Credit card kiting refers to the use of one or more

credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

s to obtain cash and purchasing power they do not have, or pay

balances with the proceeds of other cards. Unlike

check kiting Check kiting or cheque kiting (see spelling differences) is a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiabl ...

, 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. In order for prosecution to occur in a credit card kiting scheme, a bank must prove intent to deceive.

Methods

Introductory rates

Many credit cards offer

introductory rate An introductory rate (also known as a teaser rate) is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent and after it expires a normal or higher than normal rate will ap ...

s, which in some cases, could be as low as 0% to which balances from other cards can be transferred. In theory, this enables the endless transfer of balances between cards, and since so many offers are available, this could be carried out for a long period of time. But many banks now have become aware of this practice, and introductory rates are offered only a limited number of times. In this case, the kiter is delaying legally due balances, and potentially, interest payable to the

bank.

Cash advances

Cash advance A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the ot ...

s 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 A credit limit is the maximum amount of credit that a financial institution or other lender will extend to a debtor for a particular line of credit (sometimes called a credit line, line of credit, or a tradeline). This limit is based on a variety ...

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

bank; or, in the cited extreme case, using the

proceeds to earn interest at both banks' expense.

Self payment

Many payment services, such as

PayPal PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper ...

and

Square In Euclidean geometry, a square is a regular quadrilateral, which means that it has four equal sides and four equal angles (90- degree angles, π/2 radian angles, or right angles). It can also be defined as a rectangle with two equal-length a ...

, allow people to receive credit card payments for low prices, which could be made to oneself. These could be used to pay off balances. In this case, the kiter is creating cash while avoiding legally entitled

cash advance A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the ot ...

fees. This is a violation of PayPal and Square Terms of Service contracts and agreements.

References

Credit cards Fraud {{law-stub