The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: beachkat on November 06, 2014, 06:23:02 AM
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We have a balance on a credit card due to an unexpected bill that we are working very hard to pay off, and it will be gone by June.
My question is this. We have an annual bill that is due on January 1 that will cost $1100.00. We have that cash set aside for it.
I was thinking though, if I took the $1100 and paid it off the credit card now we would save on a little interest but of course I'd have to charge the $1100 bill when it comes due. In the end the credit card will still be paid off by June and we'd also gain the rewards $ for using the credit card to pay the bill.
We are very disciplined tracking every cent and I've no doubt that we will pay off the card, so I am not worried about back sliding or anything.
The cash is earning nothing in our bank account waiting to pay that bill and so perhaps it could save us a tiny bit in interest on the credit card until it's due as well as earn us the rewards$$.
In this same way, what about paying monthly utility bills with a credit card to earn the cash back rewards?
We obviously don't have the 30 day no interest grace period right now because we are carrying a balance, but I was thinking if I paid the amount of the utility bills off of our credit card with the cash that I would use to pay the bill with on the day before I pay the actual bill and then charge it to the credit card (no fee to pay with credit card by our utilities), our daily balance should never rise higher then it would be and we'd earn the rewards $.
Is there anything i"m missing with either of these ideas?
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Some utility companies charge a convenience fee for using a credit/debit card. My utility charges are so small that it's not really worth the fee for me, but if your company doesn't then there's definitely no reason not to use your CC to gain those points.
As far as your other plan using the set aside $$ to pay down the CC then charge the $1100 back on it come January, no I don't see a problem with it unless it costs you more in accrued interest.
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Thank you. I guess that's what I'm trying to figure out. I think I understand accrued interest but I'm not an expert on any of this. In my mind if I pay off $1100 now my daily average balance will be lower over the next 45 days or so which should equal less interest charged for that time. Of course it will go back up once I charge the bill, but it will not ever be higher than the balance is right now and we will still make the other normal payment we make each month.
The money is just sitting in our savings along with our cash emergency fund, but we make so little on any of that. It's just I know we should be paying cash for everything, but if I could save a bit of interest plus earn the rewards dollars, it seems like it could be a good idea?
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Pay by June? What?
If you have an emergency fund, now is the time, right? Pay it off, rebuild emergency fund. In the meantime, the credit card IS your emergency fund while you're rebuilding it.
$1100 isn't that hard to rustle up even for a low-income mustachian.