Investing on Credit

xAnDienx said: "I was thinking - since you can own more than one credit card to more than one company, why not use the credit on one card to pay off the debt on another? I have no idea if this is legal, and if it's possible, but if you can 1 - get the credit payment deadlines for each card on a different day of the month, and 2 - have equivalent amounts of credit with each card (i.e. $5000 max per card), you could just max out every card but one and use that money to invest. Then, when the payments are due, max out the last card you have and use that to pay for another card, then max out that card to pay for another, etc. I've just entertained this idea for a couple years, and I wanted to know if that's possible."

trickynick said: "Borrowing money to invest so that you can increase your potential return is called 'leverage'. There is also another meaning of the word leverage which refers to businesses going into debt to finance capital equipment, but that's a whole seperate matter. The most common way to do this is with margin, option or futures. All of which make more sense than to use credit cards for this purpose. Credit cards normally involve higher rates, which put additional pressure on the level of returns you need just to break even. Plus, having consumer credit accounts maxed out is not good for your credit score. However, the methods of leveraging I mentioned involve risks you should be aware of. I suggest you go to investopedia.com or one of the many other online resources and do searches on leverage, options, futures and margin and read about how it works and what the risks are before you get involved in it."

BenHouston said: "Well first off, a credit from your credit card is not the type of credit you'd want to use to invest with. Credit cards interest is very high 10%-20%+. As a "casual investor" myself I only invest with money that I fully own. However if you insist on investing with credit, I'd suggest a line of credit the interest rate on that is prime, I am Canadian so its 4.5% interest, I think its 6.5% in America if i am not mistaken? Anyways thats my opinion on the matter. Good Luck!"

chahinemm said: "ben i agree with you as that is something very dangerous. Investing with CC is possible but very expensive on a long term as you pay more in interest compared to taking a line of credit or taking a loan. just off my head u pay 10 to 15% more.If you cant generate a minimum of 25% more then all the different interests combine it is of no use to go in such an adventurous or should say suicidal direction. my 2 cents at least chahine"

xAnDienx said: "yes, I realize that, but what I'm saying is, can't you use credit card 1 to pay for credit card 2 before your interest is due, and then use #2 to pay for #3, and so on? I don't know if different companies have different deadlines for the credit card payments before they charge you interest, but if they do, then you could theoretically exploit that, couldn't you?"

AlfredSokol said: "[QUOTE=xAnDienx]yes, I realize that, but what I'm saying is, can't you use credit card 1 to pay for credit card 2 before your interest is due, and then use #2 to pay for #3, and so on? I don't know if different companies have different deadlines for the credit card payments before they charge you interest, but if they do, then you could theoretically exploit that, couldn't you?[/QUOTE] Sure you could. It's a very risky strategy, but it would work. But as soon as you miss a payment, the whole daisy chain crashes."

xAnDienx said: "would repeatedly maxing out your credit card and then paying for it with another credit card bơst your credit report and history?"

Darren said: "[QUOTE=xAnDienx]would repeatedly maxing out your credit card and then paying for it with another credit card bơst your credit report and history?[/QUOTE] credit companies do a ton of data mining. the trouble with a scheme like you describe is this: [list] [*]credit lines are limited by income [*]excessive inquires hurt your score [*]this is highly unusual activity [/list] you would get maybe 3 cards at most and be shut down fast, imho"

StockFreak said: "As far as im aware you cant use a credit card to pay another credit card bill."

HappyHarry said: ""Daisy-chaining credit cards" and taking the money and investing it in the stock market may be the single worst investment idea I've ever heard proposed :)"

trickynick said: "[QUOTE=StockFreak]As far as im aware you cant use a credit card to pay another credit card bill.[/QUOTE] He can do it by way of cash advance or transfer to a checking account he has with the issuing bank, however in these cases the 25 day grace period in which no interest is charged typically does not apply, and herein lies the reason why this plan eventually falls apart. Once interest starts to be charged there is not quite enough money on the "zero balance" credit card there is theoretically always supposed to be under this plan and he will have to make up the interest charged in that period to cover what the balance on the card that isn't supposed to have one would not cover. At first it may not be any big deal, but in the long run that amount will grow and evenutally he will just end up with a bunch of maxed out credit cards and one not quite maxed out but growing and whatever stocks he bought which had better be rising at upwards of 15% annually on average in order to have made this endeavor worthwhile. In the meantime, his credit score sucks. :D"

Vesuve said: "If you want to invest using credit - Leverage. You want to have a good FICO score. Then borrow someone elses money. Buy a residential property with Cap Rates and a good positive cash flow projection. Rent it out. Positive Cash Flow is king."

mhdirect said: "[QUOTE=xAnDienx]yes, I realize that, but what I'm saying is, can't you use credit card 1 to pay for credit card 2 before your interest is due, and then use #2 to pay for #3, and so on? I don't know if different companies have different deadlines for the credit card payments before they charge you interest, but if they do, then you could theoretically exploit that, couldn't you?[/QUOTE] that is a similar thing that people used to do called "kiting" checks, where you had two different bank accounts in different cities, and kept moving deposits to cover the money you used. i never heard of anyone that made it through that, but know several people that lost their hind ends when it all crashed. when you use card a to pay card b to pay card c, at some point they are all going to be maxxed out, and you are going to be in trouble."

AlfredSokol said: "Yeah, kiting checks. I remember one guy that did so through 200 or so companies. He kited checks for years until he finally ran out of steam."

Heather said: "I wouldn't want to use my credit to invest in companies.."

wildmandan32 said: "PLEASE PLEASE PLEASE Just abandon this entire train of thought I think you'd be better off holding up banks than to pursue this idea (and NO don't try that idea either ) :eek:"

CutandWaste said: "Quick note. Just more fuel to add to the fire. Each time you open up a credit card, the credit card company checks your history. Now, normally that doesn't matter ... but each time the credit card company checks your history, it takes a few points away from your credit history. At your let's say ... 5th company, it will note all the fast checks done by other companies and a) either decline you or b) give you an outrageous APR that as seen the compound interest will literally ruin you. I mean cmon, you've seen compounded interests work before. Even Jefferson was amazed at how well it worked. Let's say the first year you get off with 10 credit cards. (Amusing you of course) First, they'll give you a decent APR, let's say .. 15% on average. At the end of that first year, you'll owe about 16% more. Next year, since your credit is absolute shit after all these Credit Cards opening up inqu. about you, it's about 25%. So at the end of 2 years, you'll be owing what you owe, and 48% extra! So let's say you borrow a thousand, you'll be owing a 1480 dollars. Now ... at three years ... It goes even higher. Now .. if you just kept one credit card saying you can't pay .. assuming your start off of a 10% APR. You'll be owing 1210 dollars. With a 22% difference... eh? Point is, this doesn't work. You don't have enough credit card companies or a high enough credit score to pull it off."

AlfredSokol said: "That's exactly right. These companies would shut you down FAST because of credit scoring."

trickynick said: "Everything you said was right, Curtland. However the original poster's idea (this is getting to be an old thread now come to think of it) was that by keeping one card "freed up" he would be able to, every 25 days, pay off another card with that card and ANOTHER card with that card and so on until they are all paid off and because he did this within the 25-day grace period he would avoid finance charges and therefore the interest rates would be irrellevant because he would never pay any finance charges. As I explained above, this falls apart because the only way to borrow from one credit card account to pay another is to either take cash out of the ATM or to execute a transfer to an associated checking account with the issuing bank. In either of these two cases there is actually NO GRACE PERIOD, interest starts accumulating immediately. When you think about this you start to realize that if it were this easy to charge money on credit cards and completely avoid paying interest we'd all be doing it."

dumaman said: "[QUOTE=StockFreak]As far as im aware you cant use a credit card to pay another credit card bill.[/QUOTE] ofcourse you can! balance transfers???? I do it all the time.. I get great offers, sometimes 1.5 yrs 1.9 fixed rates"

ADEBISI said: "it is a pretty dumb idea but I dont see why it wouldnt work"

Harry said: "[QUOTE=ADEBISI]it is a pretty dumb idea but I dont see why it wouldnt work[/QUOTE] At least wait until the next BULL market starts."

xAnDienx said: "lol I'm surprised this thread is still slightly alive"

lb19984 said: "hi everybody speaking of adding fuel to the fire... chase and citibank now offer creditcards that have 0% balance transfers for life so u might as well buy like 20,000 worth of treasury bonds and get 5% which would be 1,000 every year for life? well for a few years anyway haha but thats a bit wrong? and not right so..... stick with doing stuff with money that u have i think"

trickynick said: "[QUOTE=lb19984]hi everybody speaking of adding fuel to the fire... chase and citibank now offer creditcards that have 0% balance transfers for life so u might as well buy like 20,000 worth of treasury bonds and get 5% which would be 1,000 every year for life? well for a few years anyway haha but thats a bit wrong? and not right so..... stick with doing stuff with money that u have i think[/QUOTE] Have you looked at what the credit standards are for that offer? My guess is that you have to have a BEACON over 800 or you won't get this."

JeniousMTGPlanner said: "your credit score is killed by maxing out your cards. What is your total balance to used debt. If you have 5 cards with 1000 limit and you max out four to "invest" and use the free one to pay off the balance, using a payment of 150 dollars per card, you would have balance of $8600, using 86% of your total available credit, this would score negative on your report. Also, caculate the total return you would have to earn, and are earning. How long will it take you to pay off the increased liablity with returns, will there be any return left? Lower credit score, maxed cards, beyond risky, it could be very unsound. It better be very, very short term."

lb19984 said: "dont max your cards out DUHHHHHH keep it at 40%-50% of your max and get 0% cards.... you can get your limit bumped up every 6 months just call and ask for it"