Kredit Kard Fu: Entry Level – Pay Them Off, Get The Float
By Harry Stoll
As a veteran of the Kredit Kard Wars, who is in the trenches, kicking sand in the bully’s face, I advocate using a credit card for every possible purchase. Hold it! This is not a run-amok license. You should stay within your means and pay the credit card off each month, and credit rating agencies get antsy when you exceed 60% of your available credit. So don’t.
Maybe later I’ll do a Suze Orman jaw torque and suggest how to tunnel out of credit card debt, but basically you have to find the way.
Once you’re paying them off every month, you’re in the catbird seat and ready to take advantage of The Float (the “grace period” to the usurers). This means you have from 25 to 55 days from when charges for insurance, utilities, TV/landline/cell phone/internet, newspaper subscription, broccoli, toothpaste, gas, bouef Bourguignon and pinot noir go on your card until you must pay the piper. (Some of these are discretionary spending so use discretion.) So, if your credit card statement closes on January 15, any purchases made after that go on the next closing date of February 15 and will be due by March 10.
So, in February any money you have in a checking or savings account remains there. Does this make your head hurt? Go over it in your mind. Draw diagrams. It’s real. But what makes The Float pay off is having an interest-bearing account that you can pay from a month later. This action repeats itself every month.
The result is you always have one month’s worth of those amounts in an interest-bearing account and get 1/12 of the interest each month.
Provident Credit Union currently pays 2.26%. (Although they can pull that rate any time, they’ve kept it for a few years. Your principal is federally insured. You have to jump through some hoops but they are easy.) There must be other accounts.
Making mortgage payments with your credit card is possible, but perhaps difficult. What a huge deal that would be. I’ll research it.
Now the amount you save by using The Float might not seem big, but as with much of Kredit Kard Fu, it’s incremental. Would saving of over 2% on your payments be worthwhile?
Another advantage of using your credit card is the awards they offer that vary from 1% to 5%. They can get tricky. I’ll explain them soon. Another way is getting an account-opening bonus, which I’ll also cover.
Using a credit card is to let the genie out of Pandora’s Box, so you’ve go to be prudent.
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