Credit Card Rewards Arbitrage

Did you know you can use your credit card for two months and not pay a single dime in interest?

I call it Credit Card Arbitrage.

Here’s how it works

When you receive a credit card bill, there are three options for you to pay: the minimum payment, the statement balance, or the full balance.

If my statement balance is low, or at zero, I can then charge whatever I want and not pay until the next billing cycle — meaning I have a 58 day float.

Here is my recent Citi Double Cash Card statement. The due date is on the 17th of the month, and they close my billing on the 21st of each month.

So whatever I charge on the 21st (or after) won’t be due for 58 days.

And If I pay the statement balance, I won’t be charged any interest.

My goal is to always avoid interest.  And if I pay my statement balance in full, even if I owe more than the statement balance, I won’t be charged any interest.

So as of May 21st, (my statement closing date) I have until June 17th (my next due date) to use this card and despite how much I spend, only $135 will be due on June 17th.  

And that is the key.  The statement balance is all the credit card companies require you to pay to avoid interest and fees.  

Let’s say I go crazy and buy a jet ski (or something impulsive) and spend $10,000 one day between 5/21 and 6/17.

On my due date of June 17th my account balance will be $10,135.  My minimum payment will be something like $50, and my statement balance will still be $135. 

And as long as I pay my statement balance, I won’t owe interest on the $10k.  

In fact, I won’t have to pay that $10k until July 17th — a full 30 days later! But then I must pay in full or will incur interest on the entire sum.   

So, what happened here is I was able to use $10,000 of the credit card float for my own benefit, interest free, from May 21st — July 17th.  

That’s 58 days, or 2 months of an interest free cash flow.

It Pays to Have Multiple Cards

Over time, as I’ve tried to run my personal finances more like a successful business, I have found value in expanding my access to credit.

I have credit cards from all of the major banks, and some smaller banks and credit unions. All told, I have over $200,000 in accessible credit.

Every successful business from a donut shop to a Fortune 500 multinational corporation has access to credit, and uses it to their advantage.

Also, having a larger pool of credit helps with my credit score because one of the high impact factors is total credit usage. The more credit I have, the less I actually use as a percentage of my total available credit.

And all of my credit earns rewards, my favorite is cash-back. Below is a snapshot of how I track my credit card usage.

I used to spend a lot of time figuring out which cards to use based on their rewards potential. Now I rotate cards who have a low or zero statement balance. Meaning I’m perpetually using a two month float.

Is it Worth the Time and Effort?

Yes, because it maximizes my cash flow by allowing me to use the credit card’s money for the next 2 months — interest free.  

As I’ve climbed out of debt and optimized my finances, I take pleasure in finding new ways to improve my cash flow.

Do the credit card companies mind?  No, they make money on our transaction fees and hope in the long term we become interest paying financial slaves.  

The main benefit of Credit Card Arbitrage is it helps me take advantage of lump sum or cash discounts.  

For example, if I pay my entire car insurance bill with a (zero statement balance) credit card, I’ve given myself two more months to generate the cash flow needed to pay off this bill. Instead of an alternative like tapping into my savings.

This only works for me because I have consistently positive cash flow, and I’m only using it to stabilize any irregular spending. 

More than anything, I do this because it gives me more time.  And time equals options. And options give me choices.

More time for me to make money, invest in educational opportunities, more time to figure things out in general.  

It comforts me to know what I’m buying today won’t be due for another two months. I can always pay off my balance now instead of waiting — which is usually the case because I hate debt.   

In closing, I should point out this really isn’t arbitrage because I’m not buying and selling anything, I’m just taking advantage of a loophole in how credit card companies ask to be paid back.  

But the name just sounds so cool — so I ‘m sticking with it.