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.
Clint Says says
We too use our credit card as a float by paying it off every month. We also receive cash for the kiddies college fund too. I’m glad to see others out their thinks the same way too.
Tight Fisted Miser says
I’m surprised Clever Dude allowed a post from someone advertising extremely overpriced software to help you pay off your mortgage early. You can pay extra money towards your mortgage for free- there is no need to pay $3500 to do it.
For more information you could check out Blueprint for Financial Prosperity’s post UFF Money Merge Accounts Scam or Legit?. Or just do a Google search on United First Financial.
I would recommend the Chase Freedom card. You earn dollars in rewards (different amounts 1%-3% depending on category) and if you save up $200 in rewards they’ll send you a check for $250. So far this year I’ve gotten $500. And I also pay off my card each & every month so I’m doing will with their offer. They also allow utilities to be put on there and that’s included in one of the bonus % categories.
I recommend the driver’s edge card, mainly because you can choose to have a check mailed to your student loan or mortgage company. This ensure the rewards $ is going to the right place.
Currently I get 6% on groceries, drug stores, and gas (although I have a better card for gas that I use) and $1 for every 100 miles I drive on my registered car. 1% back on everything else.
Paid ~$500 extra on my private student loan through this. Before I would always just spend my rewards on stuff I didn’t really want because it was “free money”
Amy Boyack says
Great post, Sue. I love how you have explained interest float and the different rewards cards available. I also like your writing style.
Kevin @ The Money Hawk says
Yeah, stop trying to “play” or “game” credit cards. They’re designed to take your money, not give more to you.
“floating” anything in finance is a big mistake.
J. Money says
Wow, i have to go w/ Tight Fisted Miser here on the whole “money merge” thing. While my whole blogging experience has been owed to that – it’s what brought me to the PF arena while researching it – it frustrates me when people who promote this *rarely* state the $3,500 or whatever pricetag!
I mean, i’m all for software/ideas that help you get your stuff together, but if you’re gonna be praising it all over town, then omitting that minor piece of information is pretty misleading.
The Simple Dollar also wrote an interesting ditty on it, and has over 1500+ comments! It’s obviously a pretty passionate subject.
Great information. Earning points by using credit card is very popular nowadays, and it can save you some money by redeeming your points with gifts.
My debit card gives a 1% cash back for all purchases swiped as credit.
When you run a debit card as debit, the issuing bank gets charged a fee. When you run the card as credit, it is the store or whoever has the machine that gets charged a percentage of your purchase. So my bank rewards me for NOT making them pay the fee.
I have some of my expenses billed to my card. It’s a pretty cool idea. I wish I thought of it before I set it up to have these expenses deducted from my checking. Could’ve got more in rewards and kept money earning interest a bit longer.
As to good rewards – it depends on how much you spend. AmEx blue has 5% cash back on groceries and a couple of other things I don’t recall, on any money over 5K you spend during the year. Unfortunately, I don’t spend that much, but if all of your expenses get charged to a credit card, you probably do. As is I only use AmEx for items where I want to double the time of manufacturer warranty. One good thing about their cash back is that it is automatically applied to next month balance, so you don’t need to do anything to claim it.
I use Discover Road Edge for gas – 5%, State Farm visa for most of my purchases – 1% cash back applicable to State Farm bills — this makes sense to me since this is my insurer. Chase Amazon is good if you shop a lot on amazon.com as it gives you 3% for amazon purchases as gift cards for amazon.
Yes, I always pay my balances in full, have been doing it for over 25 years.
Oh, and specifically for Kevin: my full credit card balance for cards I use regularly is AUTO-magically deducted from my checking by the credit card company on the due date. Isn’t it amazing that such crooks (where “crooks” include the bank you do business with every day since they probably issue a card too) offer you such an easy option to avoid all interest and fees? I also have more in CD/cash part of my savings than the combined credit limit on all of my cards, including those I almost never use; so I don’t think I’ll “get bitten” any time soon.
jennifer bhala Hnasen says
I am using the money merge account system by united first financial and I am paying off my 28 1/2 year mortgage along with some credit cards in under 10 years, with little change to my budget or lifestyle. The little change that I have made is that I am now able to actually know the true cost of what I purchase in relation to my whole financial scenerio. I am able to determine the best time to buy a luxury item, and I am able to keep in categories and folders all our business and personal expenses so it is much easier to track our spending habits.
I also love the fact that the money merge account software is comparable to the navigation system of a paper airplane versus the navigation system of a jet engine flown on auto pilot. My husband and I will be saving well over $100,000 of interest charges and therefore the $3500 which we were able to finance through united first finance is pittance compared to what we are receiving in the way of a financial GPS educational, tracking system.
Interest float is just one of the strategies this program encompasses to its fullest capacity.