Don't try this at home. How credit card arbitrage funded my first company.

We're very fortunate in this country for a liberal bankruptcy law, at least for when it comes to taking this kind of risk.

Now, this kind of risk won't work as well in this economy. Credit cards have severely curtailed their introductory rates. However, in 2002-2007 I knew people who augmented their income multiple times by this same arbitage and putting the money in low risk investment vehicles. Once the intro rates were finished, they would pay back 100% and close the card, moving on to the next one.

The credit card reform act will make this more difficult in the future.

This is crazy - crazy interesting and crazy nuts. The idea of arbitraging has always be fascinating to me. I've had an idea for currency arbitrage in the travel industry, but never done anything other than back of the envelope calculations. Feel free to take the idea:

Tour operators publish their prices for the upcoming year's trips. They publish them usually in one currency, sometimes in two, rarely in three. They're beholden to these prices because they publish brochures and distribute them to places like Flight Centre.

So what you do is become a wholesaler of a bunch of tour operators' trips (this is easy to aggregate, many have XML feeds that publish their inventory, including pricing & availability). Then you use real-time exchange rates to figure out which currency it's best to sell in to a customer and then buy the product from the operator using another currency. For example, say the US & CAD dollars are at par when prices are published. If the US drops a lot compared to the CAD, you sell the trip to your customer in CAD but purchase the trip from the operator in US.

The beauty is that operators will pay you a commission (usually 20-25%) on top of whatever you gain from the currency arbitrage. There's some complexity in becoming a legal wholesaler and being able to accept multiple currencies etc.

At the very least it makes for some interesting math.

I think you missed the part where he says they had no coders as founders, and also the part(s) where he says "don't do this".

Credit card debt is, in most states, entirely dischargable in bankruptcy. So while it would be unethical to take on all this debt specifically with the purposes of squandering it, the CC companies are extending you an unsecured loan. It's really not all that bad of an idea, provided you can survive a bankruptcy and a few years of exceptionally poor credit.

Generally everybody says you shouldn't start a start up on credit cards.

What he went for is the advanced version where you can get free money if you stack the cards correctly. It is difficult to do, but companies and financial investors do it pretty often.