When interest rates are high, there are plenty of risk-free arbitrage opportunities. Banks entice customers with generous bonus savings rates and credit card issuers do the same with low rates.
I spotted one such opportunity in June 2024 with the no-fee MBNA True Line credit card and Wealthsimple’s high-interest savings account. While the credit card offered a 0% rate for 12 months with a 3% transfer fee, the savings account was at 4% at the time. CreditCard Genius also offered $100 in cash if applicants used their link to get the MBNA card.
Once I was approved for a $10,000 credit limit, I transferred $8,000 from the MBNA card to my Wealthsimple savings account. I was charged a $240 transfer fee.
Unfortunately, the Bank of Canada cut rates in the following month, dropping gradually to 2.75% by November. By then, I had still averaged a 3.25% interest rate by earning $108 in interest from the Wealthsimple account, but had to look for a way out before the rate dropped any further.
At the time, CreditCard Genius offered a $175 cash bonus to apply for the no-fee Tangerine World Mastercard. I didn’t have a Tangerine bank account, so I opened one for free before applying for the Mastercard. The account offered a bonus 5.4% savings rate until the end of April, so I transferred my $8,000 from Wealthsimple to Tangerine.
Tangerine made good on their promise and I yielded $182 of interest compounded monthly over five months.
When the high interest offer ended, I still had about a month left before I had to repay the loan in mid-June to avoid interest charges. So, I put it back in the Wealthsimple account, which by then had dropped to 1.75% , earning me another $12.
In total, I earned $577, of which $275 were from non-taxable cash rebates and $302 from taxable interest income. After paying $240 in the transfer fee and $51 in income tax, I netted $286. Even without the cash bonuses, I would still have been $11 ahead.
It took me around six hours in total to work out the math, complete the applications and perform the transfers. With an after-tax income of $48 per hour, I think it was worth it. I could’ve just earned $275 for two hours of applications, but I didn’t do it just for the money, I wanted to prove that you can take advantage of arbitrage.
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