Earlier this week, a post from Unethical Life Pro Tips skyrocketed to the front page of Reddit with 32,000 upvotes and 1,147 comments. It was supposedly a foolproof hack for anyone having trouble paying off their credit debt — you just need to, as a random example, buy and return an expensive TV. That way, the bank thinks the return credit is a payment, and viola, you’ve avoided getting hit with a penalty or interest charge.
Sure, it was posted in a subreddit that proudly features the word “unethical” in its name, but as many in the comments section pointed out, is anything really “unethical” when you’re dealing with predatory credit-card companies?
ULPT: If you aren’t able to pay a credit card balance this month, buy something expensive and immediately return it. The credit from the return counts toward your current statement balance due. from UnethicalLifeProTips
Unfortunately, however, it’s a recipe for tanking your credit score and potentially committing fraud. Maybe in another dimension such a hack works, but in ours, credit-card companies are almost always way, way, way ahead of you, no matter how much you think you might have outsmarted them.
According to Adem Selita, co-founder of The Debt Relief Company, the only way this might work is if your account meets some very specific conditions, you calculate the exact window in which to purchase and return the item, and oh yeah, you belong to the one specific bank that would seem to allow for it.
Let’s start with timing. “The credit from the return would need to be applied in the period after your statement balance is calculated and before the payment due date,” Selita tells me. Because you purchased something after your statement balance was created, technically that purchase would be applied to the next month’s statement. Then you would need to return the item before the due date for the credit to be applied and seen as a payment.
Besides perfectly threading the temporal needle, the first of many caveats is that this “may be a loophole exclusive to Synchrony,” Selita continues. “I can’t speak for every credit-card company, but I know for a fact that this won’t work with Citi, Chase and Bank of America, and probably 90 percent of the rest,” most of which “code” return credits differently from payments toward a balance. “So regardless of any return credits, most banks are going to require a minimum payment,” Selita explains.
For the sake of argument, though, I’m gonna pretend that you’ve circumvented all of the aforementioned restrictions. The next problem is that the redditor who first posited the hack conveniently left out one major detail (something he later owned up to): He zeros out his balance before every statement, thus eliminating any interest and minimum payment. Since the average American is $38,000 in debt (not counting their mortgage), this clearly isn’t common for most credit card users, who attempt to chip away at their balances monthly. So if anything, the strategy is merely a great way to slide into even more debt.
“A running balance, accruing daily interest, makes this very risky, because if you mess up the timing, you’ll get charged a lot of interest on a purchase you’ll be returning anyway,” Selita explains. Not to mention, he adds, “Even if you do everything right, you’re still only reducing your balance by the amount of the returned item — nothing is actually being added or reduced, you’re just deferring payment down the line and potentially racking up interest.”
Getting back to the original Reddit post, if the redditor’s story is to be believed, this is likely what happened. His “item” — for the sake of continuity, I’ll continue with the TV example — was his only purchase on the card he used. By returning the TV within the correct tiny window, his balance due returned to zero, and he was able to avoid having to pay the minimum on it that month. Then he went back and repurchased the same TV, for which payment is due next month.
Technically, yes, he could continue buying and returning the same TV every month without ever having to pay for it. But since this is basically a textbook case of “return fraud,” doing so without raising eyebrows in a credit-card company’s fraud department is unlikely. And if they do determine that someone is returning items over and over, they’ll freeze that person’s account and blacklist them from opening any other accounts at the bank.
It’s also worth noting that none of this is great credit-score-wise. “In theory,” Selita says, “if your balance is reported as $4,000 and you have a $5,000 limit, it could negatively impact the utilization portion of your score, which accounts for 30 percent of your overall credit score.”
Long story short, there’s a much easier way to avoid paying a late fee. “Call your bank and make them aware of any financial hardship you may be facing,” Selita advises. Many of them offer hardship plans, especially now, so “going to your credit card company with a candid approach is always your best bet.”
Quinn Myers
Quinn Myers is a staff writer at MEL. He reports on internet culture, technology, health, masculinity and the communities that flourish within.
