Credit Cards and “Interest Float”
By Mrs. Money Merge
Sue Edwards writes at MrsMoneyMerge.com. She is an experienced sales professional who is passionate about her chosen product and career.She is a successful agent for United First Financial, a 2008 Ernst & Young Entrepreneur of the Year award-winning organization.
I’m interested in researching the details of the various rewards programs that are offered by credit card companies. This became a topic of interest to me recently when I received notice that my husband’s Citi card had a new Rewards program (called Extra Cash from Citi) and that we had about $500 of “Extra Cash”. COOL, I thought! So I rushed right over to the Rewards website to redeem my “extra cash”. What a colossal disappointment!
This particular “rewards” program offers minuscule discounts (5% – 10%) on mostly non-essential merchandise (to be fair, maybe some good gift items), and then you have to pay for the remaining 90% to 95% of the purchase price WITH YOUR CITI CREDIT CARD! What, do they really think we are that stupid?
To be totally fair, I did find ONE item that was a good deal. My husband loves National Geographic magazine and I renew his subscription every year as a Christmas gift. The renewal price is $29.00. With my Extra Cash program I can take off $13.00 and get his subscription for only $16.00, and I don’t mind putting the $16 onto the credit card. But, let’s think here . . . do I really want to put close to $5000 on my credit card so I can use the remaining $487 of my rewards?
On the flip side – I have an FIA card from Edward Jones. I earn 1 point for every dollar I spend. Since becoming educated by my Money Merge Account program from United First Financial, I now am taking advantage of a concept known as “Interest Float”.
I have most of my recurring monthly expenses (cell phone, cable, telephone, insurance, etc.) automatically billed to my credit card (with a great side benefit – I’m never late with a payment!). I also pay my other monthly expenses (gas, groceries, eating out, etc.) with my credit card. I get to put virtually all of my income into an interest-earning or interest-canceling account while I’m spending the credit card company’s money. Then, when the credit card bill comes due (25 to 30 days later) I take the money from my savings account and pay it in full.
Because I pay the credit card bill in full I pay NO interest for the use of their money for that month. And, I get to keep the interest I earned during that time. And, the absolute best part is that with the points I’ve earned for using their money (remember – INTEREST FREE) I accumulate enough points that I get to cash them in about every two months for a $50 Mastercard or VISA gift card, that spends just like a credit card – so THEY’RE PAYING ME TO USE THEIR CREDIT CARD! Now that is cool!
I plan to check out the different programs that are available, but would welcome help with that research. Please tell me about any rewards programs you have with your credit cards and how, if at all, they are having a positive impact on your finances and/or your lifestyle.