Have you ever heard of the term float time? It is the time from when a check it written to when it clears. However, it is the main concept that Warren Buffet has also used to make his billions – the idea that you get time before the actual payment is due, and you can use that time to make money. It is actually how a lot of companies make money, but individuals can make money this way too if they are smart about it.
Credit Cards and Float
Do you realize that some credit cards enable you to take advantage of float time? If you have a 0% credit card, you essentially get to float all of your purchases until that APR goes away.
See, if you get 1 year at 0% APR, you can float your purchases without cost for 1 year, since you won’t have to pay interest on the balance until that period is up. Essentially, free money, or float time.
Using Float To Your Advantage
There are several different ways you can use this to your advantage. The most common way is to write a check to yourself from the credit card, and deposit it in your savings account. You can then earn interest on this money while it is floating on your credit card. Then, when the time is up, you can withdraw your funds, and then pay off the card. You can pocket the interest earned during that time.
If you want to be more risky, you can invest the money you borrowed from your card, and try to earn a higher return than a savings account. Since you have the potential to lose money, this is more risky, but it does take the principal of float to the next level.
Some individuals even get more creative, and try to float the balance from one card to the next, and do this for several cards. This is risky, and requires multiple 0% credit cards, but it can be done to extend the float time.
