Earnings, federal telephone tax credit, balance transfer game, and credit line increases

On the earnings watch for Feb 26 - Mar 2:

Mon - JWN
Tue - DECK, FD, FWLT, PSA, TGT, WYNN
Wed - TS

This weekend I was helping my sister file her tax return. Thank goodness she still asks me for financial advice, because she would have missed out on the one time federal telephone excise tax credit given to everyone who files a return for the 2006 tax year.

So a reminder, EVERYONE should file the BLUE 1040 federal tax return for the 2006 tax year regardless of your filing status or income level and make sure you fill in Line 71. You're only cheating yourself of at least $30 if you omit this credit.

I was also perusing the stories of investors who took their 0% balance transfer credit card offers and rolled them directly into 4.9% savings accounts for one year at their local banks. Doing the math, even in the worse case scenario and knowing my financial tendencies, after taxes I would have earned a risk free return of $136 for every $5,000 transferred or a 2.7% return.

Now of course there are caveats: 1) For each card, I apply for, whether approved or declined, I would suffer an immediate 5 point hit to my FICO credit score. 2) The average FICO point decline for the investors who have done this since 2000 has been 50 points within one month of the balance transfers. It usually took at least 14 months before 80% of the points to return to their FICO score. 3) The ideal investor for this "risk-free" return is one that a) owns their home and has less than a 80% mortgage and b) owns their car with no payments. So if I'm applying for some type of loan within the next 15 months, going for this "free" money would be a poor idea from a statistical point of view.

However on the lighter side, one thing I haven't done in awhile is request a credit increase in my credit cards. The ideal way is to make the request through the online access of your credit card account. Citicard is known to have the easiest option and ideally, one should go online versus the telephone to ensure your request is a "soft" inquiry versus the "hard" inquiry that shows up on your credit report. Citicard is easy because all one has to do is go to "Manage My Accounts", then select "Credit Line Increase Request". One of two things will happen: a) the screen will show your account number followed by the words "Congratulations" and list the amount your credit line increases, or b) the words "Manual Review" will appear. If you see the words "Manual Review", you want to click on the "Cancel" button so that you don't get a "hard" inquiry on your credit report. But if you see the "Congratulations", it's up to you if you want to accept the credit line increase. In 90% of the cases you want to accept because part of your credit score is based on the outstanding balance divided by your total credit lines. So obviously, the higher your credit lines on your existing cards, the likelihood your credit score will rise by a few points, given the same payment history and debt balance levels.

The trick is to find a balance on requesting credit line increases. While some have stated you should apply every 3 months, I'm thinking along the lines of once every six to twelve months might be the better play for my situation.