Here’s a sneaky way to play the Fed’s rate increase

Thanks to Trumpflation and the Federal Reserve (or, depending on your politics, thanks to Joe Biden), I can now lend money to Uncle Sam for 21 months at 4.7% a year. Which works out, over the full period, to a total return of 8.4%. Meanwhile, thanks to big banks’ eager hunt for new customers, I can now borrow money on a new credit card for the same period at 0% interest.

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But can I take advantage this apparent arbitrage opportunity to make some easy money by borrowing from a bank at 0% and then lending to Uncle Sam at 4.7% a year? The short answer is yes — but it’s not quite as easy as it may sound. I can’t just open a new card and use it to buy a bunch of zero-coupon 21-month Treasury bonds, or to fund a high-interest savings account.

These 0% introductory rates are for purchases only. On the other hand, I could next 21 months. And during the same period, I could take the cash that I would have put toward those expenses and put it in a high-yield savings account or Treasury bonds instead.

In other words, I could live off the card and use my salary to finance the extra savings. Or perhaps a practical application of satirist William Makepeace Thackeray’s celebrated challenge: “How to live well on nothing a year.” There’s some real money here. If I used a 0% card in this way to finance an extra $1,000 a month in savings over the next year, by the time the introductory rate expired, I’d have made just over $700 in extra free money.