Credit Card Shenanigans?

[ibex333]

Before I continue, please note, this is NOT a troll post. Yes I am serious, and yes, I probably don't know what I am talking about.

So I been thinking recently... I used to know someone who had a huge credit card debt, yet lived just fine, and didn't have much financial trouble or worry about his debt. Eventually he did declare bankruptcy, but recovered from it just fine, and 5 years later was already considering buying a home. Anyway..

I always thought... This guy is crazy! How can someone live knowing they owe so much money to someone?!

Call me naive, I probably am, but I think recently I had a revelation. I been getting many credit card offers in mail, and I usually just shred them, but then I decided to actually read them.

I see there are plenty of credit cards that offer ZERO percent on balance transfers within first 60 days, and then ZERO percent APR for first 12 to 21 months depending on the credit card.

So here is what I was thinking... Check this out...

First, you buy some expensive shit you always wanted. Say... A 2k MacBook Pro, a 1k 4k TV, a friggin Xbox, Playstation, games up the wazoo, and maybe a 32 inch IPS monitor and a GTX 1080 Ti to boot...

Now you got yourself some credit card debt.

So after say... 20 days or so, you open up a new credit card and transfer your balance there... Then you don't pay your debt for like 12 months or more, and when the grace period expires you open up a new credit card, transfer your balance, and continue enjoying your shit.

At some point, when your stuff is getting older, but not too old, you sell it off, and get some money back which you use to pay off some of your debt. Now you owe to your credit card not the full balance but let's say anywhere from 50% to 80%.(I am being optimistic here).

Depending on if you feel like it or not, you pay off the rest of the debt or open yet another credit card... And this "charade" goes on and on... Am I missing something here? Is my logic completely flawed?


EDIT: After some Googling I found out that balance transfers can hurt your credit score, as well as having some credit card debt for a while. If a person does some balance transfers and has debt for several months once in a great while, it's probably not a big disaster, but someone who tries to make this into a lifestyle will definitely hurt their credit worthiness.

 

[Exterous]

I think most of them charge a % of the balance fee when transferring a balance

 

[skull]

Carrying a balance lowers your FICO making the offers not as good later. Depending how much of a balance you rack up anyway. If you have 80k available and only use 10k you could probably keep it going. Also using the sign up bonuses to pay down the balance would help too.

Some people actually use those low fee 0% bt checks to put money in investment accounts. Say you pay a 2% fee to borrow 0% for 18 months you put it in a low risk index fund. If you make a modest 5% interest over the 18 months on say 10 grand you make $550 not counting compound interest after the fee. Seems like a risky way to get stuck with 10 grand in credit card debt over $500 to me.

The other thing thats illegal is bust out fraud. You purposely get as many credit cards as you can with as high of limits as you can and rack them all up at the same time with no intention of paying them back. Its fairly common, credit card companies have their software setup to detect it and can shut you down before you even hit your credit limits. Sometimes the software hits regular people with crazy spending patterns. You can get all your credit cards shut down for seemingly no reason. They will never tell you, you set off a red flag on their bust out fraud detection algorithm.

 

[WelshBloke]

So you eventually end up with no stuff and some debt?

 

[ibex333]

Carrying a balance lowers your FICO making the offers not as good later. Depending how much of a balance you rack up anyway. If you have 80k available and only use 10k you could probably keep it going. Also using the sign up bonuses to pay down the balance would help too.

Some people actually use those low fee 0% bt checks to put money in investment accounts. Say you pay a 2% fee to borrow 0% for 18 months you put it in a low risk index fund. If you make a modest 5% interest over the 18 months on say 10 grand you make $550 not counting compound interest after the fee. Seems like a risky way to get stuck with 10 grand in credit card debt over $500 to me.

The other thing thats illegal is bust out fraud. You purposely get as many credit cards as you can with as high of limits as you can and rack them all up at the same time with no intention of paying them back. Its fairly common, credit card companies have their software setup to detect it and can shut you down before you even hit your credit limits. Sometimes the software hits regular people with crazy spending patterns. You can get all your credit cards shut down for seemingly no reason. They will never tell you, you set off a red flag on their bust out fraud detection algorithm.

Thanks for the interesting info.

 

[ibex333]

So you eventually end up with no stuff and some debt?

That's a good observation, however, you got to enjoy something you otherwise cannot afford for quite a long time. Think of it as... You "rented it", and probably lost some money on that as well. (not too much) So there's an upside and a downside.

It could still have uses such as... Let's say you needed to learn how to use a Mac, but cannot afford one.
Sure, there are plenty of other ways, such as getting a used one. but this way you have a new one for 12 months.

Plus, if you are one of those dudes on You-Tube that do the unboxing video and product review, you'll probably make up the difference in ad revenue. (if you are good)

 

[BarkingGhostar]

Carrying a balance lowers your FICO making the offers not as good later.

When I bought my home I was told that not having any balances on revolving credit (cards) was a bad sign to mortgage lenders. Who knows.

 

[lxskllr]

That's too much work. If you don't follow the rules to a T, you can get hit with back interest and other penalties. I'd rather get a bullshit job at 7-11 or something, and pay cash.

 

[WelshBloke]

That's a good observation, however, you got to enjoy something you otherwise cannot afford for quite a long time. Think of it as... You "rented it"...

So why not just rent it then? At least you dont have to keep paying for it when you dont have it then.

 

[s0me0nesmind1]

You will never sell items and get enough cash to pay anywhere near your bills.

Also, if you file for bankruptcy...
1. You will pay significant dollars. Filing for bankruptcy isn't free, and you will need a lawyer.
2. Your credit is shot. You won't get a loan (car, mortgage, credit card) to save your life for at least 7 years or whatever the statute is.

That said, if you want to play stupid games and win stupid prizes, go for it.

 

[skull]

When I bought my home I was told that not having any balances on revolving credit (cards) was a bad sign to mortgage lenders. Who knows.

They want to see you use them. You have to do whats called the two dollar trick, to get maximum FICO. Ideally you have about 5 open credit lines. Pay every one of them before the statement is cut except one that you leave a $2 balance on. More can ding you a little bit on the score, over 10% starts to hurt more and 30% is worse, the farther you go over certain thresholds the more it will hurt your score. Where around a 50% balance on one card can really tank your score, depending on the rest of your credit profile.

 

[Tweak155]

I essentially did this strategy for about 15 years, except I didn't use balance transfers since they had a fee. Basically what I would do when the time was close to running out on the 0% card (say, 2mos ahead of time) is open a new 0% card for purchases and put everything on the new (even regular monthly expenses add up), pay the minimum but use the extra to pay off the 0% card that was about to run out. Other ways to do this is to offer to buy something for someone and have them give you cash (didn't get to do that one much, but it was free loans against my credit card when I did!).

I've yet to pay a cent in interest or CC fees. In fact, I just got done paying off a 0% card last month that I opened when I got my new house. Used it to buy furniture. These days I don't do it because I lack funds though, I do it because it's a free loan and I can spend my money elsewhere while I make payments.

 

[dullard]

They want to see you use them. You have to do whats called the two dollar trick, to get maximum FICO. Ideally you have about 5 open credit lines. Pay every one of them before the statement is cut except one that you leave a $2 balance on.

That is very bad advice. It costs you money and does NOT help your credit scores.

You are thinking about balances wrong. The balance that is considered on your credit score is how much you owe BEFORE you pay it each month, not after. The credit card rating companies never know if you left $2 on the bill, $100, $1000, or paid it fully. Remember the only thing they use to generate your credit score is what is on your credit report and no where on your credit report does it say if you left $2 on it or not.

A typical credit card that is paid in full each month also carries a balance. From the time that the credit card bill is generated, mailed to you, you both to open it, and you bother to pay it (with a check or online) until the time your check clears, you have probably have already made another purchase. So, you can in most cases always pay it in full and also at the same time always have revolving debt.

 

[ibex333]

So why not just rent it then? At least you dont have to keep paying for it when you dont have it then.

I never seen these things for rent.

 

[skull]

That is very bad advice. It costs you money and does NOT help your credit scores.

You are thinking about balances wrong. The balance that is considered on your credit score is how much you owe BEFORE you pay it each month, not after. The credit card rating companies never know if you left $2 on the bill, $100, $1000, or paid it fully. Remember the only thing they use to generate your credit score is what is on your credit report and no where on your credit report does it say if you left $2 on it or not.

A typical credit card that is paid in full each month also carries a balance. From the time that the credit card bill is generated, mailed to you, you both to open it, and you bother to pay it (with a check or online) until the time your check clears, you have probably have already made another purchase. So, you can in most cases always pay it in full and also at the same time always have revolving debt.

I said pay every one in full before the statement cuts except the one you let report a $2 balance. Unless you have some shitty sub prime credit card you have 30 days more float left. You pay the $2 before the due date and don't owe any interest.

You don't wait for the bill to come in the mail goof ball you go on line about 5 days before your payment is due, don't wait for a check to clear you pay through the internet and it clears in about 3 days.. It should have $0 due because you paid it in full the month before, before the statement cut previously. So now you pay all the charges you made that month before the payment is due. That is paying it before the statement cuts. So nothing reports at all your next bill comes up as $0 balance, $0 due, even though you used it the previous month.

The one you leave the $2 on you pay all but $2 before the bill is due with enough time to spare so that your payment clears before next months bill generates.

The credit card companies absolutely report how much your balance is every month thats your utilization. Utilization effects your fico both in how much of your limit your using on one card in particular and how much your using across all your credit lines.

I don't bother doing it that close I let a few hundred to a few thousand report here and there but when you have 100k in open lines a small utilization doesn't hurt much. Now when I go for my next mortgage I'll be doing the $2 trick just to be sure.

 

[dullard]

I said pay every one in full before the statement cuts except the one you let report a $2 balance. Unless you have some shitty sub prime credit card you have 30 days more float left. You pay the $2 before the due date and don't owe any interest.

You don't wait for the bill to come in the mail goof ball you go on line about 5 days before your payment is due, don't wait for a check to clear you pay through the internet and it clears in about 3 days.. It should have $0 due because you paid it in full the month before, before the statement cut previously. So now you pay all the charges you made that month before the payment is due. That is paying it before the statement cuts. So nothing reports at all your next bill comes up as $0 balance, $0 due, even though you used it the previous month.

The one you leave the $2 on you pay all but $2 before the bill is due with enough time to spare so that your payment clears before next months bill generates.

The credit card companies absolutely report how much your balance is every month thats your utilization. Utilization effects your fico both in how much of your limit your using on one card in particular and how much your using across all your credit lines.

I don't bother doing it that close I let a few hundred to a few thousand report here and there but when you have 100k in open lines a small utilization doesn't hurt much. Now when I go for my next mortgage I'll be doing the $2 trick just to be sure.

If I understand your change, you are now saying pay that card twice, once down to $2 and then a second time just before the bill. Still that is a lot of excess work and gains you nothing.

Download your credit report. That is all the credit scores can be based upon. Show me one place that it shows that you paid down to $2 instead of down to $0. Go ahead. I'll wait. And if the difference between $2 and $0 is going to affect your utilization score, you have much bigger problems to solve.

 

[skull]

If I understand your change, you are now saying pay that card twice, once down to $2 and then a second time just before the bill. Still that is a lot of excess work and gains you nothing.

Download your credit report. That is all the credit scores can be based upon. Show me one place that it shows that you paid down to $2 instead of down to $0. Go ahead. I'll wait.

No just as I said originally paying before the statement cuts, which means before the bill generates. Say you have a credit card with a due date of july 5th, as long as the last statement shows $0 balance $0 owed. Because you paid that bill on may 30th and the payment cleared before that bill was due on june 5th. You don't use that particular card for a week before they generate the statement a few days after the due date. After they generate the statement you use it for a few weeks then here comes june 30th pay the balance you racked up in the mean time again before the statement comes expect leave a $2 balance. Now augusts 5ths bill will say $2 balance $2 owed. You just pay in full on july 30th no interest owed.

Like I said you only do it when you want your highest fico before a major purchase. No need to stop using a particular card for a week when you don't need your credit as high as it'll go. Its still a good idea to pay your balance in full before the statement cuts.


Your annual Credit reports don't show balances. You need to pull with myfico or credit check total, it will show all your balances. If you have say capital one, credit tracker will show the balances owed too. Your utilization most definitely effects your fico score. The programs might show the $2 as zero but it still counts, its not the one dollar trick because fico looks at $1 as 0 for this exact reason. Don't believe me look it up but before you do bet me $1000 paid via pay pal.

 

[RockinZ28]

The $2 sounds ridiculous. Stay under 10% utilization and keep your score over 760 you'll get the best rates available.

Usually let 3-4 cards report a balance each month, but my utilization is rarely over 1-2% total. Scores over 800, had two mortgages and 2 car loans in the past 3 years.

 

[skull]

$2 is ridiculous its generally for people with bad credit. Those of use over 740 under 10% is cool still doesn't mean I won't take the little extra step before a mortgage app.

 

[dullard]

Your annual Credit reports don't show balances.

Exactly. That is why leaving $2 vs $0 or any other number on there does not help you in any way at all (unless you are in the over utilization territory, and then $2 vs $0 is not significant). Your credit score is based entirely on what is in your credit report.

You need to pull with myfico or credit check total, it will show all your balances. If you have say capital one, credit tracker will show the balances owed too. Your utilization most definitely effects your fico score. The programs might show the $2 as zero but it still counts, its not the one dollar trick because fico looks at $1 as 0 for this exact reason. Don't believe me look it up but before you do bet me $1000 paid via pay pal.

Utilization does affect your FICO. But you have a fundamental misunderstanding of how credit scores are made. Your utilization is not the amount you owe when the bill is created. So, paying down to $2 just before the bill is created does not help. Your utilization is how much you owe on the day the credit score was created as a percent of total allowable revolving credit. Unless you just happen to have your credit score be created just after you paid it down to $2, then your $2 trick does nothing. And even then, going down to $0 could be better (if you are in the high utilization category) or the same (if not).

Make it $100,000 that paying down to $2 just before the bill is created instead of $0 just before the bill is created has no benefit (I win) vs paying down to $2 just before the bill is created instead of $0 just before the bill is created has a benefit (you win) and we have a bet worthy of consideration. No paypal, only a valid escrow account, prepaid.

 

[skull]

Exactly. That is why leaving $2 vs $0 or any other number on there does not help you in any way at all (unless you are in the over utilization territory, and then $2 vs $0 is not significant). Your credit score is based entirely on what is in your credit report.

Utilization does affect your FICO. But you have a fundamental misunderstanding of how credit scores are made. Your utilization is not the amount you owe when the bill is created. So, paying down to $2 just before the bill is created does not help. Your utilization is how much you owe on the day the credit score was created as a percent of total allowable revolving credit. Unless you just happen to have your credit score be created just after you paid it down to $2, then your $2 trick does nothing. And even then, going down to $0 could be better (if you are in the high utilization category) or the same (if not).

Make it $100,000 that paying down to $2 just before the bill is created instead of $0 just before the bill is created has no benefit (I win) vs paying down to $2 just before the bill is created instead of $0 just before the bill is created has a benefit (you win) and we have a bet worthy of consideration. No paypal, only a valid escrow account, prepaid.

Did you not read the original post you quoted me as responding to? Dude got dinged for a $0 across all credit lines. You need to report an insignificant balance on at least one card to show your using them. I win, pay pal me $1000

I didn't say it how much you owe its your balance, you pay your balance to $0 every month before they generate the statement then it always comes up as $0 balance every month. I did say it should come up as $0 owed every month, which would mean a $0 closing balance. FICO gets your balance from when your credit card statement closes. If you pay your entire balance including pending charges before the payment is due and you don't use it until the statement closes your bill will say $0 balance $0 due. Which means $0 gets reported to the 3 agencies.

If you want to keep arguing I got $10,000 for the escrow account just pm me.

 

[WilliamM2]

If you want to keep arguing I got $10,000 for the escrow account just pm me.

Your credit report will show what your highest balance was on each card, going back several years, even if you pay it off every month.

So they already know you use it. Your idea is ridiculous. I've paid all mine off every month for decades, my credit score is always above 825. 0 balance every month on all cards.

I'll settle for $5K. PM me.

 

[skull]

Your credit report will show what your highest balance was on each card, going back several years, even if you pay it off every month.

So they already know you use it. Your idea is ridiculous. I've paid all mine off every month for decades, my credit score is always above 825. 0 balance every month on all cards.

I'll settle for $5K. PM me.

It might but thats not what utilization goes off of. So your wrong, pms coming since dullard won't step up to the plate, I'll settle for 5k. Who we going to have officiate?

 

[Svnla]

OP, here are a few pointers, answers.

1. Some CC companies will not let you open new CC if you have too many recent opened CC accounts. Chase is one of them.
2. Your FICO score will suffer if you continue to open new accounts. Lower FICO score = harder to open good CC accounts.
3. You do not get to transfer the balance for "free". You usually have to pay a transfer fee, a percentage of the transfer amount.
4. The bad marks (charge-offs, etc.) usually fall off your credit report after 7 years. Others such as bankruptcy are longer, 10 years IIRC.
5. This is how your FICO being calculated: 35% payment history, 30% amount owed, 15% length of history, 10% new credit, 10% types of credit used. See the length of history and new credit? Not good if you continue to open new CC accounts.

This is how I play the CC game. I pick and choose CCs with the best reward programs for me. In my case, cash back and travel. I am using 2% (1+1) cash back unlimited CC from Citi for my heavy duty spending because it has no cap. I also use Chase CSR for 3% dining and BoA CC for 2% CB at grocery/membership clubs and 3% for gasoline ($2.5K limit per quarter). Then the QuickSilver for 1.5% as the backup.

I pay all of my CCs before the due date and get a few hundred bucks per month as cash back. As a matter of fact, just received $971.99 from Citi for this month cash back. Cold hard cash back into my pocket.

 

[dullard]

Did you not read the original post you quoted me as responding to? Dude got dinged for a $0 across all credit lines. You need to report an insignificant balance on at least one card to show your using them. I win, pay pal me $1000

I didn't say it how much you owe its your balance, you pay your balance to $0 every month before they generate the statement then it always comes up as $0 balance every month. I did say it should come up as $0 owed every month, which would mean a $0 closing balance. FICO gets your balance from when your credit card statement closes. If you pay your entire balance including pending charges before the payment is due and you don't use it until the statement closes your bill will say $0 balance $0 due. Which means $0 gets reported to the 3 agencies.

If you want to keep arguing I got $10,000 for the escrow account just pm me.

Clearly you did not read it. No where did he say that he had a $0 balance on all revolving credit nor did he say that he was dinged. He said exactly:

I was told that not having any balances on revolving credit (cards) was a bad sign to mortgage lenders

You are making up random "facts" out of thin air and pretending that they are true. Just like you are making up the $2 myth.

Yes, you need to have a balance at some point on revolving credit on your credit report otherwise there could be a minor ding. But the $2 fake trick doesn't help.

1) FICO does NOT usually get your closing statement balance. They get your current balance when it is reported by your credit card companies, which is usually a different date. https://www.nerdwallet.com/blog/finance/30-percent-credit-utilization-ratio-rule/

Ask your issuer when it reports to the credit bureaus. If your payment date is on the 5th of the month and your card issuer reports your activity on the 1st, you may have a high credit utilization ratio even if you pay in full every month.

Many credit card companies let you choose your statement closing date. But, they just typically submit to the credit reporting agencies in batches. Meaning that their report date and your statement date may have nothing to do with each other.

For example, it is common for credit card companies to report the balance on the 1st of the month (shifting it a couple days as needed for holidays and weekends). But your statement closing date may be on the 15th and the due date on the 10th. So following skull's idiotic $2 trick 5 days before the statement due date would mean paying it down to $2 on the 5th. But your credit utilization was calculated on the 1st, 4 days before your $2 "trick" was performed. So that "trick" couldn't possibly work in that common situation.

Conclusion: you suggested paying on the wrong date, so your trick wouldn't work as you posted it.

2) Utilization of $2 isn't more helpful than any other utilization number under ~10%. Even if you only had one credit card and only if it had a very meager $100 limit, you could go up to $10 and have no impact on this at all. Typical limits are closer to the $10000 range, so that means that you could pay it down to $1000 and be just fine.

Lets look at it the opposite way, what utilization do high credit score people have?
http://www.bankrate.com/finance/credit/trying-get-perfect-credit-score-worth-it.aspx

High achievers use an average of 7 percent of their available credit on credit cards

If $2 is truely the holy grail, and people with high credit scores tend to have an average of 7% utilization, then skull is basically telling us that the way to maximize credit score is to have a $28.57 total revolving credit limit. Oddly that doesn't jive with reality.

Conclusion: So, $2 is not needed, it could be many values.

3) Skull had the wrong number of cards. As skull said, "Pay every one of them before the statement is cut except one". Going to just one card is often the wrong number. Lets see what FICO wants:
https://www.figfcu.com/documents/fico/FICO® Score Factors Guide - Experian.pdf

FICO® Risk Score Reason Codes 03. Too few bank/national revolving accounts. You have fewer revolving credit card accounts than other consumers with credit histories of similar length. Actively and responsibly managing a moderate number of revolving credit cards is a sign of good credit management.

Conclusion: numbskull's $2 idea of just a balance on one card is probably the wrong number of cards. Even if $2 was correct, the number of cards with $2 must be a "moderate number" that is similar to "other consumers with credit histories of similar length".

4) Your credit report goes back 7 years. You do need to show that you use revolving credit, yes. But not every month as the report includes 7 years of data. Instead, you need to show recent activity. From FICO again:
https://www.figfcu.com/documents/fico/FICO® Score Factors Guide - Experian.pdf

FICO® Risk Score Reason Codes. No recent revolving balances. Actions You Can Take You might consider moderate and responsible use of your revolving accounts, such as charging low balances and repaying them on time.

Recent is typically 24 months, but sometimes 12 months depending on the credit scoring company. Thus, you don't need to do this monthly, you just need to do it on occasion. Also, look at their advice: repay it on time. It doesn't say repay most of it, or even down to $2. It just says to maximize it you have to repay the revolving credit on time.

Conclusion: skull had the wrong month.

Overall conclusion: skull had the wrong month, wrong date of the month, wrong number of cards, and wrong dollar amount. By the way I said I might consider you paying me $100,000, not $10,000. I wouldn't expect you to understand numbers though, so it is okay that you didn't read properly.