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Save Money Using Your Credit Card Instead Of Cash (???)

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That title goes against generally-accepted wisdom ---but hear me out. Say you need to shell out a large amount of money (say $10,000 for example) & you want to pay cash so there will be no credit card bills or finance charges. Instead charge it to your cash-back credit card. WIth 1% cash back, you'll get $100 back. In addition, your $10,000 can earn interest for an extra month until the credit card bill arrives. Interest rates are low now, but even at 1% you will...... (click title for more info.)

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...earn about $8 in a month. If you pay the credit card bill in full, you'll save or get back $108. If you spend only $1000, you'll still save about $10.80. It adds up over time. You MUST pay the bill in full each month to benefit, otherwise finance charges will wipe away your savings & more.
- Submitted by STORMY724 8/22/2010 in Saving Money | 8 Comments
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Member Comments

MI-ELLKAYBEE 5/8/2012 11:26:00 AM

    This works for people rich enough to qualify for rewards cards. What about the rest of us - who are desperate for any kind of break?
SHADOZA 8/22/2010 11:34:00 AM

    I cannot see how one can earn $8 a month on 10k in savings. At the most, you would earn a dollar or two. When compared to the 23 - 27% interest you are paying on the balance of the 10k, you save nothing. Even the cash-back rewards do not cover the cost of financing. Better to pay with the debit or take a traditional loan for large amounts.
STORMY724 8/25/2010 7:13:00 AM

    SMILEYBABS: I didn't realize that some cards will charge for high dollar amounts, just to put it on your bill. Skeptic that I am about banking institutions, I figure they would be thrilled to have you charge a large amount, hoping you will take years to pay it off so they can earn large finance fees. If they can charge fees to the vendor, then charge you a fee to put it on your card AND charge finance charges ---well, no wonder they are rolling in dough.

My credit cards don't charge extra for placing high charges as long as they are within my credit limit. Some people might want to check into other credit card options if their cards charge these kinds of fees.

One thing I didn't have room to mention in my original "secret" is that if you make many large charges, it can affect your credit rating, even if you pay them off in-full & on-time when the first bill listing that charge is due.

STORMY724 8/25/2010 7:02:00 AM

    SHADOZA: $10,000 for 1 year at 1% APY (10,000 X .01) would earn $100 interest. Divide that by 12 to get $8.33. I figured about $8.00/month.

If you read the entire "secret" you would see that by paying in-full when the first bill (after the charge) is due, the finance charge is $0. By getting 1% cash back ($100) & earning an extra month of interest instead of withdrawing $$ immediately, I figure Ion saving about $108. If I pay with a check at the time of the sale, I get nothing back & lose about a month of interest.

Check bankrate.com to find good interest rates on savings & money market accounts. My accounts are currently paying 1.29% & 1.34% ---which are low, but not as low as some banks paying half that.

I never pay attention to percentage rates on credit cards because I pay them in full every month. Whether they be 1% or 50%, I pay 0%. I make sure there is no annual fee & that I am getting something back (cash or miles.)
STORMY724 8/25/2010 6:45:00 AM

    DJ: I know that credit card companies charge businesses a percentage of each sale for using their services & perhaps, other fees. I also know that you rely on credit card users to bring in more and higher sales. If I have only $50 cash with me or only $75 in my checking account, but I want something that costs $150, I can buy it with my credit card. That's good for me (well, unless I can't control my spending) and it's good for you because you sell more in the long run. I know different credit card companies charge vendors different amounts ---and that is why many small businesses don't accept AMEX, for example. You've gotta' do what you have to do to stay in business. Consumers have to do what they can to save money, too.
SMILEYBABS 8/22/2010 8:44:00 PM

    We recently tried to put a charge for 5000 dollars on our credit card for replacing our old air conditioning system. However, the fee for placing the charge on the card would have been about 170 dollars. We paid by check instead and saved the 170 which was more than we would have earned by putting it on the card. It does pay to check which is better for any given situation.
DEBBIE_J 8/22/2010 8:38:00 PM

    I accept credit cards in my business. All those "points" and "cash back" programs cost me plenty since the credit card companies make me pay them back in advance for the perks my customers get. Whenever someone uses a credit card at my business that has a cash back or point program, the credit card company automatically withdraws an exta fee from my bank account. I have no choice in the matter and the charges are close to putting me out of business.
ARIAS1111 8/22/2010 1:27:00 AM

    I get points with my check card when I use it as a Credit card instead of debit. Thanks for the tip.

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