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NWC
Imagine for a moment that you’re a 24-year-old recent grad “hacking” personal finance. You go to Reddit, because that’s where nerds that are into these sorts of things tend to congregate.
One idea you might come across is to use credit cards for sign up bonuses. This is often called churning. Another idea you might come across is to use credit cards for their interest-free loans. The signup bonus sounds great — you get a few hundred dollars for signing up for a new credit card. Less intuitively, (and this is the cool part!) the interest-free borrowing period can be used to transfer the entirety of your credit limit to your bank account as a gift.
To do this, you start by spending your entire credit limit. I’d suggest you spend it on things you would have otherwise purchased, but that’s not necessary for the gift “hack” to work. To make this a bit more tangible, let’s call the credit limit $10,000, and call today October 22, 2020. Tomorrow, you wake up with $10,000 in credit card debt, on which you pay no interest. Same thing the day after, and the day after, and so on and so forth until October 21, 2021. Now, using a new interest-free credit card with the same credit limit, you purchase $10,000 in goods and services that you would have otherwise purchased with cash, and instead of paying for those things in cash, you use the cash to pay off the old credit card. Another year passes, and you have now again successfully borrowed $10,000 for a year and paid no interest.
