0% APR Arbitrage: What Borrowing at 0% to Buy T-Bills Pays After Fees and Tax

The pitch goes around every time short-term rates are high. Open a card with a 0% introductory APR, leave the money you would have used to pay for things in Treasury bills, and collect the yield until the promotion ends. On October 2, 2026, the 52-week bill yielded 4.46%, so $20,000 looks like $892 a year for doing almost nothing.¹

The trade is real. Borrowing at zero and lending to the Treasury at 4.46% is a positive spread, and issuers know some customers do exactly this. What the pitch leaves out is everything between the 4.46% and your bank account: the transfer fee, minimum payments that shrink the invested balance every month, federal tax on the interest, rewards you stop earning on another card, and a 22% rate waiting behind any missed deadline. Run those through and the common version of the trade, a balance transfer with the average fee, loses money.

The trade, with every term included

In a textbook the profit on borrowing $X$ at zero and investing it at yield $y$ for $T$ years is $X y T$. Nothing in a real card offer looks like that. The version that matches your bank statements is:

where $t$ is your marginal tax rate on the interest, $f$ is the upfront fee as a fraction of the amount, and $\bar{B}$ is the average amount you have invested, which is always less than $X$. Each term gets its own section below because each one is large relative to the profit. On $20,000 for a year, a single percentage point of fee is $200, and the entire after-tax yield is about $640.

Four kinds of 0% offer

Card marketing uses “0%” for products with very different cost structures. Sort the offer into one of these before doing any math.

The CFPB draws the line between the last row and the first: with a true 0% APR, interest starts on whatever balance remains after the promotion ends, while with deferred interest, “interest going back to the date of the purchase will be added on top of the remaining balance.”² The CFPB found that about one fifth of deferred-interest promotional balances were charged that retroactive interest.³ Store cards and medical financing are where these offers live, and they have no place in a yield trade.

Convenience checks are the other trap. The CFPB’s 2025 market report notes that some issuers treat them as balance transfers while others treat them “similarly to cash advances,”⁴ which usually means a separate fee, a higher rate, and interest from the day of the transaction, since grace periods “typically apply only to purchase transactions.”⁵

The fee decides the balance-transfer trade

An issuer can charge a balance-transfer fee on a 0% offer, and almost all of them do.⁶ The CFPB’s survey of card terms put the average fee among the 25 largest issuers at 4.3% in the second half of 2024, up from 3.9% in 2022.⁴ Some cards charge 3% for transfers made in the first 60 days and 5% after that. A few credit unions charge nothing; BECU’s Low Rate card advertises 0% on transfers for 12 months with no transfer fee.⁷

If the whole balance stayed invested and nothing else got in the way, the yield needed to cover a fee is the fee divided by the after-tax share of a year’s interest:

For a 3% fee over one year at a 24% federal rate, that is 3.95%. For the 4.3% average fee it is 5.66%, well above any bill on the curve in October 2026. Minimum payments push both numbers higher, to 4.17% and 5.98% in the model below, because the fee is charged on the full balance while the interest is earned on a balance that shrinks.

Here is what $20,000 nets at the October 2, 2026 52-week yield of 4.46%, held in T-bills, with a 24% federal rate and a minimum payment of the greater of 1% or $40 each month:

The 18- and 21-month columns assume you can keep earning 4.46% the whole time. A 52-week bill only locks the rate for a year, and the 52-week yield fell from 4.58% to 4.46% in the four trading days before October 2. In the 32% bracket the 3%, 12-month row turns negative (about −$26). The fee also does not shrink when you pay down early; it is charged once, on the full amount, on the day the transfer posts.

You earn interest on less than the credit line

Two things keep the average invested balance below the headline amount.

Minimum payments. A 0% promo still requires a payment every month, and that payment comes out of the cash you parked. Chase sets its minimum at the greater of $40 or 1% of the statement balance, plus interest and fees.⁸ On $20,000 over 12 months the invested balance averages about $18,900 and about $17,700 is still owed at the end.

Spending that arrives over time. A 0% purchase APR only creates float when money you would have paid out stays in your account instead. A $20,000 roof on day one gives you about $20,000 to invest. $20,000 of ordinary spending spread over 12 months gives you an average invested balance near $10,400, and the 12-month result drops from about $640 to about $350. The credit limit is a ceiling on the trade, and most people never come close to it.

Taxes take a quarter or more of the yield

Interest on Treasury bills is “subject to federal income tax but is exempt from all state and local income taxes,” according to IRS Publication 550. Bank interest is taxable at both levels.⁹ Above $200,000 of modified AGI for single filers or $250,000 for joint filers, the 3.8% net investment income tax applies to interest as well.¹⁰

That makes the vehicle matter more than a few basis points of quoted yield. For a filer in the 32% federal bracket paying a 9.3% state rate, $20,000 for 12 months at 4.46% in T-bills nets about $574, while a 4.25% savings account nets about $472. Bills bought at a discount also report their interest in the year they mature, so a 52-week bill bought in October 2026 is taxed on your 2027 return. For the comparison in your own state, see SGOV vs. a high-yield savings account.

Savings deposits are insured by the FDIC up to $250,000 per depositor, per insured bank, per ownership category.¹¹ T-bills are direct Treasury obligations. Either is an acceptable place for this money. A Treasury money market fund works too, though it is not a bank deposit and its yield floats daily.

Rewards you stop earning are part of the cost

If the 0% card earns 1% and the card it replaces earns 2%, moving $20,000 of spending costs $200 in rewards. Moving it from a 2% card to one that earns nothing costs $400, which takes the 12-month result from about $640 to about $240. This is the term most write-ups leave out, and for readers who already use a good rewards card it is often the largest one. The comparison runs the other way if the 0% card earns more than your current card, or carries a sign-up bonus you would not otherwise get.

Run your own numbers

The calculator runs the same month-by-month model as the tables above. Enter the offer you have, the yield on a bill that matures before the promo ends, and the rewards rate on the card you would stop using. The sensitivity table shows how much of the result comes from the fee.

A missed deadline costs half the profit per month

Everything above is the outcome when nothing goes wrong. The rate waiting behind a missed deadline is large. The Federal Reserve’s G.19 release put the average APR on card accounts assessed interest at 22.15% in the second quarter of 2026.¹² Using account-level stress-test data, the Philadelphia and Boston Feds found that APRs rose by 16 percentage points on average when promotions expired.¹³

On the $20,000 example, about $17,700 is still owed when a 12-month promo ends. One extra month at 22.15% on that balance is about $327, roughly half of the best-case profit. Two months erases it. A payment more than 60 days late also lets the issuer apply a penalty rate to the existing balance, after notice.¹⁴

Two other ways to lose money have nothing to do with the deadline:

• New purchases on a transfer card. On most cards, the CFPB says, if you carry a balance from month to month, “any purchases you make will accrue interest from the date of the transaction,” and a 0% transferred balance counts as carrying one.¹⁵ Payments above the minimum go to the highest-rate balance first under federal rules,¹⁶ so you can pay those purchases off, but interest accrues until you do. Keep the transfer card in a drawer.
• Investing the cash in anything that can fall. Stocks, crypto and long-duration bond funds can all be down on the day the balance comes due. At that point the 0% card is financing a leveraged position with a fixed deadline, and the expected return and risk belong in a different calculation. Personal leverage covers that one.

Why issuers make these offers anyway

If disciplined customers profit, the issuer must be getting something from the rest. The evidence says it is.

Credit cards are among the most profitable things a bank does. A 2026 New York Fed staff report using regulatory data on about 550 million monthly accounts, around 90% of the U.S. market, finds an average card interest rate of 22%, a spread of about 18 points over the short rate, and a return on assets of 6.8%, more than four times the rest of banking.¹⁷ Lawrence Ausubel documented the same pattern in 1991: card rates were “exceptionally sticky relative to the cost of funds,” which he linked to consumers choosing cards “without taking account of the very high probability that they will pay interest.”¹⁸

Promotional rates are how issuers acquire those balances. In stress-test data from 2018 and 2019, roughly a quarter of card debt carried a promotional rate, and nearly half of that came from balance transfers.¹³ The CFPB counted $59.5 billion of balance transfers in 2024, and $2.1 billion of balance-transfer fees.⁴

Xavier Gabaix and David Laibson built the theory for this kind of market. Firms price a visible product low and earn their money on add-ons that inattentive customers overlook. In their words, “Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes.”¹⁹ The sophisticated customer in this case is the one who takes the 0% rate, never pays a penalty, and walks away. The issuer does not need every account to be profitable, only the portfolio.

The behavioral evidence cuts against the plan

People who try this intend to be the sophisticated customer. The research on teaser rates suggests that intention is a weak predictor.

• In a randomized mailing of 600,000 card offers, Haiyan Shui and Lawrence Ausubel found that more people accepted a 4.9% rate for six months than a 7.9% rate for twelve, and that customers kept borrowing after the introductory period ended. They read this as people underestimating how long they would carry a balance.²⁰
• A 2022 study of one U.S. bank’s new customers found that teaser rates raised revenue by increasing borrowing at regular rates later. Customers who paid off their promotional balances on time went on to “borrow even more at regular rates than customers who do not pay off their balances timely.”²¹
• David Gross and Nicholas Souleles found that when card limits rise, debt rises too, including for people “starting well below their limit.”²² A new 0% line is a limit increase.
• Before the 2009 CARD Act, issuers applied payments to the 0% transfer balance first, so new purchases on a transfer card piled up at the regular rate. Sumit Agarwal and coauthors found that about a third of customers worked this out right away, about a third worked it out after one or more billing cycles, and slightly more than a third never did during the promotion.²³ The payment rule has since changed, but the finding is a fair estimate of how many careful people miss a mechanical detail in a card agreement.

None of this says the trade cannot work. It says the main risk sits in your own behavior over the next 12 to 21 months rather than in the spreadsheet.

Keep the emergency fund separate

Economists have long noticed that many households carry expensive card debt while holding cash that earns little. In the 2001 Survey of Consumer Finances, 27% of households did both. Irina Telyukova’s model explains 44% to 56% of those households by the need for cash in situations where a card will not work: rent, some bills, some emergencies.²⁴

The same logic applies here in reverse. The pot of T-bills set aside to repay the card is spoken for. If a job loss or a medical bill forces you to spend it, you are left with a five-figure balance about to reset to 22%. The arbitrage pot should sit on top of an emergency fund, never be counted as part of it.

When this is worth doing

Reasonable candidates check every one of these:

• You could pay the full balance in cash today without selling anything risky.
• The offer is a true 0% APR with no fee, or a transfer fee low enough that the calculator still shows a profit you care about.
• The cash goes into T-bills or insured savings that are available before the promo ends.
• You are not applying for a mortgage, refinance or car loan in the next six to twelve months.
• You already pay every card in full, on autopay, and the extra account will not change how much you spend.
• The dollars justify the time. Applying, setting up autopay, buying the bills and paying off the balance might take four hours. At $640 that is about $160 an hour; at $42 it is about $10.

Skip it if any of these is true:

• You already carry a balance on any card.
• You need the promo to afford the purchase.
• Your repayment plan is to move the balance to another 0% card when this one expires. That is borrowing with refinancing risk.
• The offer is deferred interest.
• You want to invest the cash in stocks or crypto.
• The new card would be close to its limit and a lender is about to look at your credit report.

Operating rules if you do it

1. Before applying, calculate the net result with your real fee, tax rate, lost rewards and a realistic average balance.
2. Turn on autopay for at least the minimum the day the account opens.
3. Keep an amount equal to the outstanding balance in the designated T-bills or savings account at all times.
4. Buy bills that mature at least a few weeks before the promo end date, and put a reminder in your calendar a month before it.
5. Do not make new purchases on a card carrying a transferred balance.
6. Pay the balance in full before the promo ends, and stop there.

What it does to your credit

The new account adds a hard inquiry, which FICO says costs most people fewer than five points, and lowers the average age of your accounts. A large promotional balance also raises your utilization, both overall and on that card, and scoring models see the balance without the T-bills that back it. A mortgage lender will count the card’s minimum payment in your debt-to-income ratio unless the balance is paid off at or before closing. Our sister site Card Savvy covers these mechanics and the fine print in Using a 0% APR card to earn interest: the credit-score and fine-print risks, and your credit score is not your financial health score covers when score optimization stops being worth the effort.

The practice has a long history in the UK, where it is called “stoozing,” after a Motley Fool forum poster who popularized it as 0% card deals spread around 2000.²⁵ The reasoning has not changed since then, and neither has the deadline risk.

How Summitward helps

The cash reserved to repay a promotional balance is earmarked money. Track it next to the rest of your cash, at the yield it earns, so it does not get counted twice as both repayment money and emergency fund.

Frequently asked questions

Is 0% APR arbitrage legal?

Yes. You are borrowing on the terms the issuer offered and repaying on schedule. Issuers can decline to approve you, lower your credit line, or close the account under the card agreement, so do not rely on the line staying available.

Is a 0% balance transfer ever worth it as an arbitrage?

Sometimes. At October 2026 yields, a $20,000 transfer with a 3% fee nets about $42 over 12 months and about $475 over 21. With the 4.3% average fee and a 12- or 15-month promo, the $20,000 example loses money even when every payment is on time. A transfer that pays off a balance you already owe at 22% is a different, and much better, use of the same offer.

Should I keep the money in T-bills or a high-yield savings account?

Compare after-tax yields. T-bill interest is exempt from state and local tax, so it usually wins in high-tax states unless the savings rate is meaningfully higher. Match the bill’s maturity to a date a few weeks before the promo ends.

Can I invest the money in an index fund instead?

You can, but the result is no longer an arbitrage. Stocks can fall 20% or more inside a year, and the card balance does not fall with them. That is borrowing to invest, with a short deadline and a 22% rate if you cannot repay on time.

Will it hurt my credit score?

Usually a little, and temporarily: one hard inquiry, a younger average account age, and higher reported utilization while the balance is outstanding. The timing matters more than the size. Avoid it in the months before a mortgage or car loan application.

Is the interest I earn taxable?

Yes. T-bill interest is federally taxable and state-exempt; savings interest is taxable at both levels; the 3.8% net investment income tax can apply at higher incomes. The 0% rate itself does not create taxable income, since borrowed money is not income.

Key takeaways

• The fee usually matters more than the advertised APR. At the 4.3% average fee, a $20,000, 12-month transfer parked in 4.46% T-bills loses about $220 after a 24% federal tax rate.
• No-fee purchase promos are the version that works. On a $20,000 purchase you would have paid for in cash, the same 12 months nets about $640; spread over a year of normal spending it nets about $350.
• Profit depends on the average invested balance. Minimum payments and gradual spending keep it well below the credit line.
• A missed deadline costs about half the best-case profit per month. In the $20,000 example, one month at 22.15% on the remaining balance is about $327. Autopay and a calendar reminder a month ahead are part of the trade.
• Deferred-interest offers and risky assets are a different trade. One charges back interest from day one; the other is leveraged investing.

Related guides

• Where to park cash compares T-bills, Treasury ETFs, money market funds and savings accounts.
• The risk-free hurdle rate explains why the T-bill yield is the benchmark for this kind of decision.
• Box spread loans is another way to borrow cheaply against a T-bill-like rate, with different risks.
• The 2% yield hiding in your budget covers what card rewards are worth in a financial plan.
• Debt avalanche vs. snowball is the guide for anyone already carrying a card balance.

Sources and method

1. U.S. Department of the Treasury, Daily Treasury Bill Rates, coupon-equivalent column. October 2, 2026: 4-week 3.95%, 13-week 4.11%, 26-week 4.29%, 52-week 4.46%. The 52-week rate was 4.58% on September 29, 2026. Treasury
2. Consumer Financial Protection Bureau, How to understand special promotional financing offers on credit cards (blog, archived). CFPB
3. Consumer Financial Protection Bureau, Issue Spotlight: The High Cost of Retail Credit Cards, December 2024. “About one fifth of deferred interest promotional balances were retroactively imposed interest charges,” citing the CFPB’s 2021 Consumer Credit Card Market report. CFPB
4. Consumer Financial Protection Bureau, The Consumer Credit Card Market, December 2025. Average balance-transfer fee 4.3% (minimum $5.51) among the top 25 issuers in the second half of 2024, up from 3.9% in 2022; $59.5 billion of balance transfers and $2.1 billion of balance-transfer fees in 2024; convenience checks treated as balance transfers by some issuers and similarly to cash advances by others. CFPB (PDF)
5. Consumer Financial Protection Bureau, What is a grace period for a credit card? CFPB
6. Consumer Financial Protection Bureau, What is a balance transfer fee? Can a balance transfer fee be charged on a zero percent interest rate offer? CFPB
7. BECU, Low Rate Credit Card, accessed October 3, 2026: 0% intro APR on balance transfers for 12 months on transfers made within 90 days of opening, no balance transfer fee. BECU
8. Chase, How to calculate your minimum credit card payment: the greater of $40 or 1% of the statement balance, plus interest and late fees. Chase
9. Internal Revenue Service, Publication 550, Investment Income and Expenses. IRS
10. Internal Revenue Service, Net Investment Income Tax. IRS
11. FDIC, Understanding Deposit Insurance. FDIC
12. Federal Reserve Board, G.19 Consumer Credit, released September 8, 2026. Average APR on credit card accounts assessed interest, Q2 2026: 22.15%. Federal Reserve
13. Lukasz Drozd and Michal Kowalik, Are Zero or Low APR Credit Promotions Beneficial to Credit Card Companies and Their Customers?, Federal Reserve Bank of Philadelphia, August 2023. Philadelphia Fed
14. 12 CFR 1026.55, limitations on increasing annual percentage rates, fees and charges, including the 60-day delinquency exception in paragraph (b)(4). CFPB
15. Consumer Financial Protection Bureau, Do I pay interest on new purchases after I get a zero or low rate balance transfer? CFPB
16. 12 CFR 1026.53, allocation of payments: amounts above the minimum go “first to the balance with the highest annual percentage rate.” CFPB
17. Itamar Drechsler, Hyeyoon Jung, Weiling Peng, Dominik Supera and Guanyu Zhou, Credit Card Banking, Federal Reserve Bank of New York Staff Report 1143, March 2025, revised August 2026. New York Fed
18. Lawrence M. Ausubel, The Failure of Competition in the Credit Card Market, American Economic Review 81(1), 1991, 50–81. RePEc
19. Xavier Gabaix and David Laibson, Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets, Quarterly Journal of Economics 121(2), 2006, 505–540. NBER
20. Haiyan Shui and Lawrence M. Ausubel, Time Inconsistency in the Credit Card Market, working paper, University of Maryland, January 2005. PDF
21. Kamran Kasaian, B.P.S. Murthi and Erin Steffes, Effects of teaser rates on new credit card customers’ spending and borrowing: an empirical analysis, International Journal of Bank Marketing 40(7), 2022, 1555–1574. Data from one U.S. bank. Emerald
22. David B. Gross and Nicholas S. Souleles, Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data, Quarterly Journal of Economics 117(1), 2002, 149–185. RePEc
23. Sumit Agarwal, John C. Driscoll, Xavier Gabaix and David Laibson, The Age of Reason: Financial Decisions over the Life Cycle and Implications for Regulation, Brookings Papers on Economic Activity, Fall 2009, 51–117. Brookings (PDF)
24. Irina A. Telyukova, Household Need for Liquidity and the Credit Card Debt Puzzle, Review of Economic Studies 80(3), 2013, 1148–1177. OUP
25. MoneySavingExpert, Stoozing. MoneySavingExpert
26. Method. Every dollar figure in this guide comes from web/src/lib/zero-apr-math.ts, which is unit tested against the tables above. The model runs month by month: the full amount is invested on day one (or in equal monthly amounts for spread-out spending), interest accrues monthly at the stated yield, the minimum payment (greater of 1% or $40) is paid from the invested cash at each statement, and the remaining balance is paid at the end of the promotion. Tax is applied at the stated marginal rate, with T-bill interest exempt from state tax. The transfer fee is counted in full. Yields are held constant for the whole promotion, which flatters the longer terms when rates are falling. Nothing here is tax, legal or investment advice.