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Pay your credit card off monthly?
Old 11-15-2007, 07:19 PM   #1
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Pay your credit card off monthly?

Feel like a dummy: we pay off our PenFed card every month and grab the 1.25% credit they give every month - last night it dawned on me that if we charged $1000 every month and paid the bill off the next month and got the 1.25% credit - that would be equivalent to making 15% or $150 on the $1000. More, since the money we charge is money we would be spending anyway, we are effectively making that 15% on borrowed money. Gotta see if there aren't any other bills we can put on the card. 'Frinstance, since it's property tax time here in Oregano i'm gonna stick the $6000 worth of vinyl windows that went on a 5-plex on the card and move my payment date out a month. No reason to pull $$ out of a 5% MM to pay the bill if we can make 3 times that much delaying payment! Crazy. feel like such a finance doofus that it didn't dawn till now that 1.25%/month = 15%/annum.
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Old 11-15-2007, 07:45 PM   #2
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Isn't float great!

I do this with big ticket items, but stopped putting smaller stuff ($10and $20) on the card becuase I got charge creep and some heartburn when the bill came in. Still paid it off monthly, but it made the cash flow the next month a bit tight.
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Old 11-15-2007, 10:36 PM   #3
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I always pay my credit card bills before the due date, but not necessarily close to the billing date. Depends on how I'm feeling more than anything else, but I try to float my money in the MM until a few days before payment then transfer out.

Also, for the first time I'm carrying a credit card with a balance. I did a 0% balance transfer of $30k onto a Citicards, then invested it at 7-10%. Unfortunately, the BT is only good for 12 months and I don't want to take the $30k out of that investment.

So I then called up Discover to open up a Motiva card and told them I was planning to transfer a $25k balance and needed them to give me the largest limit they could. They gave me $22k which I transferred over at 3.9% until something like 2010.

It just feels weird to be carrying revolving debt. I've always prided myself on not having any CC debt, but I know in this situation it's right because anytime I can start with $0 and end up with something more than $0, then the only question is "was it worth my time?" A few clicks a month... definitely worth my time.
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Old 11-16-2007, 06:06 AM   #4
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Actually the PENFED, if set up for some type of AUTOPAY, will go to the actual Closing date for the next month. Example: the due date is the 27th of the month but the closing (or cutoff date) is the 2d of the following month. Under Autopay the money moves to the credit card on the 2d -- the end result is you get an extra 4 or 5 days. I set-up the autopay to come from another PENFED account so that, if for some reason, PENFED does not move the money and make the payment (assuming the money is in the account to be available) they should waive any penalty that may accrue.

Regarding some of the larger payments going on the credit card. Here you can pay your RE taxes with a credit card BUT the County charges a fee to do so (about 2.5% of the payment) so it is not appropriate to do it; ACH is much cheaper.
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Old 11-16-2007, 08:08 AM   #5
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Originally Posted by R Wood View Post
Actually the PENFED, if set up for some type of AUTOPAY, will go to the actual Closing date for the next month. Example: the due date is the 27th of the month but the closing (or cutoff date) is the 2d of the following month. Under Autopay the money moves to the credit card on the 2d -- the end result is you get an extra 4 or 5 days. I set-up the autopay to come from another PENFED account so that, if for some reason, PENFED does not move the money and make the payment (assuming the money is in the account to be available) they should waive any penalty that may accrue.
Let me make sure I understand this about PenFed:

A) They pay the rebate monthly (my AMEX is annually)?

B) They let you set up 'auto-pay' for the entire balance (Amex will only 'autopay' the 'minimum' - clever, huh?)?

That's nice - I gotta look into that.

I will ask AMEX to do it, I'm sure they will say no. And then, when I go to cancel, they will offer to wash my car and give me a foot massage to keep me, and I'll tell them it's too late. Why should I stay after setting up the other account - they had their chance? That is what happened the last time I dropped a card - they would waive the annual fee when I called, but told me they couldn't just do it automatically. So I walked, then they had at least two levels of people try to talk me into staying - suddenly they could do what I asked before. Stupid people.

-ERD50
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Old 11-16-2007, 08:59 AM   #6
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Originally Posted by ERD50 View Post
Let me make sure I understand this about PenFed:

A) They pay the rebate monthly (my AMEX is annually)?

B) They let you set up 'auto-pay' for the entire balance (Amex will only 'autopay' the 'minimum' - clever, huh?)?

That's nice - I gotta look into that.

I will ask AMEX to do it, I'm sure they will say no. And then, when I go to cancel, they will offer to wash my car and give me a foot massage to keep me, and I'll tell them it's too late. Why should I stay after setting up the other account - they had their chance? That is what happened the last time I dropped a card - they would waive the annual fee when I called, but told me they couldn't just do it automatically. So I walked, then they had at least two levels of people try to talk me into staying - suddenly they could do what I asked before. Stupid people.

-ERD50
1. Yes.
2. Yes. Though cumbersome, it can be set up to auto-draw from another bank's checking account, for instance, mine. You may wish to set up your PenFed card to draw from your checking account rather than mine however. i'm good with that.
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Old 11-16-2007, 11:25 AM   #7
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My computer pops up two reminders per month re cc payments. One to set up the payment in Vanguard Advantage, and the other to confirm that the payment was made.
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Old 11-16-2007, 01:11 PM   #8
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ERD 50: Yes it is simple to set up - need to actually mail them a form (which you d/l from their site). The options are minimum payment, set amount of payment or full payment. Full payment works just fine and I have the account set up that even if there is not enough money in the account (never happened) they would still make the payment; and advance a loan in $100 increments to cover the payment (not a good idea since the interest rate is a personal loan rate).

BTW at PENFED they have a option to get e-mail notifications when virtually anything happens within any of your accounts. Checks come, checks go, dividends post, ACH deposits post, etc, etc.,.

I actually use another PENFED account to be the debit account for the reason stated.
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Old 11-16-2007, 02:27 PM   #9
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I use Chase and there you have the option to autopay the full or the minimum amount due. Everything can be done from there website. No forms to mail in.
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Old 11-16-2007, 03:17 PM   #10
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last night it dawned on me that if we charged $1000 every month and paid the bill off the next month and got the 1.25% credit - that would be equivalent to making 15% or $150 on the $1000.
Your math is a little fuzzy. You're not making $150 on $1000; you're making $150 on $12,000 worth of purchases. That's still 1.25% cash back. and it's still good!
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Old 11-16-2007, 03:50 PM   #11
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Originally Posted by TromboneAl View Post
My computer pops up two reminders per month re cc payments. One to set up the payment in Vanguard Advantage, and the other to confirm that the payment was made.
OK Al, I admit I live in relative disorganized chaos. How much would I have to pay you to come to my house and organize my life?
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Old 11-16-2007, 04:09 PM   #12
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OK Al, I admit I live in relative disorganized chaos. How much would I have to pay you to come to my house and organize my life?
Be careful what you ask for Martha or you'll find yourself chopping firewood and surfing Lake Superior in a 2" thick dry suit!
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Old 11-16-2007, 05:52 PM   #13
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Gotta see if there aren't any other bills we can put on the card. 'Frinstance, since it's property tax time here in Oregano i'm gonna stick the $6000 worth of vinyl windows that went on a 5-plex on the card and move my payment date out a month.
A couple other things to consider:
- Many contractors I've worked with will give a cash discount far better than a credit card rebate. Of course I have no idea how they pay the 4.5% excise tax on our pile of Benjamins, but that's their concern. They (and their employees) would rather get cashflow than have to deal with paying the merchant's credit-card fees.
- In the last few months, Hawaii Craigslist has exploded with gift-card sales. You may see the same in your area. These are legit cards, mostly from Home Depot & Lowes, being sold for 85-90 cents on the dollar. (This week, just before the start of the holiday retail season, they're even down to 80 cents on the dollar.) Some of the cards are handed out by the stores (spend $5000, get a $500 gift card) and some of them are gifted by family/friends. The card balance is verified at the store's cash register and AFAIK it's not against HD/Lowes policy.
- As soon as you put a bunch of recurring bills on your credit card, Murphy's Law will change its number and you'll have to start all over again with all the billing companies. I hate that.
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Old 11-16-2007, 06:15 PM   #14
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But if you think of it as 1.25% off, it doesn't sound so great. Think of a sign in a store:

1.25% off -- today only!
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Old 11-16-2007, 08:06 PM   #15
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Your math is a little fuzzy. You're not making $150 on $1000; you're making $150 on $12,000 worth of purchases. That's still 1.25% cash back. and it's still good!

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%?
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Old 11-16-2007, 08:21 PM   #16
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A couple other things to consider:
- Many contractors I've worked with will give a cash discount far better than a credit card rebate. Of course I have no idea how they pay the 4.5% excise tax on our pile of Benjamins, but that's their concern. They (and their employees) would rather get cashflow than have to deal with paying the merchant's credit-card fees.
....
I kinda am circumspect about who gets paid with a VISA. Small local businesses that i like get cash or a check. Big stores or companies that don't give me the warm fuzzies get Visa. Worked with a plumber today who seriously undercharged me and refused to raise his bill - got downright firm about it. Something to do with his sister and family that i've had various dealings with. Ok Bubba - no check for you! Forced him to deal with sitting on folding money.
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Old 11-16-2007, 08:49 PM   #17
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Originally Posted by TromboneAl View Post
My computer pops up two reminders per month re cc payments. One to set up the payment in Vanguard Advantage, and the other to confirm that the payment was made.
Hey Martha! You don't need Al!

I get emails directly from the bank/credit card companies reminding me to pay several days in advance, and acknowledging the payment when they receive it. All I had to do was turn on "email alerts".

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Old 11-16-2007, 09:26 PM   #18
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No doubt i'm kinda fuzzy - but 1.25%/month is 15%/annum. I'm making the money on money they loan me!
Well, after a nice dinner and some premium ales, I'm a bit fuzzy on this too.

But, I don't think you can look at it as an 'investment'. This is money you were going to spend anyhow, you can't give them a pile of money to get 1.5% per month. So, as T-Al pointed out, I think it is really just 1.25% off the purchase price of what you buy - period. No per annum about it.

Two options - pay 12,000 cash over the year - no rebate. Pay 12,000 on CC over the year, get $150 back, 1.25%. I suppose you could add in a small % on the early money, as you could reinvest it, but that is a single digit percent on a single digit percent. Not much.

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Old 11-16-2007, 09:43 PM   #19
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- As soon as you put a bunch of recurring bills on your credit card, Murphy's Law will change its number and you'll have to start all over again with all the billing companies. I hate that.
Doesn't even take Murphy's Law to put a wrench in the the works...a new expiration date will do it. I have all recurring bills charged to my credit card and once I forgot to update my profile with the new expiration date. Only one recurring bill was kicked out...they forgave me...eventually...with no penalty. Now, when I get cc with new expiration dates, I go online and update my profile immediately.
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Old 11-17-2007, 07:32 AM   #20
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Doesn't even take Murphy's Law to put a wrench in the the works...a new expiration date will do it. I have all recurring bills charged to my credit card and once I forgot to update my profile with the new expiration date. Only one recurring bill was kicked out...they forgave me...eventually...with no penalty. Now, when I get cc with new expiration dates, I go online and update my profile immediately.
I wouldnt count on the autopay feature either with cc's changing statement dates...I agree with T-AL, and I pay and the double check...I have even seen people post on another board complaining that they thought that they paid through the cc's online pay feature and didnt since some have a few layers that you have to confirm the payment....
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