Guide to Credit Card Hacking for Flippers!
I'm not sure if anyone has brought up this strategy before but I'd like to share how I funded my flips starting out. I call it credit card hacking though thats probably not a great name for it with cyber crime and all. Oh well lets get to it!
What you need: Credit Cards and Paypal
Purpose: To fully cash out your credits cards and get the lowest interest rates possible in doing so. This money can then be used for down payments and rehab costs.
How it works: First let me start with the easiest solution we don't use: The cash advance. I don't like it because they typically only let you take out 25% of your credit limit. We're trying to get our whole credit line cashed out. So to do that we need to look at balance transfers. For me I'm always getting mail from my credit card companies offering 0% interest for 18 months on balance transfers. If you're not getting them usually you can call and ask for them. A lot of times they'll have them and you can take advantage. I've found that some companies will let you balance transfer your whole credit line into your checking account with these promotions.
So for example I have 3 cards that are managed by FIA Card Services and two are Bank of America Cash Rewards and the other is a Fidelity American Express. With all three of them I'm able to balance transfer any amount for an up front 4% fee and then I get 0% interest on that cash for the next 18 months. So lets say I have a $50,000 credit limit on the Fidelity American Express, I can borrow that whole amount in cash for $2,000 and have no interest for the next 18 months. Now after the 18 months the APR will jump to a high rate but if you're a smart flipper you should be able to pay it back then repeat.
Now there are some cards that don't allow balance transfers straight into your checking account. I have an AMEX Blue Cash and a Discover card that don't allow me to do that. They have the same kind of 0% for 18 months at a 5% up front fee but its only on balance transfers from another card.
Here's where the hack comes in:
DON'T CASH OUT YOUR CREDIT CARDS THAT ARE ABLE TO BALANCE TRANSFER STRAIGHT INTO CHECKING! You will need them to balance transfer onto the cards that can only accept balance transfers from other cards.
For example assume I have a $20,000 limit on my AMEX Blue Cash that only accepts transfers from other cards. You will need to have $20,000 on another card that you can transfer to it. To do this you need Paypal. On Paypal you can transfer cash to somebody as a gift for a 2.93% fee if you use credit card. So you need to create two Paypal accounts. One to transfer money into the other. So for me I would use my Fidelity American Express because it gets 2% cash back on any charge. I would send $20,000 from one account and receive it on the other account. Now my Fidelity American Express has $20,000 in charges on it and I have $20,000 in cash. Then you call up the AMEX Blue Cash number and you balance transfer that amount to it. So now your AMEX Blue Cash is maxed out at $20,000 and the Fidelity American Express has a $0 balance again. Now you can use the checking account balance transfer on the Fidelity American Express for $50,000 and they'll both be maxed out and you'll have $70,000 cash to work with.
Conclusion: So with this hack you now have $70,000 cash for the next 18 months at 0%. So what did it cost? The Paypal transfer of $20,000 cost 2.93% but it was offset by the 2% cash back the Fidelity American Express offers on any charge. So it basically cost $200 to transfer on Paypal. Then the balance transfer on that $20,000 is 5% so thats another $1,000. Then to do the checking account balance transfer for the Fidelity American Express on $50,000 it was 4% so thats $2,000. So the total cost to borrow $70,000 cash for the next 18 months at 0% was $3,200. If you're a flipper thats an amazing deal and there are a lot of properties you can get the next 18 months with that cash.
I hope this hack can help somebody! Please let me know if you have any questions. And lastly I don't recommend this for a beginner. Credit cards are risky if you don't know what you're doing!