The Ultimate Interest Free Credit Card Strategy

If you have been following any personal finance topics long, you have been told six ways from Sunday to avoid credit card debt. Overall, I will agree that this is a sound financial policy. Credit cards are the most profitable thing a bank can issue because the interest rates are so high. Once you get pulled into more debt than you can pay off each month, you are trapped.

The interest rate is sometimes as high as 25-30% and will eat you alive. It is like a vampire draining your blood cash away every month. Some people can barely hold their head above water each month and can never get ahead once the credit cards have a grip on their wallets. You become a slave that now works for the banks to pay their high-interest rates. I am allergic to interest, so I go out of my way to avoid it.

The Old Credit Card Strategy

When I was still in college, I worked a part-time job, and one of my co-workers was an intelligent older guy with a bit of life experience under his belt. He came across this system where he would open multiple credit card accounts. None of them had any balances on them. He would put them in a shoe box, all organized by the due date.

Starting with just one or two cards, he would pull the maximum cash advance off the cards. At this point, he now had precisely 30 days until that money was due back, or else he would get hit with 30% interest.

As he was nearing the end of the 30 days, he would get two more cards out of his box and pull cash advances off those. He would use those cash advances to pay off the first two cards that were coming due. Now he had 30 days until the second 2 cards came due. As he was nearing the end of his second 30-day period, he would pull two more cards from the box, remove the cash advances off the cards, and pay off the last two cards.

He would continually rotate through the cards each month, always keeping the cash advance float going. He had a whole shoe box filled with cards and would keep the money in a float. He essentially had an interest-free cash loan going forever. Eventually, he expanded the system and pulled cash from multiple cards and used other cards to keep paying them off. He now had an enormous loan that was interest-free he used for years, albeit with a bit of work each month to maintain this system.

Today, it is harder to employ this since most banks won’t give cash interest free for 30 days. However, as I note below in a case study this isn’t always true. A woman I met at an investment conference was able to buy a large beautiful 5 bedroom house using cash from her credit card as the down payment for 18 months. Keep reading, her story is below. So, as the saying goes, times are changin.

Now you may be saying that is a lot of work for an interest-free loan. Yes, it is, but he was using the bank’s money, and he was very disciplined and organized, so it worked for him. I was amazed at how someone could think up a system like this. I never forgot this story, and years later, I figured out how to improve on his system…

The New & Improved Interest-Free Credit Card Strategy

Generally, cash advances will no longer work or least it isn’t as common as interest free balance transfers and purchases. However as I mentioned above and detail below this isn’t exclusively true any longer. Most offers will not apply this strategy to cash advances. Sometimes banks will send out these offers with the little paper checks that offer you the ability to write check to yourself, for cash and get the money interest free for the same period of time. I have not personally used this technique, but someone I met did and quite successfully I might add.

As I thought about the guy in the story above using his strategy, I decided to rework the system a smidge. You will still need to flip the original debt at the end of the 30 days. That part has not changed. However, instead of taking cash advances to pay it off, I simply do a balance transfer to one of my other cards using a promotional offer.

If you are like me, you get a zillion promotional offers every week to transfer your balance to a new card for anywhere from 18-24 months on average for 0% interest. Most of these promotional offers charge you a one-time 1-3% transfer fee to move the balance, which I consider a very reasonable cost, especially when you compare it to the 18-23% interest you will get charged each month if you don’t move it.

After I make the initial purchase(s) on the first card and my billing cycle closes, I grab a card with no balance from my box and call and check to see if they offer a balance transfer promotion. If they say yes, I get the terms, and if I like them, I transfer the balance, typically for a year or more with 0% interest for the low amount of a one-time transfer fee, again, 1-3% of the balance transferred. As you continually keep paying this balance down, over each promotional period the overall balance gets smaller so the next flip will cost you less. The 1-3% fee is charged on the outstanding balance and if that is smaller the next time you flip it the fee is smaller.

Watch Your Credit Limits

One crucial point here is that you never spend more than you can quickly transfer to another card. In other words, if you only have two cards that each have a $10K credit limit, which are both empty when you start, then you can’t exceed $10,000 for your floating loan. I wouldn’t exceed $9,000, so you have a little wiggle room. Your initial purchase needs to be less than $10,000, and again I would do $9,000 and transfer that balance in 30 days to the other card. Otherwise, you will find yourself stuck with debt you can’t move and end up getting socked with some interest.

For example, if I make a purchase on my initial card for $7,000, I make sure that I have a balance-free card with at least an $8,000 credit limit with a promotional offer that I can transfer to at the end of my initial 30 days. I like to maintain a little cushion between the balance I am moving and my credit limit on the new card.

If you are consolidating a few smaller cards into one card, make sure you have a high enough credit line on the new card to consolidate everything on as few accounts as possible. This system is MUCH easier to maintain if you keep it down to 2-3 cards at any given time. If you get into a mess with 10-15 cards rotating, you will likely get yourself into trouble. At most, I have only had three out at any given time.

Shop for Interest Free Promotional Offers First

BEFORE you make your initial purchase(s) take all your cards with zero balances and call each one to see if they have any current promotional offers for balance transfers. Sometimes you will get emails or even snail mail with these offers and won’t need to call. If you don’t have any of those lying around, you need to dial for dollars and start checking.

Call each bank and go through the verification process so you can talk to an agent. Once you are talking to an agent ask them if they are offering any balance transfer promotional offers. They will look in their system and see what is available. Sometimes they have none, and I call another bank. Typically, within three calls on average, I hit pay dirt and find an offer.

After the agent tells me the offer’s terms, I will ask how long this offer is available. They will give me a date when it expires. I jot this down on a piece of paper. If I like the terms of the offer I may stop there, but sometimes for added safety I will call other banks and line up 2-3 offers before making my move. Make sure you carefully document the terms of the offer and expiration dates.

 The Initial Purchase(s)

Once you have lined up your balance transfer offers from the step above you are ready to go. Choose a card that didn’t have a promotional offer and has a zero balance. You go out and make your purchases. Remember, you can’t use cash advances; you must make the purchases directly with the card. This is typically not difficult since almost everyone takes credit cards today. You could even use a service like PayPal to pay a merchant and make sure PayPal uses this card for the purchase. Sometimes you can get those little checks from the bank and write a check to the merchants instead of swiping the card.

You need to execute all your initial purchases within one billing cycle, typically a month. If you cross a billing cycle with your purchases, you increase the difficulty of the process and may pay some interest to boot. Preferably you get them all finished within 10-15 days, so you have time to go to the debt flip. I recommend having all your purchases lined up in advance and ready to go so you can just move through them in rapid succession. Depending on the amount of the purchases and the time frame you are doing it in, you may trigger a fraud alert from the bank and need to call them to authorize the transactions. It will look like some teenager got a hold of your card and is on a spending spree to the bank. It is not an issue. You call them or even text them back if they sent you a text and tell them you are making these purchases and your card wasn’t stolen. I have only had this happen a couple of times to me.

I also recommend that whatever card you are using for the initial purchases, you call the bank and determine when your billing cycle ends. Start your purchases right after the billing cycle changes. You will get bonus time on the free money because a payment won’t come due until the billing cycle closes and it sets when the first payment is due.

For example, if your billing cycle starts on March 4th and the card has no balance, you can begin your purchases on March 5th. Your billing statement won’t close until April 4th with the payment coming due later in April. I have a card that the billing cycle closes on the 3rd of each month, and payment is due on the 27th of that same month.

Once all your purchases are completed, you are ready to go to the next step. When you are about 15-18 days from your payment coming due, you move to the debt flip.

The Debt Flip

You evaluate which of your balance transfer options you researched from the previous step above and call them up and execute the balance transfer. They will ask you for the account number you are transferring from and the amount. Therefore, it is essential to have your statement from the card you made the initial purchases. You want to make sure you have the complete and exact balance.

Every bank is a little different in the amount of time it takes to conduct the transfer, but it is typically 10-18 days. Keep checking the card you used for the purchases and the card where it is going to so you can verify when the balance has transferred. Once it looks like it moved, verify that the card you started with has a $0 balance, and no payment is due. On the new card, make sure the amount transferred is correct. The only extra amount you should have on there is the one time balance transfer fee of 1-3%.

Once you make the first promotional transfer, you have essentially locked in a 0% interest loan for 12-24 months! Each month you only make a small minimum monthly payment (or more if you want), and every dollar of the payment lowers the balance down dollar for dollar!

You may be asking why in the world the bank would make such a stupid offer? The banks do this because they hope when the promotional period is over, especially if you have only been making the minimum monthly payment, that they will be able to start charging you interest, a lot of interest.

What do you think I do at the end of the promotional period if I still have a balance? If you guessed that I simply repeat the process from above, you would be correct! I reach in the box and pull out a bunch of cards and start dialing for dollars. I call until another one of my cards offers me a new promotional offer and flip the debt to the next card, again for a small 1-3% one-time balance transfer fee, but I reset the clock to a new 12–24-month 0% interest rate loan!

I simply rinse and repeat this process over and over. It isn’t that hard, and with anywhere from 1-2 years on each offer, I can keep the debt in a perpetual float and moving forever if I want. Overtime I pay the balance down, so each time I transfer, the one-time 1-3% balance transfer fee gets smaller with each flip.

You are getting a near-interest-free loan that you can maintain forever if you want! I have flipped the same debt back to one of the cards I had previously transferred from a year or two earlier! These banks are behemoths with vast numbers of employees, billions of dollars in loans, and millions of credit lines. They simply never notice someone like me working their system against them again and again. I am always faster and more maneuverable than they will ever be.

Strong Credit, Organizational Prowess & Discipline

As I mentioned earlier, you must have strong credit, extra cash flow, good organizational skills, and discipline to make this work. If you don’t have all four, then DON’T TRY THIS! You will end up becoming the cellmate to bubba, the banker, who will beat you into the dirt by charging you outrageous interest every month! Remember, they create the rules and are stronger than you. Your advantage is speed and knowing how to work around the system they created.

Strong Credit

Strong credit is essential for two reasons:

1. Promotional Terms: It is the high FICO score that generates the incredible promotional offers. If you have crappy credit, you will not get promotional offers or not very good ones. It is those promotional offers that make this strategy work. You want to be able to move those balances for a low transfer fee and get as much time as possible before you need to do another debt flip using another promotional transfer.
2. Backup Plan: I have only had this happen to me a couple of times, but it is a risk, and you need to be aware of it. When the financial system gets bent out of shape, credit and promotional offers will dry up quickly. Think 2008 financial meltdown or Covid-19 pandemic outbreak. Banks decide to stop being generous to preserve capital. I have gone through multiple promotional periods, and suddenly when it came time to transfer, none of my existing cards were offering any promotional offers.

Fortunately, Google and my incredible FICO score came to the rescue. I did a quick search in Google for “credit card promotional offers” and found several new cards with promo offers. I called up and opened a new account and transferred my balance to the new card. Sometimes these cards were with the same bank that I already had a card through that was not offering promos on my existing open cards, but if I opened a new card with them, they would give it to me?!? 12-18 months later, credit was typically flowing again, and I could move balances to my existing cards again.

I have only had to rely on my backup plan once or twice in almost 17 years of doing this, so it is rare. Still, as you can see, a strong FICO score is necessary as it is only the strongest borrowers that will be able to open new accounts in the middle of a financial meltdown!

Organizational Prowess

The second item you will need is strong organizational prowess and tools. As you can see, flipping debt every 12-18 months and making sure you are making at least minimal payments each month can be a little confusing and easy to mess up.

The first thing I do once a card is active is to go online and set up an online profile and log in. I use incredibly long and complex passwords that I manage in a password manager for cybersecurity. Once the account is active, I go in and change to paperless statements and set up alerts and reminders. I set it up reminders so upcoming payment reminders are emailed and texted to me. You may like paper, but I find I can easily misplace these, so I prefer online statements and text reminders to make sure nothing falls through the cracks.

The other significant benefit you get from an online portal is making online payments. I can go in and set an amount to hit on the due date and know it will automatically debit from my account on that date. I don’t have to worry about the mail not delivering it, the payment getting lost, or forgetting to send it. I know the exact day it will hit my account so I can manage my cash flow better. Online banking has made this system soooo much easier than the old days of mailing payments out.

My system is primarily in Quicken. I go in and set up a new payment reminder as soon as I flip the debt for the new card’s monthly due date. As a backup, I often write these on a sheet of paper or keep them written on Post It Notes stuck to the bottom of my computer monitor, so I see them each day.

You must never miss a payment. Sometimes these offers have bear traps built into the small print. It says if you miss a single minimum payment, the promotional offer ends immediately, and the bank starts charging you the entire interest rate immediately plus hits you with a late fee. Not all cards do this, but some do. In the rare instance where I screwed up and missed a payment, I was often successful at calling and immediately making a payment and getting them to waive the late fee.

I never had them end my promotional offer, but it is possible, so be aware. If you miss a payment and the bank ends your promo and charges you a late fee, call immediately and make a payment. Then request that they reinstate your promo, if it terminated, and waive the late charge. If your credit is strong, you can almost always get this restored once, but they will never do it a second time, so don’t screw up.

In Quicken, starting with the first payment, I write a note in the memo line, in the software, for the payment, something like this…

1/23 Payments – Transfer Balance on or before August 3, 20XX

Each month when I make the payment, I update this, so it says the same thing except I update the payment number, i.e., 2/23, 3/23, etc. When I am about one month out from the promo’s expiration, I start lining up my next flip. Always give yourself an entire month to execute the next flip in case something goes wrong.

As an added margin of safety, I also subtract one month from the promo. For example, if the promo is for 18 months, when I enter it into Quicken for the first payment, I subtract a month, so it says “payment 1/17” so technically, I have two months left on my promo when I start dialing for dollars and looking for the next card to flip it to.

High Discipline

This strategy works best if you can maintain rigorous discipline in how much you borrow. I never borrow more than I can comfortably move from one card to another quickly. I also make sure I have enough free cash flow each month to pay a chunk of the debt off.

While it is possible to float the debt forever, I don’t recommend it. I strongly recommend you consistently pay down the balance each month. Plus, there is always a possibility that banks just stop doing promotional offers this good. While I doubt that will happen, anything is possible.

The minimum payment each month will reduce the balance dollar for dollar, but it isn’t a big minimum payment. The bank hopes to string you along until the promo ends and then wallop you upside the head with future interest charges. It is vital to make sure you are genuinely reducing the debt each month and working to pay it off.

When I set up new floating debt, I plan the purchases I am using it for, and I calculate how much cash I have available each month to reduce and eventually eliminate this debt. For example, if I borrow, in my head, I know I can remove the debt over three years in some cases or longer in another, but the point is I work at reducing and ultimately eliminating the debt every month. I maintain strong discipline each month on these payments and the schedule I have laid out for eliminating the debt. If cash gets a little tight, I can always go down to the minimum for a month or two, but I never stay there long. 

The Main Risks

While I would consider myself a moderate risk taker on the whole it is important to acknowledge this strategy does have some risks. However all of them can largely be mitigated to a great degree with planning and common sense. Ignore these risks at your own peril.

No Place to Flip

I have already discussed some of the risks previously, but I will quickly summarize. As I mentioned before, one of the most significant risks you face is reaching the end of the promo, and none of your existing cards offer a promotional transfer. While I have dodged this by opening a new account and I was successful, you could find that you can’t do that. If that happens, you will be stuck with an outstanding balance charged a brutal rate of interest.

To protect against this, I maintain cash reserves and credit lines with my bank with a lot lower interest rates than credit cards. If I ever had to resort to my credit line, I would still be looking for a new credit card to flip the balance to so I could restore my 0% interest loan. The use of the credit line would be temporary. I would use it just until I could find a new card to flip it to. While I have never had to go to “Plan C” by using these, I have them just in case.

If my Plan C failed for some reason, my Plan D would be to utilize a type of debt snowball to quickly pay it down and pay the least amount of interest as possible. Again, I have never had to do this either, which is one more argument for having a solid FICO score.

Poor Organization

The other main risk is your organizational skills suck, and you start missing payments and racking up late fees or getting your promos canceled. You could also forget when your promos expire and start paying interest on your outstanding balance without realizing it. Stay on top of this.

Borrowing Too Much

The final risk you face is you get stupid and start taking on more debt than you can comfortably handle and pay off. You borrow too much or have multiple floating loans out at once on different cards, and you aren’t paying them down every month or retiring some of them. Eventually, the debt keeps piling up, and it gets harder and harder to flip it from one card to another and still make monthly payments.

Once that happens, a debt spiral begins, and it can quickly overwhelm you. Think of a small boat in the middle of the ocean squaring off against a tsunami! My typical floating loans are between $8K to $20K at any given time. I can easily handle the extra payments it takes to reduce this every month and eventually retire that debt. Your limit may be higher or lower depending on your circumstances, but make sure you understand what those limits are. I recommend starting small until you get the hang of it. If something goes wrong, you are not swept away in an avalanche of debt, where your only option is bankruptcy.

Great Power Requires Great Responsibility

I have discussed how my system works; now, how do you use these interest-free floating credit loans? If the first thought that popped into your head was buying a big screen TV, hot tub, or a trip to Maui you are a moron. Get off my blog.

I ONLY use this strategy to create financing for wealth-building activities. Here are some of the things I have purchased over the years using this technique…

• Computers
• Software
• Training Courses
• Legal Services
• Seminars
• Mailing Campaigns
• Investment Services
• Building Supplies
• Tools
• AC Unit for a Rental Property

All the purchases were investments for my business to generate future sales or purchase building supplies and tools for real estate projects. I once bought a shed for a rental property where the garage was not part of the lease (I was using it for personal storage), and I needed to provide a place for the tenant to store their yard tools.

I have also carried some of this flipped debt out for as long as seven years. Each month I would pay it down, and when the promo ended, I would flip it to another card. I kept this going, constantly reducing the debt until I eventually paid it off.

I once met a woman at an investment seminar that used this strategy to buy a 5 bed 6 bath house in Colorado! She was offered $30K on one of her cards for 24 months interest-free. Next, she talked to a mortgage broker and asked if she had money in her bank account and how long it had to “season” before she could use it as a down payment on a property. The answer was 2 months. She logged onto the credit card website and transferred $30K into her bank account. 2 months later she bought a house and used the $30K as a down payment and for expenses. She moved in and lived in one bedroom and rented the other 4 out. The cash flow she generated over the next 22 months paid off the $30K before it was due. After the $30K was paid off she continued to get this cash flow. She was proud of the fact that today she still owns (but doesn’t live in any longer) that house and still has none of her own money in the property!

Remember, the goal is ultimately to grow your net worth and passive cash flow. To do that, you need to constantly expand your assets and shrink your liabilities, i.e., your debt. While you can theoretically carry these loans forever, you shouldn’t. I use them and eventually pay them off and then do it again for a new project or business opportunity. I am very disciplined and use these loans strategically to grow my business or assets.

Boost the Credit Limits

When you are issued a new card, you have a credit limit: the higher your FICO score, typically the higher the credit limit on the new card. I find $10,000 to be average. I have received some that had limits set at $30,000 and some as low as $5,000. No matter what the limit is, you will want to raise it.

I find if I use it a bit for small purchases and pay it off each month for about six months or so that I can call and get an increase to my limit. Again, the better your FICO score and lower your overall outstanding debt, the easier this will be to do.

There is an old saying in banking that when you don’t need the money, the bank is willing to lend you anything you want. When you do need it, you can’t find them with a police search party!

I review my free cards regularly, and if it has been a while since my last increase, I will give the bank a call and inquire about raising my limit. I am not always successful, but more times than not, I get an increase. I keep my requests reasonable. Banks don’t mind $3-5K increases but will likely refuse if you call in and ask for a $10-20K increase. If you follow a schedule and do this periodically, you will slowly raise your limits higher and higher over time.

A point of caution here, just because you increase your limits doesn’t mean you should be increasing the amounts you are borrowing. See my warning above about overextending yourself. Only borrow what you can comfortably handle, even if your credit limit will let you borrow five times that amount.

You may be wondering why you keep raising the limits if you aren’t ever going to use them? When you have large amounts of available credit that you are not using at any given time, your FICO score will get better, and it becomes even easier to get new cards and promotional offers. Credit rating agencies like to see you maintain lower debt limits than you could tap. The higher your debt, the more wary banks get and the harder it is to keep the ever-important FICO score up. Plus, it gets harder to qualify for other types of financing such as mortgages or other business financing. 

 Required Maintenance

There may be times where you do not need a floating debt. Over the years, I have gone through periods where I didn’t need to use this strategy for a couple of years. Even when I had to employ it, I often had several cards with no balances. Remember, I am typically consolidating the debt to only one or two other cards at any given time. It might be possible to have 2-3 of these floating debts out at any given time utilizing 2-3 accounts. However, typically you still have several cards with no balances on them.

The banks don’t like unused credit accounts floating around for years without some activity. If you get a card and toss it in the drawer and don’t ever use it, the bank will eventually cancel the account or lower your credit limit. You will need to open a new account up or keep requesting further credit line increases, and each time you do, your FICO score takes a hit. Banks don’t like to see you opening a lot of new accounts up in a short time because they think you are having financial problems. So, they will ding your FICO score each time you open a new account, and it takes two years for those to drop off your report.

To avoid this, use the card from time to time for small purchases. I typically buy a book, office supplies, dinner with a client or potential private lender, etc. I use it for something small that I quickly pay off in full at the end of the month when it comes due. This shows the bank that there is activity on the account and they are less likely to cancel it or reduce the credit limit.

Alternatively, you could make a few modest purchases on several cards and consolidate several cards at the end of the month into a smaller floating loan. Doing this gives each of your cards a little activity.

After I use one of these cards for a maintenance purchase, I will lay the card out on my desk with a Post It Note that shows what I purchased and when. I also document when the payment is due so I can go in and make that payment and not get hit with a late charge. Remember, I am using a card I don’t normally use so I don’t always remember what the payment dates are, so this is an important step to make sure you don’t miss a payment.

I have heard some people say you need to use each card at least once every other month. I have never found that I need to use it that often. I typically use them about once every 3-4 months. Sometimes I even stretch it out six months or even a year. So far, that seems to work for me, and my accounts are rarely closed due to inactivity.

Conclusion

What I have laid out here is a potent and valuable strategy for the entrepreneur and investor. It allows you to tap into interest-free loans for years at a time. The system is flexible and can be accessed quickly. I have used this strategy successfully for 17 years. My accounts are active and organized. I am very disciplined and never overextend myself. I make sure I can easily handle the minimum amount due but typically an amount over that, so I am paying the debt down faster on some type of reasonable repayment schedule.

I maintain multiple backup plans to extract myself from a floating loan at the end of a promotional period. I also stay rigorously organized and keep careful records, so I am not missing payments or allowing promotions to expire before moving them.

I make sure to use the cards regularly to keep them open and constantly boost up the credit limits as I go. Occasionally I will add new cards into my rotation as I need them. I make my life easy by using online banking and software to keep track of everything and keep precise control over cash flow.

I have also pointed out that this strategy is a double-edged sword. If you are sloppy in your record-keeping or miss payments, you will find yourself in trouble very quickly. If you borrow more than you can comfortably handle, you will begin a debt spiral that could end in bankruptcy.

Finally, I have discussed how you should use these loans. Don’t be stupid and buy depreciating garbage. Make sure you only borrow to grow your business, expand your investing, build new assets, and passive cash flow.

If you are intelligent, disciplined, organized, and prudent in your use of this strategy, you will find it serves you well and makes you a better entrepreneur, investor, and a true Money Outlaw!