogroll.

I hope that you have enjoyed this series and I may continue to add pertinent posts to this subject over the next few months. I enjoy interacting though the comment thread or by through my contact form, please feel free to ask any questions that you might have about this topic. If I don’t know the answer, I can send you to someone who does.

  1. 20 Responses to “Our Story Part III: the Moral”

  2. By My Dollar Plan on Mar 15, 2008 | Reply

    Wow, what a story. Thanks for sharing and being so honest. I’m glad you were able to keep it from spiraling out of control. Great job!

  3. By E.C. on Mar 16, 2008 | Reply

    That was certainly a creative way of handling a shortfall. What are your plans for increasing your income and/or reducing your expenses this year? Do you have any idea how long it will take to bring your credit score back up after you get done with the balance transfer arbitrage? Since a rate increase in your ARM contributed to your problems, you might need to consider refinancing at some point.

  4. By rocketc on Mar 17, 2008 | Reply

    EC, thanks for stopping by. . . sounds like I need to to another blog post to answer your questions. :)

    Stay tuned.

  5. By Bargain Hunter on Mar 22, 2008 | Reply

    I have recently switched from Chase Freedom to Chase Freedom Plus. Check it out, you get same basic benefits but more categories and no cap on rewards

  6. By Brip Blap on Mar 22, 2008 | Reply

    That is a great story. It’s not a direction I would go in – I’m steering clear of the arbitrage, personally – but it’s great that you took control of a bad situation and made something good happen. Good for you.

  7. By rocketc on Mar 22, 2008 | Reply

    I don’t recommend arbitrage. . . it worked for us this once, but I don’t plan to continue doing it. Thanks for stopping by!

  8. By BPaul on Mar 23, 2008 | Reply

    I tried the same methods last year also, and had similar success but my credit score also dropped. I realized you have to be a very disciplined person to make these methods work for you. If not, you will end up paying late fees, interest, and basically make no profit at the end. The only good thing is my credit score jumped back up after paying off the interest only loans. Good Luck, you’re definitely on the right track.

  9. By DJ on Jun 19, 2008 | Reply

    quick question – how much of your $5,000 was taxed, and how did taxes figure into your budgeting? Thanks!

  10. By rocketc on Jun 19, 2008 | Reply

    Good question – answer is all of the money that came in the form of bank interest and most bonuses are considered bank interest. The thing to remember is that if you try to get the Earned Income Credit for children, you will not qualify if you have more than $2,900 in bank interest.

    We were just under that amount – something like $15 short if I remember correctly.

  11. By 144mph on Jun 25, 2008 | Reply

    If you’re smart enough to out-hustle the hustlers this much, why are you only earning 28K a year, with an ARM mortgage that bumps 3%, and adding on a third kid?

    Don’t you think that a similar effort, put into studying to develop valuable job skills, would earn a higher yield?

    People put so much effort into cheating the system, it’s amazing. Don’t get me wrong, I fully appreciate your ingenuity and inventiveness, but I think your misdirection of effort is grossly inefficient. Most of all, I like how you took matters into your own hands and developed your own solution instead of turning to the charity bandwagon and looking for a handout because of your life situation.

  12. By 144mph on Jun 25, 2008 | Reply

    I’m sorry, that above post sounded really rude. I didn’t mean to insult you, but your solution to this problem was exceptional and surprising. Great job.

  13. By Sharon on Jun 25, 2008 | Reply

    I think that was the point. He learned budgeting and to watch all of the financial stuff much closer. And I think that he knows now that there are better things to do which won’t affect your credit score.

  14. By rocketc on Jun 25, 2008 | Reply

    I think your critcisms have some merit. There are also some points of which you should be aware. I earned 28K while working for a non-profit organization. I have since changed jobs and increased my salary a little and also put myself in a position to earn an MBA.

    The strategies outlined here were a one-time, emergency fix.

  15. By MoneyEnergy on Aug 15, 2008 | Reply

    Sounds exciting, in a way. I know in Canada much of this hustling stuff just isn’t available – and that could be a good thing – but the variety of strange credit card offers and bank bonuses and all that marketing hoopla – there’s some of it, but no where on the degree it seems to be in the US. I’m partly envious since I would like, perhaps, to do some “hustling”:) (online paid surveys, maybe), but it also seems a difficult way to literally scrape up a living. But I also probably don’t have the overall salary needed for those bank bonuses anyway – like needing to move $5000 at once into one account in order to get a $75 bonus, etc.

    Good for you for being able to take such radical transformative action! That’s what counts.

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