Pay your credit card off monthly?

calmloki

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Jan 8, 2007
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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.
 
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.
 
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.
 
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.
 
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
 
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.
 
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.
 
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.
 
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.
 
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!
 
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?
 
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!
 
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.
 
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!
 
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%?
 
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.
 
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".

Audrey
 
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.

-ERD50
 
- 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.:rolleyes: Now, when I get cc with new expiration dates, I go online and update my profile immediately.:angel:
 
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.:rolleyes: Now, when I get cc with new expiration dates, I go online and update my profile immediately.:angel:

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....
 
So i'm laying there not sleeping.... Looking at it from PenFed Visa's point of view: Bob is one of our "bad" customers; he charges $1000, pays his bill ($987.50 every month after 1.25% rebate) in full each month and charges $1000 the day after paying. PenFed gives Bob 1.25% of that $1000 back each month. What does PenFed have to keep on hand to keep Bob's account ticking along? Less than $1200, allowing for a bit of reserve. At the end of the year PenFed has given Bob $150 for the privilege of loaning him $1000. Heck of a winning business model! So what's PenFed get for it's $1000 loan? Assuming that Bob shops at a store using Costco's merchant Visa processing processing program (picked because i figured it was fairly cheap) the store gets charged 1.64% + $0.20 per transaction, or $49.20/year to PenFed after paying Bob his $150. So PenFed gets maybe a minimum of 5% for it's $1000 loan vs. Bob's $15%. For some reason i thought merchant fees were higher.
 
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....
I set up recurring bills (pnone, D-TV, etc.) to charge to my cc, but I don't have the cc auto pay. I scheduled monthly reminders on my phone to check the cc's when the statements close. I travel 100% of the time, so I do everything on the internet...mail never arrives in time to make timely payments. After I check the charges to be sure I made them, I schedule electronic transer payments two days before it's due, and I have a log where I always write down the payment confirmation number. One cc sends me an e-mail when the payment posts, and I log on and check the other. I only use two cc routinely, but when I use any of the other cc (to keep them active), I just log on and pay them immediately.
 
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!
 
I don't know if my thinking is fuzzy or not but I just looked at my 11/07 PENFED VISA and it indicates that they have "paid" me about $125 in rebates (they even broke it out by the Gas 5% and the Other 1.25% amounts). Since these are purchases I would have made anyway I look at the $125 as "found money" or money I had to spend that I would not have otherwise had. In order to "get" $125 it would take about $2,500 a MMA or bank paying 5% interest. Granted the "principal" in this case is non-existent but the "earnings" are there.
 
I am my Mother's son. I bend over to pick up pennies (and gum wrappers). "Watch the pence and the pounds will take care of themselves".

Most of our money is spent on the rentals - that is, invested in something we hope to rent or sell for more money after the investment. To that extent it is like we are buying dollars with our Visa, if you accept that the rental property value is equivalent to cash and therefore fungible (really like that new to me word). The more we spend the more we make! And it's all free money!?

Or maybe we have 800# of birdseed, and if we buy another 200# we get a free budgie. I am my Mother's son.
 
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