Creative Financing with Credit Cards

[Nick Coons]

I'm always trying to think of new and creative financing options. One has just occurred to me, and I'm curious if anyone is doing it.

Using credit cards for financing can be expensive, even when going through a service like Plastiq where you pay purchase rates rather than cash advance rates.

But what if you were to use a credit card to secure another loan? A lender gives you cash for a certain amount, and places an authorization on your credit card for that amount to secure the loan. The authorization can last up to 30 days depending on the merchant settings, where they can then cancel the authorization and renew it, and repeat the process for the term of the loan. If the loan is ever unpaid, the lender can settle the authorization and just receive the money from your credit card, at which point you're now paying normal credit card purchase rates, but the lender is now satisfied since they have their money. This would allow them to lend to you at a fairly low rate because from their perspective this is a relatively secure loan.

There are a couple of risks for the lender. For instance, the bank may decide to close the account or reduce the credit limit, or the credit card holder may close the credit card account. So this would need to be taken into account.

Is anyone doing anything like this?