I've got a buddy who is having problems with credit card debt. He had a small business go sour on him and ended up with about 35K of debt that's he struggling to keep under control while looking for a new income source.

In order to keep himself afloat, he's been doing something he calls debt-shifting for the past several months in order to meet the minimum payment requirements on his credit cards. Basically, he's linked several of his cards to Venmo and Paypal, and a few times a month he sends his girlfriend a few hundred dollars (for "rent," etc). The money gets sent to his girlfriend and charges to his credit card, usually for a small fee. His girlfriend then writes him a check for the amount he sent her, he deposits it and uses the funds to help pay the minimums every month. He's basically making the cards pay for themselves. It's not a zero-sum game, since he accrues small fees for each transfer and still has to deal with the interest on the cards, but it's allowed him to keep his head above water the last six months or so as he's been having to pay about 800 dollars in minimums. Apparently it's allowed him to avoid any late payments, which is helping him to stay in reasonable standing with the banks despite the amount he owes.

Now, obviously this is not something any good financial adviser would recommend. Kind of a robbing-Peter-to-pay-Paul kind of thing. Hardly what the banks want you doing either, I'm sure. But my question is whether or not this is technically legal. He says it is, and it kind of makes sense that you're not really stealing from the bank using a strategy like this, but I'm curious, are there any regulations (USA) that make this sort of game illegal?

  • 29
    What exactly would the theft be? He sends $100 to the girlfriend, it costs $103. It's probably against the cardmember agreements but then it's just breach of contract, not theft.
    – quid
    Commented Jul 26, 2019 at 1:05
  • 9
    It smacks of check kiting, which is why it seems shady. But it's costing him a lot of interest, since there is no grace period on cash advances. He needs to get a job!
    – RonJohn
    Commented Jul 26, 2019 at 1:27
  • 16
    A credit card company is not likely to stop this so long as you are making the minimum payments reliably. After all, the more money you owe them, the more profit they make. But things might turn nasty if the plan falls apart for some reason. FWIW the first time (in about 20 years) that I didn't pay off my card debt in full every month for a couple of months, the CC company made an unsolicited offer to double my credit limit! So much for the idea that they want people to be financially responsible.
    – alephzero
    Commented Jul 26, 2019 at 12:31
  • 8
    "my question is whether or not this is technically legal." --> law.stackexchange.com
    – 0xFEE1DEAD
    Commented Jul 26, 2019 at 18:23
  • 3
    Minor nitpick - zero sum game doesn't mean zero sum after round-trip. It means a situation where one player's gain is always another's loss (as opposed to a game where win-win is possible).
    – Money Ann
    Commented Jul 27, 2019 at 7:54

7 Answers 7


Your friend is basically doing "Credit Card Kiting". While not strictly illegal* (there are nuances), it's an expensive way to maintain debt.

Your friend would be much better off taking the time to consolidate his debt at the lowest possible interest rate and come up with a repayment plan. $35k seems like a lot, but it's doable and his current plan has him paying to make that total go up, not down. My advice would be to focus on getting a job and steady income first, then consolidate, find a low interest rate and start paying off the debt asap.

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

  • 20
    It's fraud (at least per 9th circuit precedent). That means, among other things, that his debt is likely not dischargeable in bankruptcy. See In re Eashi (Also, In re Dougherty, 84 B.R. 653.) Commented Jul 26, 2019 at 15:46
  • 10
    There's also the concern that the IRS might be interested in his girlfriend getting "rent" from him regularly like that. They don't care that she's writing a check back to him afterward, to them it just looks like unreported income.
    – Doktor J
    Commented Jul 26, 2019 at 18:24
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    @DavidSchwartz From your link "A debtor who uses cash advances on one credit card to make the minimum payments on another credit card and has no intention to pay for the money, property or services received, engages in credit card kiting". My understanding is that the test for fraud involves many factors: simply shuffling money around isn't definitively fraud if you're making a good-faith effort to eventually pay for anything you purchase using your available credit. Commented Jul 26, 2019 at 19:05
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    "The debtor's prospects for employment" are a part of the test for fraud. The fact that his friend is actively looking for a new income source (hopefully that means actively applying to jobs and having a record of doing so vs cooking up get-rich-quick schemes) would be big difference in his favor vs. the linked case where the person determined to be engaged in fraud was on disability and was not actively seeking employment, especially if the income he can reasonably expect to receive from such a job would enable him to pay off his debt. Commented Jul 26, 2019 at 19:09
  • 3
    "If this spirals out of control, there will wind up being [...]" I agree with that statement 100%. Funding gambling trips, foreign travel, etc., as the debtor did in your linked case, while never seeking to improve his financial position to eventually pay off his debt would be fraud, with all the effects that go with that. I think @Rocky is correct that the type of behavior OP's friend engaged in does have some nuances affecting legality, and what he's done so far may or may not be illegal, a court would need to decide. Commented Jul 26, 2019 at 19:20

I don't know if it is explicitly illegal but it's certainly against Venmo's user agreement:

Restricted Activities

  • ...
  • Provide yourself a cash advance from your credit card (or help others to do so);
  • ...

It's also worth noting that PayPal owns Venmo as of 2014 so if your buddy is doing something similar there then the same rules probably apply.

If this is illegal then the friend could get charged as an accomplice.

Additionally from https://www.thebalance.com/can-you-use-a-credit-card-on-venmo-4588383

Venmo’s user agreement states that your credit card issuer may treat a transaction as a cash advance if you use your credit card to pay someone via Venmo. However, that same user agreement also states that it’s a violation of Venmo’s terms of service to use the service to get a cash advance or help someone else do. Given that such transactions are “restricted activity,” it seems unlikely your credit card issuer would treat Venmo transactions as cash advances.

So your buddy could get royally screwed if these transactions get treated as cash advances since the interest starts accruing immediately.

  • 2
    since he is not paying in full (for at least 1 month) he already got no grace period on his cc. So anything already acrue interest immediately
    – Rémi
    Commented Jul 26, 2019 at 14:37
  • @Rémi Kind of. If I understand correctly then the minimum payment via Venmo will not incur interest until the following due date but a real cash advance would start accruing on day 1. Given that the person is stuck in a monthly cycle then I guess they are deferring about $800 for about 1 month which is negligible compared to the $35k. If the CC companies were to identify this pattern then a retroactive cash advance would be devastating. However, I've never had to deal with minimum payments so I do not speak any of this from experience.
    – MonkeyZeus
    Commented Jul 26, 2019 at 15:25
  • @MonkeyZeus Your assessment is correct. 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. This is a great way to find yourself in uncontrollable debt quickly and to have your card shut off, but this is not a crime, just a terrible idea.
    – Michael W.
    Commented Jul 26, 2019 at 17:18
  • 3
    Venmo's user agreement doesn't apply to PayPal, corporate mergers do not work that way. Second, there's all kinds of "illegal" which is civil, not criminal, and you can‘t be an "accomplice" in a civil matter. Commented Jul 28, 2019 at 14:33

The rest has been answered, but I'll just throw out one alternative to this form of "Credit Card Kiting" for another that saves some fees:

Collaborate with friends or family who like to pay in cash

These are getting harder to find, but if you have some who do a significant amount of spending with cash, offer to put their purchases on your cards and accept the cash instead. If you really trust them (be careful) you can add them as an authorized user so you don't have to be present all the time.

It's definitely a purchase, so no cash advance possibility, no PayPal/Venmo fees, and although it's the smallest of the advantages: any rewards from the cards, especially in high-reward categories, offset a tiny bit of your interest.

Wanted to edit in that in this day and age, Cash in this post doesn't have to mean physical cash. A Venmo/PayPal/Zelle/etc. payment works just as well (maybe better) as long as it's the type that incurs no fees.

  • 5
    Now waiting for a new "Uber of Finance" to pop up to offer "finance sharing" whereby strangers who were going to pay cash anyway get a small (but less than credit card companies would) cut of your purchase by putting it on your card and giving you the cash instead...
    – user12515
    Commented Jul 26, 2019 at 22:37
  • 3
    I continue to be amazed at the number of new and creative ways people come up with to screw themselves over financially. Commented Jul 29, 2019 at 2:49

The biggest problem with this is that the net effective interest rate is going to be sky-high. If there is not an immediate end in sight (e.g. a client payment coming in), then this is going to get out of hand very fast.
$35k right now can easily turn into $70k with interest and the Venmo fees, etc.

Some strategies include:
- Consolidate and pay something affordable. (Best option.)
- Figure out the highest interest rate and/or highest balance, and just let it go to collections. Offer to pay 25% of the balance.
- If one of the cards is Discover or AmEx, know that Discover will sue in court, and AmEx will bar bad debitors for "life" (or some really long time). - Consolidate, then let that one thing go to collections.
- Look up ways to spend less money, to pay this off. (Always look to spend less.)


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.

You are in much worse trouble if it looks like you don't have a plan to pay the money back. In that case, your borrowing is fraud since you have no intent to repay. "Intent" is not merely wishful thinking; it means making a viable plan and executing diligently on it.

So you would defend against a fraud claim by showing you really did spend 4 hours/day seeking employ, and averaged 6 job interviews a week, and these jobs would let you realistically live and pay down the debt.

A ruling of fraud means you cannot discharge this debt in bankruptcy, and it will be a monkey on your back for the rest of your life (barring some horrible turn of misfortune that renders you unable to ever pay). The fraud ruling will happen either when they sue you for the money, or when you file bankruptcy and they raise an objection. There are painful ways to prevent either from ever happening, that wasn't your question.


OK, so it is a form of kite flying. Do they have an aversion to cash advance fees? It is not necessarily a problem to pull a cash advance two weeks prior to the due date, and wash the money back in.

This may increase the interest rate payable as well as attracting a fee, but is less fraught with risk as you are not relying on a third party and not creating any false beliefs.

Ultimately to avoid the debt snowballing, selling down some high value asset may be in order, and soon. Otherwise 35K should not be costing more than $100 pw. which can be hard if you don't have $100 a week to spare. I would hope the business was affected by a one-off catastrophic event and was not intentionally trading beyond the point of insolvency as that can be a problem as well.

  • 1
    Cards limit cash advances. They limit them more if they smell kiting. Commented Jul 29, 2019 at 18:58
  • It's generally on the bank. Banks make a lot of money from people using their credit cards as a de facto line of credit. They may use analytics to reduce the limit if they notice income has dried up.
    – mckenzm
    Commented Jul 29, 2019 at 23:16

well Im no lawyer, but I see no illegality in what he is doing. On the other hand I can offer him another way to do this and pay much less in interest and fees.

1). get yourself a Square account which is free

2). sign up for the square debit card which is free

once you receive the debit card you can then just invoice yourself for services(Labor) through your square account and then pay the invoice with one of your credit cards. the money will show up on your square debit card in about 15-20 minutes and then you can use the square debit card to pay the minimum amount due on any of your credit cards. square charges no fees other than the initial invoice being paid, I think around 2% (could be wrong there, not sure).

  • 2
    That probably violates the terms of service of every business involved, skirts the edges of fraud, and I'm fairly sure it's more expensive than the current kiting scheme.
    – Mark
    Commented Jul 29, 2019 at 3:13

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