Money Machine


Why won't this work?

Acquire two credit cards, A and B (preferably cards that earn reward points or frequent flyer miles). Charge stuff to card A for one month. Pay the bill with card B, and charge stuff on card B for one month. Now pay that bill with card A and switch back to card A for a month. Lather, rinse, repeat until one of the cards maxes out, at which point you pay off the bill with a check and start the cycle over.

Since each card is paid in full by the other each month, there are no fees or finance charges, and the amount keeps snowballing to earn more and more reward points.

I'm sure there's a flaw here. What is it? Is it even possible to pay one credit card with another?


This happened to PayPal in a big way in their earliest days. Folks would max out their credit card sending money to PayPal, withdraw the money from PayPal and pay off their credit card, and rack up some obscene frequent-flier etc. rewards. PayPal ate the ~2% overhead charged by the credit card companies for several moons until they cracked down on that behavior.

Well, for one thing most credit cards only allow you to charge things - to pay something like another CC bill you would need to use one of their "credit card checks" and those almost always have a fee and / or start charging interest right away, so you'd be building up interest on both cards each month, which would kind of defeat the purpose.

In the banking industry this kind of behavior is called "kiting" - floating payments between accounts - and is actually illegal. I'm not sure if the same is true for CC bills.

The only way to move money from one card to another is with a "balance transfer", which usually has a 3% fee and no grace period (finance charges start accruing immediately). But there were a lot of 0% APR intro offers a couple years ago when the interest rates were low, so even with the transfer fee it was a pretty good deal, if you were careful about the timing.

To chime in on what others said, usually you don't get rewards (points, miles, etc.) for blance transfersm credit card checks, or cash advances either.

I think it's possible to get balance transfers without fees, and with 0% interest offers, if you shop around carefully. However you can't get points/miles/cash back on balance transfers, usually. I can't imagine any bank would accept a credit card "swipe" for payment - they would have to pay the other credit card company the 2% fee, losing money every month.

Even more elegant: try paying the CC with itself.

I inadvertently tried doing this once (a case of companies buying one another out, so two of my cards both ended up being serviced by MBNA unbeknownst to me). It was not pretty.

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