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A few weeks ago I blogged about some credit card checks that Capital One sent, with terms that appeared to offer free money. I wrote myself a check for ten grand, and deposited it in the bank to see what would happen.

As expected, they billed me on Dec 11th and what do you know, they really do have a grace period so the bill was for $10K, no interest, due on the 5th of January. So I wrote myself another check for $9900, to avoid hitting my $20K credit limit, and deposited that on Sunday. Today they sent me another email telling my balance transfer was approved and now I have $19,900 of free loan money in the bank.

So this actually seems to work, I'm earning a modest amount of interest on the free loan, and I still have a check left. How does Capital One plan to make money from this? Do people really write themselves these checks, then pay 17.9% on the balance? Yow.

comments... (Jump to the end to add your own comment)



You are so cool! I think the truth is, most people aren't smart enough to figure this out and Capital One counts on that. (by Julie 16 Dec 2009 14:56)



i'm not certain, but since it sounds like you've withdrawn the second amount before paying off the first amount, you'll have a non-zero average daily balance against which interest will be charged; please let us know how it goes regarding your closing questions, the answer is that people are sometimes in difficult financial situations; a loan at high interest can _seem_ appropriate if it is the only way to avoid utility cuttoff, avoid foreclosure, put gas in car in order to drive to work, or buy food ... look at the "payday loans" shops for instance -- the APR on those loans can exceed 300%! why would anyone take a loan like that? (by steve harley 19 Dec 2009 19:46)

No interest I can see

They say these checks are treated as purchases, which should mean that so long as I pay back each one by the due date on the bill on which it appears, there should be no interest. I'll let you know. (by John Levine 20 Dec 2009 00:33)



I did this exact same thing, wrote a CapOne purchase check for $19,500 last week, depositing it into a 5% checking account, and will pay it back in early February with (hopefully) no interest charged by CapOne. (by Doug 23 Dec 2009 13:33)



I don't think you are their target demographic. Their hope is that you forget when the free period expires, or that you are one day late paying them back and they can retroactively increase your interest rate to 3000%. (by Christopher Herot 30 Dec 2009 00:37)



Yeah this is probably some sort of loophole that noone ever "noticed". (by Nostalgia_Guy 16 May 2010 01:40)

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