http://en.wikipedia.org/wiki/Arbitrage
While the 4th credit card company he applies to has imperfect information about what his credit is (at that point) actually worth, it seems like all the deals are independent.
Though inaccurate, the title was much catchier than:
"How credit cards funded my first company"In my case, it was playing the us mint. They sell 250 $1 coins for 250 with free shipping. Fidelity Amex card gives 2% cash back. So I would order tens of thousands of coins and use the coins to pay the credit card build. 1K roundtrip = $20, and it was pretty scalable. Nowadays there is a limit
This wasn't a particularly uncommon scheme in the mid-2000's with easy credit and high savings rates. A rough calculation shows that with a zero-interest card (you could generally negotiate 0% cash-advance checks as well) and a 5% savings account, you could make in the ballpark of $450 over the course of a year per 10k borrowed. If you had good credit and could quickly get access to 100k, you'd be making a few thousand for a not much more than a days work + some short-term damage to your credit score, though at that time, credit scores didn't really mean all that much.
That's arbitrage to me.
Like, you took on a risk, and you got compensated for the risk.
You essentially issued insurance. Perhaps you were lucky that you didn't have to pay out. But that doesn't mean you found an arbitrage.
1. Get a bank to loan you at 0 percent.
2. Buy something liquid.
3. Sell said something.
4. Loan the money to another bank at >0 percent. (ie, buy a CD.)
...it's still stupid, because if they caught on to your shenanigans, that zero would turn into 29.95% overnight and you'd lose a pile of money trying to unwind the mess. The unavoidable problem is step #2. Good luck buying anything except for treasury bills that don't immediately drop 5 percent or more in value the minute you purchase it.