Guide to Credit Card Hacking for Flippers!

46 Replies

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 needCredit 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!

@Account Closed

 - Thank for this writeup.  I've done something similar for a Buy & Hold.  I bought a total fixer upper with a small mortgage, then used cash advances in this manner to finance the rehab.  As you say, it's not for beginners.

6 months after the purchase, I was able to refinance the mortgage and get cash out based on the much higher ARV. I used that cash to pay down some of the advances, but I took the rest of the cash to buy another rental that was turnkey.

The net rental income is what goes to pay off the cash advances - so essentially I get $0 from the first rental for 18 months, but I receive the income from the second rental (which goes in savings towards the next property).  At then end of 18 months, the cash advances will all be paid off and the first rental will also be cash flowing.

Essentially, the tenants pay for the vast majority of the rehab.

Medium cluebussol logo3inLinda Weygant CPA, Clue Business Services, Inc. | [email protected] | Podcast Guest on Show #244

This is definitely not for beginners!! @Account Closed  I've been travel hacking and churning credit cards for a few years so I get what your are doing ;).  From being around some travel forums I keep seeing that peoples paypals get shut down and money that was transferred in gets tied up until it is resolved.  Often times the account never gets reinstated and the refund takes weeks to months.  With this kind of cash transfer wouldnt it flag paypal as suspicious activity?  I think most of the time those were from multiple transactions with lessor amounts, but I'm sure they have a built in trigger for higher amounts.  How many times were you able to do this? I agree with you that this is a great way to get started, but I think it is a one time thing or at least it is not something you can keep on rinse and repeat. Though with the money you make from that first couple flips you shouldnt need this trick anymore.

@Account Closed good post. I've dabbled in a few credit card hacks for cash back and not real estate purposes so I must agree that this isn't for beginners. You need to know the rules and keep your records straight so you don't miss a payment. That being said I agree with the other poster that PayPal is very likely to shut you down with this kind of dollar volume, if not the first time they'll get you eventually.

Another method you can use if you have a 0% on purchases for X months kind of card is this. Buy Vanilla Visa cards at CVS (max $2k per day - they put your license info in the computer) for a cost of $4.95 per $500. These are essentially debit cards and they have a pin. Go to your local super market (WalMart won't work anymore) and buy a money order. Deposit in your bank and you've got the cash to use until the deal runs out on the CC. Of course this takes some time, but it could fund you if you can't save the money from your W2 job. So on a $20,000 credit line like you mentioned above, you could buy 40 $500 Vanilla Visa cards for $198 in fees. Buying a $500 money order at my local Publix costs $0.89 or $445 in fees for all 40 money orders. Total fees are $643 or 3.215% plus your time, effort and gas to get it all done (less any cash back and points you'd get for making all those purchases) Reasonable rate if you want to put the time into it.

This is great stuff. If you are able to have a credit card with a $50k limit wouldn't you be able to get a line of credit for that same amount? I know this is trying to take advantage of the 0% apr but I feel like it would just be easier to use an unsecured line of credit. And if your using these funds for a flip you should really only need access to the funds for only like 9 months max. Just my thoughts.

@Chris Z. That is a good hack as well I haven't thought of. But like you said that will take a lot of work many people won't want to do. But definitely a good alternative if you're willing to put in the work.

@Royce Talbo I have done it twice on Paypal for 10k each time. They haven't said or done anything about it. I am concerned if what you're saying is true though. I would think that since Paypal is getting their 2.93% cut they shouldn't care right? But if they do then I would imagine there is another site out there that would basically let you "purchase cash" on your credit card for a fee. I just haven't really looked into it because Paypal hasn't caused me any problems. Also it might help that I have a verified business Paypal account.

This post has been removed.

Originally posted by @Cory Land :

This is great stuff. If you are able to have a credit card with a $50k limit wouldn't you be able to get a line of credit for that same amount? I know this is trying to take advantage of the 0% apr but I feel like it would just be easier to use an unsecured line of credit. And if your using these funds for a flip you should really only need access to the funds for only like 9 months max. Just my thoughts.

 I have tried to get a line of credit and they've only approved me for a few thousand. Could be because of mortgages and other credit cards. But ya you're right if you're flipping you should hopefully sell the property long before 9 months. But if you've got multiple flips going on and limited cash then being able to have access to your whole credit limit is huge! With this method I don't need to pay back the credit cards after I flip. Instead I can just keep using that cash and the cash profits from the flips to fund the next ones. I never wanna turn down a good deal because I don't have the cash so having the credit reserves gives that cushion.

@Account Closed

As for Paypal - What I can say is the guy who runs our friendly football pool couldn't take payment through paypal this past season becuase they shut him down.  It took a couple years before it happened and he was receiving $100 payments that totaled up $50,000, so it was a bit different.  But, just an FYI that it can and does happen.

It's basically to "prevent money laundering"  

@Mitchell Jaworski thats good to know. I wasn't aware Paypal was so strict even though they're charging a fee. I wonder if anyone has any alternatives for charging credit cards for cash?

I have read online in other forums where people were using Credit Cards to purchase $1 coins from the Mint.  Before the Mint tightened the reigns on how many you could buy, you could purchase $15K at a time for their website.  Now it is $1K every 10 days, or was  when the person posted the thread. You might have to pay shipping via UPS to get hem shipped to your house.  The thread did not mention that part of the process.  

Then you would take the coins into your bank and make a deposit into your account.  

Most people do this to accrue Airline Points, but you can use this hack to get money from your Credit Cards also.  

@Robert Blanchard If you can get 15k at a time thats a great alternative. I'll have to look into that.

Robert,

do you have any good websites to buy mints from?

At one time you could buy EE Savings Bonds with credit cards (not anymore).  I bought $15k worth on a credit card to generate points.  Then I transferred the cc  balance to another 0% card until I could cash out the bonds, pay off the balance and repeat. 

One critical note:  You must make minimum payments on the credit cards even though the rate is 0%.  If you miss a payment, the 0% intro rate is done and becomes 20%+.

@Chris Z.

Did you do those 40 transactions because if you dont spread them out I would think that would be another red flag and they would contact the IRS.  Another thing I just saw on another forum someone posted up a sign from western union stating that debit cards that would be accepted has to have pin bank name and account name on it so no more visa gc or VR I suppose.
@Account Closed

 This is really old stuff but its still a good story with people earning millions in free flights, hotels stays and lifetime elite status.  The problem was that those coins were meant to circulate in the public to replace dollar bills because of the cost to keep printing new ones.  The hackers never put any into the public and it just went straight to the bank.  The Mint caught on to this and changed the rules so if you purchase with a credit card it will count as a cash advance instead of a purchase, so you would need to have credit cards with free cash advances and again you wouldnt get enough money to flip a house.

@Rayman Shakuri

Here is the U.S. Government Mint site:

http://catalog.usmint.gov/

But..I was on their website and they are charging a premium of 10% for the Eisenhower $1, and the price for the Indian $1 is listed at TBD or to be determined.  

I doubt this hack is viable now the the Mint is charging a premium for the dollar coins currently available on the site.  

I was going on what I had read and even heard on Clark Howard. 

I apologize for the misinformation. 

Edit: I found an article describing why the Mint stopped the program for selling large quantities of coins at face value and free shipping.  It was being abused thus the program was ended.

http://mintnewsblog.com/2012/01/the-end-of-circula...

Robert

Thank you 

@Royce Talbo yes I did them in two separate years. One account was my wife's and the other was mine (which is a business account). I'm wondering what Western Union's cost would be? It would be nice if every credit card could just do the balance transfer straight into checking! Then we wouldn't have this issue.

Credit card arbitrage is nothing new. I used to do this like crazy when you could get 3-5% in a CD.  What you don't pay in interest, you pay in hassle. Its risky and it will wreck your credit. 

Its also kinda amateurish. If that's the only husltle you got, it'd better then nothing. Just be careful. Remember the credit card companies make the rules and they're not stupid. 

@Account Closed

Thats commonly called being a "credit card tart"!  I've done it before, but not to the extreme of $70k.

Good idea with the PayPal.

Just don't forget the deadlines and go into the APR zone as it'll hurt.

@Verna M. I agree if you're doing that to make a 1-2% return on your money its not a very good hustle. But I suggest it for flippers and rehabbers where they may be able to take out 50k and get a 50-100% on it in one deal. And if you get that cash at 0% for 18 months the return will increase based on how many you can flip in that time.

You're not getting 0% for 18 months. Not with all those fees, and all the time it is taking you to do all this.  If you miss one payment they slam you with the full amount of interest and late fees.  It's very easy for this to go sour very fast. I was getting about 4% and I look back and think "god how did I not **** that up?"

I am not saying don't do it, but I think you are underestimating potential problems, and by calling this a "Guide to Credit Card Hacking" is just...well.....  I think it's sort of cute you think you have some original idea. 

  The credit card companies can change the rules and fees at any time, xfers can take time. Payments sometimes fall thru the cracks.  Which will most likely happen at the worst time when you're too busy trying to do your flip to make a call to the credit card company/paypal/WU to figure out your little scheme isn't working. 

I wouldn't suggest it for anyone who has access to money in another way. If that's all ya got, well, that's all ya got.  There is no free lunch, that's for sure. But regular money is so cheap right now! 

If I needed it to get started, I might try it.  However I would get into some other type of financing as soon as possible.

@Verna M. When you factor the fees of $3200 over 18 months it comes out to about a 3% interest rate. I don't know anyone that will lend me that amount of cash at 3%. And as far as the time it takes less than an hour to call a couple credit card companies and transfer some money on Paypal. But yes with any kind of financing don't miss a payment! If you miss a private money, hard money, credit card, or traditional mortgage payment it will be bad news. And if you were getting 4% return on what you were doing then I would agree that it was a very bad idea. But like I said if you need money for a downpayment and rehab and you're experienced in real estate and making timely payments then its a great strategy to access cash and get a huge return.