credit cards and infinite loops

[gusl]

Suppose you buy some stuff with credit card A.
Then you pay the balance on card A (due on the 30th of the month) with card B (due on the 15th)...
and then you pay off card B with card A.
and so on...

(You never use card A or card B for anything else)

Since you are never late, you are never charged interest. If you never miss a payment, will this balance just float around forever? And besides, aren't you accumulating advantages every month? (dividends, airmiles, whatever)

Comments

[zarex.livejournal.com]

I've never seen a credit card that could be paid off with another credit card, unless it was just a balance transfer or something (one-time).

[gustavolacerda.livejournal.com]

this disagrees with you:
http://www.ehow.com/video_4766592_can-use-credit-card-pay.html

[velellavelella.livejournal.com]

I know I can not pay off my credit card with another credit card. They don't allow it.

[nibot.livejournal.com]

You can't directly pay one credit card with another, as a purchase.

What you can do is to take out a cash advance from one credit card and use it to pay the other. However, there is no grace period for cash advances: interest begins accumulating immediately, usually at a rate higher than for normal purchases. Additionally, there is typically an up-front fee of something like 3% for a cash advance.

You could just apply for an entirely new credit card each month. Usually when you get a new credit card, you can transfer balances to it for free under very favorable terms, for example it used to be common to be offered "no interest for the first year" on this initial transfer. People would transfer money into a savings account and then use one of these deals to avoid paying interest on it for a year. However, one missed payment and you're screwed.

[nibot.livejournal.com]

Also, you generally do not earn rewards (i.e. airline miles) on transferred balances.

[nibot.livejournal.com]

At one time (and maybe still) it was possible to do exactly what you suggest using Paypal as an intermediary. Use your credit card to fund your paypal account, transfer this to a checking account, use the checking account to pay a different credit card. However, this was explicitly against the terms of service, which were inherited from the credit card companies, who don't want you to be able to do this.

[gustavolacerda.livejournal.com]

how screwed are you if you miss one payment?

[nibot.livejournal.com]

Typically when you are granted a favorable rate for a balance transfer (i.e. no interest for a year), it's stipulated that this will revert to the usual rate (i.e. 20% APR) if you miss a payment. You will then have a huge balance at a huge interest rate...

[gustavolacerda.livejournal.com]

I suppose that would be time to refinance.
I'd think it's easy to get lower than 20% interest, unless you have really horrible credit.

[nibot.livejournal.com]

Most credit cards subject you to a "default rate" which is much higher than the usual/promotional rate once they are angry with you.

[gustavolacerda.livejournal.com]

I'm saying: couldn't one move to a different credit card, with lower interest? Afterall you only missed 1 payment...

[nibot.livejournal.com]

Yeah, certainly.

It's just hard to come out ahead. The scheme most people talk about is borrowing money from a credit card under a 0% APR promotion and investing it in a guaranteed-yield savings account at some small interest rate like 1-4%. The fees and interest you'll have to pay on a balance-carrying card after you miss a payment are likely to wipe out the small profit you were hoping to make.

It's not impossible, it's just a pain to execute properly, and for only a small gain.

[bhudson.livejournal.com]

Most 0% APR offers I've seen have tiny print about a one-time 3% transfer fee. So you get 0% APR for 6 months, but you paid 3% upfront, which, oh hey, that sounds an awful lot like a 6% APR!

[noequal.livejournal.com]

Also, be careful of universal default. This at least exists in the states. If you miss one payment on one card, all interest rates may go up. Perhaps worse, credit limits may go down.

All from just one missed payment. Be careful when dealing with CC companies.

[radiata-prime.livejournal.com]

Some of the most brilliant mathematicians I know work as financial analysts for Chase Credit. Good luck trying to outsmart them.

[http://users.livejournal.com/_wirehead_/]

plus, if you miss a payment, they very often charge that interest rate retroactively from the beginning of the balance.

[jgrafton]

not to mention the fact that opening a new credit card each month will ruin your credit, and you probably won't be able to keep it going for very long.

Another problem.

[noequal.livejournal.com]

It all depends on how you do this. When I worked for BankOne doing credit card customer support, I learned a few things.

1. Balance Transfers from one card to another are fine.
2. Paying one card with another tends to be done as a cash advance. This -- typically -- will have outrageous fees, as mentioned above.
3. Paying it so that you never need to pay even a minimum payment is illegal, at least in the states. Apparently it counts as kiting.

That being said, if you can do 0% APR Balance Transfers with no fee, then go right ahead. That's the way to do it, and sometimes one can get those offers. Be wary of the fine print, and -- something else I learned -- if they say it needs to be paid off in 6 billing cycles, shoot for 5.

[easwaran.livejournal.com]

As others have said, I think this only ever works as a balance transfer, or cash advance. In either case there's normally a one-time fee even if you don't have to pay interest. Also, these types of transactions normally don't give any benefits.