Why can't you credit card swap

override367

Now I know there's a good reason to not do this, but I can't spell out why. I'm reasonably sure it's against a contract and probably illegal but I'm trying to explain to a friend why not to do this.

Basically he wants to buy something, then when the bill is about to come due pay it off with his other credit card, and then vice versa, so he doesn't ever have to actually pay. He says his cards both have 0% interest if you pay the bill off before the end of the month, so why wouldn't this work?

FoF404

I think most credit card companies will only take actual cash for their payment and won't allow you to pay with a different card - the exception being balance transfers, but there is usually a fee tied in to that. I can't ever remember having an option to pay my credit card bill with another credit card.

Crashtard

Probably because, usually, the only way you can pay a credit card bill is either by check or debit. The only way I know that would "work" for him is to take a cash advance, put the cash in his checking, then pay the bill. He'll accrue interest that way though. Believe me when I say that the credit card company already thought of this plan, and put things in place to protect themselves from it. Nothing is free.

Thanatos

It won't work because it's considered a "balance transfer," and not treated like a purchase. Generally, you immediately begin accruing interest on balance transfers, and there is frequently a fee associated with them, as well.

VThornheart

And even when there's no APR (due to introductory offer) on balance transfers, the initial transfer fee (generally 3%, though it can be higher) gets applied every time.

It's good if you're looking at switching from something that's already charging > 3% in interest already, but it's bad if they're both 0%. You'd basically just end up racking up a larger and larger bill with every transfer.

EDIT: Oh, also, there's usually a long lead time between balance transfers and when they actually "go off". A lead time that can potentially be longer than the billing period, which means you'll get slapped with late fees before the transfer even happens.

RNEMESiS42

I'd say, don't use the credit card unless actually needed, and then pay it off like anybody else? This scheme won't work, and balance transfers will be a hassle and more money spent in the end.

matt has a problem

Purchase interest may be 0%, but balance transfer (which this transaction will be) interest usually runs around 19.9%. Plus like others have said there's usually a 3% transfer fee.

Shogun

You know when you see those debt consolidation commercials on the teevee where it spits out something along the lines of ,"did you know 47 million americans have at least $8,000 in credit card debt?"

Your friend is going to be one of those people if he isn't already.

Nakatomi2010

I'm one of those people.... But my wife and I get it sorted now... Last year was just a bad year...

He doesn't want to do it because as people have mentioned before balance transfers accrue intrest, so while he wont have to "pay" out of his bank, eventually the intrest will accrue to a point where he has to pay out of pocket...

Hachface

Cash advances have both higher interest rates and instant flat fees. If he keeps doing this he will eventually reach the limits on both cards and be totally screwed.

EggyToast

Only way this could work is by using those annoying fake-checks that CC companies mail out every once in a while. However, if you use them to pay other credit cards, I wouldn't be surprised if the fine print handles it just like a balance transfer.

MurphysParadox

Read the fine print on those checks - they are certainly not the same as normal checks.

The credit cards know this trick and they are very keen on noticing it. They will let you do it (for awhile at least) because you get hit by a charge every time and that's just free money for them... however, they can at any time nail you with a jacked up interest rate and stop your ability to transfer balances to the card. Since the credit card companies like to share information about someone, it may lead to other cards involved in this 'technique' quickly following suit and then hits against his credit. Now, I don't know if it would really get that far, but the following is still true:

1) The credit card companies and/or banks will notice.
2) They can change most any part of the contract (interest rates, fees, promotional deals, credit limits, balance transfer rights, validity of the credit card) whenever they want and most of the time without warning.
3) Transfers have decently high fees usually expressed as a percentage of the amount.
4) Transfers take time and that may leave him with a several thousand dollar balance on a card when the 24.99% interest rate hits... and hit hard it will.
5) They are not stupid and they want your money.
6) They have entire departments that write software to watch for patterns both for fraud detection and marketing research - be certain they have software to detect this little event.

Inquisitor77

At the end of the day, your friend is better off just paying the minimum payment and figuring out how to clear up the balance ASAP. As others have pointed out, he might be able to do this once or twice, and perhaps manage not to accrue any interest while doing it, but eventually he will have to stop and pay something, and there's a good chance he might actually get screwed in the process of trying to screw around with the credit card companies.

Long story short - they've been doing this a lot longer than he has, and faced people who are a lot smarter, to boot. Responsible people learn how to manage their finances and credit, not waste their time and energy doing stupid shit like this (that will only come around to bite them in the ass anyway). Tell him it's time to grow up.

Unknown

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