the credit card issuer objected to discharge on grounds the debtor obtained cash advances by false pretenses and fraud. It is well known that credit card issuers compete for new users and a great deal of the marketing effort encourages customers to transfer credit card balances, usually at very low interest, to a new issuer. It is not at all unlikely for a person of average means to receive new credit cards unsolicited.
For a credit card, this will be the credit limit . Make sure you weigh all of the factors above before you jump on a second balance transfer credit card to avoid interest charges. Remember that any balance transfer card you apply for will be subject to approval and recorded on your credit report, so it pays to do your research first. The typical fee is 3% to 5% of the amount you want to transfer and is deducted from your remaining credit limit.It’s also important to consider other costs, such as the annual fee and the non-promotional interest rate. The transfer likely isn’t worth it if these amounts outweigh the savings earned by paying off all or part of your remaining debt without interest. To transfer money from your credit card into your checking account and avoid large interest rates and fees, you just need to pay yourself using a Square Account. In a typical check kiting scheme, someone opens up two checking accounts.
Why Does Kiting Matter?
It technically violates credit card agreements. But if they catch you, they’ll probably just cut you off from additional cash advances. They will probably do that anyway once the pattern establishes itself enough to be noticeable. I believe this is known as a credit card “bust out scheme”. When the CC company receives payment they increase the line by the amount of the payment but they are at risk if the check bounces.
Can we transfer money from credit card to debit card?
You can transfer money from a credit card to a debit card if you have a credit card that permits this. Be aware that you need to check first whether you will be charged any fees for interest for making the credit card cash transfer.
Unlike check kiting, which is illegal under nearly all circumstances, laws against credit card kiting are not completely prohibitive of the practice, thereby allowing it to be done to some degree. It is up to the banks to detect the practice and when necessary, stop it. For as long as you meet the eligibility criteria, yes, you can move more of your balance to the second 0% balance transfer credit card. Usually, 0% balance transfer credit cards are introductory offer and you usually qualify when you do the transfer at the time of application. Section 523 of the Bankruptcy Code delineates various exceptions to discharge under a Chapter 7, 11, 12, or 13 bankruptcy petition.
Although the debtor in this case dodged a bullet, the lessons are many. First and foremost, if you are considering bankruptcy then stop digging the hole deeper! Stop using them and try to live off your existing income, even if that ultimately means you can’t make the credit card payments. Take, for example, a typical case last year in Ohio. A couple who were preparing for divorce filed a Chapter 7 case together. The wife had transferred almost $18,000 onto her new Chase credit card and made some retail charges. Only 82 days elapsed from opening the account to the actual bankruptcy filing.
This is a violation of PayPal and Square Terms of Service contracts and agreements. Cash advances can be obtained from most credit cards, which can be used to pay off balances or loans. Though there are fees and higher interest rates for obtaining these loans, if a card has a high credit limit or no limit at all, this in theory could be used to pay off the previous balance while adding to the interest. In this case, the kiter is delaying legally due balances, and potentially, interest payable to the credit card bank; or, in the cited extreme case, using the credit card proceeds to earn interest at both banks’ expense. Square allows “add money” from your bank account balance to your Square account balance for use with your Sqaure card. This is THE exact equivalent of using your OWN debit card OR credit card (funds that you have 100% FULL UNDISPUTED ENTITLEMENT TO) to swipe into your Square account. No difference except that Square gets a % of you swiping your card rather than adding money from your bank account which is attached to your debit card.
Issuing or altering a check or bank draft for which there are insufficient funds. The general rule is that an appellant’s failure to raise an objection at trial will ordinarily foreclose him from raising that issue on appeal. Telco Leasing, Inc. v. Transwestern Title Co., 630 F.2d 691, 693 (9th Cir.1980) (citing Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 ).
And recall that bankruptcy law presumes fraud if cash advances over $750 were made during the 70 days, or “luxury” purchases totaling more than $500 during the 90 days, before a case is filed. Instead, you’re focused on putting one over on the big bad credit card companies with the “loophole” you’ve discovered. The usual way people do this is they pay the minimum (say it’s $100) and then they charge $100 of the expenses they otherwise could have paid. Done this way, you are basically revolving that $1k of debt more or less indefinitely, and your balance is going to go up as it accrues interest . Now your expenses go down to $10k/month , and you have to revolve that $1k and pay interest on it, which you don’t want to do. Besides, somehow you have to come up with the minimum monthly payment.
The amounts will just keep going up to try to keep her head a float. OK I know what kiting is but we have a customer that uses credit cards (advances, checks, pulls cash out of ATM’s) to cover her payments to the credit card companies.
Very interesting- have read a bit about this as the term “bust out risk”. Like you said, a credit profile is built up slowly, because it’s synthetic it doesn’t affect the profile of the fraudster. There are 6 million new credit files each year with little or no data/history. There are 20 million valid identities with overlapping social security numbers. There is no person victim to report the fraud, no real person to inquire of for collections. Most of this is treated as a credit loss and charged off. When these new authorized user accounts report to credit bureau, they can improve the FICO score.
payment works just as well as long as it’s the type that incurs no fees. Cash advance accrues interest immediately while “just” using it waits until the next cycle, usually either one month or 30 days. The only thing I would add is that while this is most certainly against the Terms of Service, this would not be illegal unless there is some wrinkle that OP left off.
If you have circumstances like or analogous to any of the above, seek consultation from an experienced bankruptcy attorney who can advise you what might be done to mitigate or repair the situation. But they can send up “red flags” to creditor banks. These items above, either individually or a combination of the above, “suggest” fraud to the creditor. This type of challenge is probably unlikely, but is more likely the closer in time to filing bankruptcy that the application was submitted and the more egregious the fabrications are.
In a credit card kiting case, the debtor’s duty to disclose is triggered by the debtor’s creation of a facade which conceals his fraudulent intentions. When a debtor, with intent to defraud the creditor, makes minimum payments with cash advances from other credit cards, the debtor has a duty to disclose to the creditor that he no longer intends to pay his credit card debt. If the debtor fails to make this disclosure, then he commits actual fraud.
I made no other transactions and now may or may not get the funds in time to make the wedding. Unfortunately, our decision to deactivate your account is final.
You can definitely accept card payments from your customers for the sale of genuine goods or services. As the owner of the business, you won’t be able to use a payment card with your own Square Point of Sale account.
Not only benefits you with the long interest free credit but it also reduces your previous month amount payable if the transactions fails. Another means of kiting involves taking advantage of introductory rates by continuously transferring balances between cards without paying the balance. Let’s say you have a checking account at Bank ABC and a checking account at Bank XYZ. You use the Bank ABC account to pay the household utility bills, and your electric bill is set up on autopay. Your electric bill this month is $200, and it’s going to come out of the Bank ABC account today. If you aren’t sure how to refund a payment, this Support Center article will help you.
- A balance transfer is one of the most common types of credit card consolidation.
- However, due to employee error and a variety of other factors that will not be disclosed, cheque kiting continues to be a problem with most Financial Institutions.
- In addition, as a promotion, banks may offer a low- or no-interest introductory rate on balance transfers—often for 12, 18, or 24 months—if they’re made within a certain timeframe of opening a new credit card account with them.
- Or they use fictitious merchants — it’s easy to become a small merchant with credit card processing.
- In a kiting case, the creditor continues to extend credit to the debtor in reliance on the fact that the debtor’s credit card account is not in default.
- Sometimes naïve and/or greedy Individuals are recruited to deposit these items into his/her account with promises of a huge commission.
I actually testified at a criminal trial not too long ago and the guy was convicted and got 20+ years. Most Financial Institutions now place holds on funds for at least five days, thus allowing enough time for the cheques to complete the clearing process. However, due to employee error and a variety of other factors that will not be disclosed, cheque kiting continues to be a problem with most accounting Financial Institutions. Cheque Kiters will open several chequing accounts at different banks and deposit minimal funds in each one. The kite can go on for weeks before one of the accounts goes into overdraft when the cheques are returned NSF. Unfortunately, by then the fraudster has made off with thousands of dollars or more and the Financial Institutions are left holding the bag, literally.
Credit card balance transfers are often touted as a low- (or no-) interest way to quickly pay down high-interest credit card debt. And if you have a plan for keeping your spending in check, reducing your expenses, or earning extra money, a balance transfer may be a good option to help you pay down credit card debt. The critical factor to me is that Judge Speer took a moment to consider the important distinction between a “balance transfer” and a “cash advance.” Just because the credit card treats them the same doesn’t mean the law does. First, the presumption of fraud should not apply. But, more importantly, he noted the meaningful difference in the transactions.
I don’t want my account reinstated, but if that happens I will update that. Refunds are available within 60 days of the original payment. To process a refund, log in to the retained earnings Square dashboard. Fo Je, no up front taxes are involved if you don’t choose to charge taxes when accepting the payment, but the income should be reported on your taxes.
A cash advance is an increase in debt at high interest, while a balance transfer is a a refinancing of existing debt — something one typically does only to get a better “deal” on repayment. That is a critical difference which credit card lenders would like judges to ignore. In sum, the debtor’s credit card kiting constitutes actual fraud. Thus, the debt owed to Citibank is nondischargeable. The Bankruptcy Appellate Panel’s decision affirming the bankruptcy court’s order is AFFIRMED. Many payment services, such as PayPal and Square, allow people to receive credit card payments for low prices, which could be made to oneself. In this case, the kiter is creating cash while avoiding legally entitled cash advance fees.
So if I needed $40 I would take 40 and divide it by .9725 to find the amount I need to charge credit card kiting myself. Please read the Square Terms of Service before attempting this money hack.
Author: Maggie Kate Fitzgerald