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Thursday, March 29, 2007

Never Pay Your Credit Card Bill

Here is a useful application of a very simple technology. Ever get a late payment on your credit card? Tired of paying the bill? Credit card companies have a great business going for them and they are a perfect example of the current war that is being waged on the customer. Terry Gross gave a great interview with Elizabeth Warren, a Harvard Law Professor on how credit card companies optimize their customer abuse department. I've recently developed a way to avoid finance charges while still carrying a large balance on your card. This is a method of deferring payment, possibly years into the future.
Basically, the idea is that you can pay your credit card bill by billing your credit card. There are probably several ways to do this, but the easiest is with PayPal. You have to link both your credit card account and PayPal account to your checking account. Say you spent $500 in January and the statement arrives on the last day of the month, but it's not actually due until the last day of February (CapitalOne gives you this much time). You can bill yourself by sending a money request to your PayPal and using your credit card to pay. This will provide you with the cash necessary in your checking account to pay the credit card bill. Essentially it's just rolling over charges into future periods. The only catch is that you can't do this forever because most entry level credit cards have limits of about $5K if you have good credit. You can, however, continue it into perpetuity and avoid a finance charge as long as you keep your balance below the minimum. Meanwhile you can have your actual money (if you have any) earning 5.2% in an ING savings account. As far as I know, there are no rules or laws against this, but be careful not to charge up too much debt or Asta Funding might knock on your door. That's not pretty, from what I've heard.