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.