No doubt i'm kinda fuzzy - but 1.25%/month is 15%/annum. I'm making the money on money they loan me! I don't lock up $1000 of mine/month - the card company loans it to me each month in hopes that I'll forget to pay the bill. On money that is gonna get spent anyway on recurring bills er whatever, i'm up for snagging that 15%! Good point about the $12k worth of purchases though - of course i don't charge all that $ on January 1, so would you think that the interest earned on the money borrowed should be 1/2 way between 1.25% and 15%?
calmloki, you definitely have a point, and I think this is an interesting problem. As you said, from PenFed's point of view, they are giving you twelve short-term loans of $1000 throughout the year, and paying you $150 to give you that money. However, from your point of view, it's not like you can actually "make" any money off this deal.
To actually make money, you'd have to be able to get 1.25% back on cash advances, or you'd have to be able to sell all the merchandise you're buying ($1,000 a month) for exactly what you paid for it. So really, from your perspective, this deal is like Al said: it's like everything you buy is on sale for 1.25% off. Still not bad, but nothing like a guaranteed 15% return on your investments!