When I was homeless and going from job to job, moving from apartment to apartment running from the “repo man,” he finally caught up with me and repoed my car. My credit score was now 500. After I began rebuilding my credit, I started receiving credit card offers in the mail. I soon discovered that most people simply throw the offers in the trash, and say things like, “I don’t need any more credit cards,” or “they are not going to keep me in debt.”
As I thought about also trashing the credit card offers, I remembered a quote that said, “middle class thoughts, make you middle class money.” And I started to ask myself how could I make money off these offers. I told myself that they are offering me money at 0% interest for twelve months, and after that the interest increases to roughly 19% of the balance, or the amount owed. Whoa! But then I thought about the business model of some of the most successful types of businesses in the world – Banks! Their business model or “how they make money,” is simply borrowing money at a low interest rate, and then lending that same money to someone at a higher interest rate.
So the price of money for the credit card offer was 0% for twelve months and then 19% once the promotional rate expires. The card had a $1,000 credit limit. This means I can borrow $1,000 free for twelve months, but the credit card company is betting that I will have a balance after twelve months that they will be able to charge at 19%. I don’t think so! Instead of borrowing the $1,000 and re-lending it to someone at a higher interest rate of 15-20%, I decided to borrow and invest the money in products that would earn 100-300% profit, which means for every dollar I invest in purchasing and selling a product, I would earn two to three dollars extra.
The Credit Card Entrepreneur
My credit card business model worked like this:
Step 1: Borrow $1,000 from a credit card by performing a balance transfer into my bank account.
Step 2: Purchase $1,000 worth of products that can easily be resold for profit of at least 100% or more. For example, buy $1,000 worth of polo shirts at $12.50 per shirt, and resell the polo shirts on average for $25. After selling all the shirts you should have a total of $2,000, which includes $1,000 borrowed from the credit card and $1,000 profit from the polo shirts.
Step 3: Repeat this process for the entire twelve months and pay the required minimum monthly payments and the full balance of the card before the promotional 0% interest rate expires.
Now you can use the profits as capital to continue your investment operation of buying and reselling products. Also, you will be surprised that once you pay off your credit card balance, your credit score will have increased, which will make you even more attractive to banks and lenders who will send more pre-approved credit card offers. You can simply repeat the process until you have stacked enough profits that you no longer need to use the credit cards anymore. This strategy should only be used if you have ridiculous discipline to pay the card off and not remain in debt. Grind for Greatness!
James “Bird” Guess is a world-renowned speaker and trainer, entrepreneur and founder of JBG International Success Academy. He is also the best-selling author of the book How I Made a Quarter Million Dollar$ From the Trunk of My Car. James inspires working professionals, entrepreneurs and students to adapt to change, develop into global leaders and achieve their greatest potential using a success process called “Grinding.” He can be reached at firstname.lastname@example.org
Category: Startup Advice