Author Topic: Credit Card Question  (Read 1834 times)

Kazr01

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Credit Card Question
« on: February 12, 2016, 09:30:16 PM »
Hey all!  Long time forum reading, first time poster.

Growing up I was exposed to the typical rhetoric of fearing credit cards.  Above all else, you were to never, EVER use one credit card to pay off another.  After growing my money stubble I've begun to wonder about a possible trick.  Let's say I have 3 credit cards; we'll call them A, B, and C.

Credit card A has 3% cash back

Credit card B has 1% cash back

Credit card C has 1% cash back

Let's say I charge $1,000 on credit card A.  In addition to now having a balance, the card will earn $30 (3%) cash back.  Can I now pay off credit card A by using credit card B, and in the process gain another $10 of cash back?  Could I even continue down to card C and earn another $10?  This is assuming that when the balance reaches the final card it will be paid in full.  This has been mulling over in my head the past few days and no one around me (all non-mustachians) has been able to actually give me an answer. 

Goldielocks

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Re: Credit Card Question
« Reply #1 on: February 12, 2016, 10:25:57 PM »
The primary way to do this is with balance transfer checks, which do not give you cash back, and charge a percentage of the amount, interest, or both.

There may be a way to flow it through a cash checking account, but really, that would be the same as charging everything you can on there.

Anyway, the reward cards have high interest, which you want to pay off in full every month.
Much better to look into travel bonus point hacking, for a much better payoff for your effort.

Rubic

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Re: Credit Card Question
« Reply #2 on: February 13, 2016, 11:37:20 AM »
Let's say I charge $1,000 on credit card A.  In addition to now having a balance, the card will earn $30 (3%) cash back.  Can I now pay off credit card A by using credit card B, and in the process gain another $10 of cash back?  Could I even continue down to card C and earn another $10?  This is assuming that when the balance reaches the final card it will be paid in full.  This has been mulling over in my head the past few days and no one around me (all non-mustachians) has been able to actually give me an answer.

As goldielocks mentioned, in general this will not work.  If you read your terms and conditions, carefully note the fees associated with balance transfers.

However, occasionally there will be some arbitrage opportunities.  For example, one time I needed to meet a $5000 minimum spend for an Amex Platinum bonus.  There was a 2.25% rebate offer to purchase Amex gift cards, up to $2000, so I purchased a single $2000 gift card ($45 rebate), then used it to buy four $500 VISA gift cards (each with a $5 fee) and used them to load my Redbird (now Serve) debit card, transferred the $2K to my bank and paid off the Amex charge.  So I was essentially paid $25 in the process of meeting my minimal spend requirements.




 

bacchi

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Re: Credit Card Question
« Reply #3 on: February 13, 2016, 12:01:03 PM »
In the early '00s in the US, the balance transfer check fees were 0, the promotional interest rates were 0%, and the savings account rates were ~4%.

The procedure:
1) Get 0% card.
2) Buy what you regularly buy.
3) Put the equivalent money in a high yield savings account.
3) Pay the minimum payment.
4) When the promotional period is about to expire, balance transfer to a new card with 0%.
5) Repeat.

Floating $20,000 yielded $800 almost risk free.

The banks caught on and that's why we have balance transfer checks that charge a fee.

https://en.wikipedia.org/wiki/Stoozing

Good times, good times.

Kazr01

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Re: Credit Card Question
« Reply #4 on: February 13, 2016, 01:22:11 PM »
Thanks for the comments everyone!  And thank you Bacchi for the brief history lesson.  I was no where near paying attention to finances in the early '00s so this was interesting to learn about.