Yep. If good with money management, this works wonders. Unfortunately, most aren't and get trapped paying higher interest anyway.

That's how the banks make money, all they rely on is the 10-20% who get it wrong and they are gold. And it's not just money management, it's financial knowledge as well which is severely lacking in Australia.

Let me tell you a story I heard on a tram quite a while ago and I have told to so many other people.

Two young males (18~20) were chatting on the tram and one of them mentioned he was going to take a loan to buy a $10k motorbike. Then his friend mentioned that he should take a $15k loan instead and put the $5k in a savings account and get interest. Whoops and high fives and they went on their merry way.

Spot the mistake in the paragraph above :D