Wed 23 May 2007
Using Credit Cards for Staggered Extended Float
Posted by RichSlick under Money Management
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One of the other cool things you can do with credit cards other than arbitrage is to stagger your payment schedule and get a float for 45 days. How does it work?
First you’ll need at least two credit cards, preferably with high credit limits. This “system” only works if you have the cash flow to pay off BOTH credit cards at the end of the payment cycles.
Assume that we’re starting on June 1 for this system with two credit cards A & B. Credit Card A has the bill due at the end of the month (e.g. June 30th) while credit card B has the bill due on the 15th (e.g. June 15th).
The “system” is simple. You charge all of your expenses on Credit Card A from June 1st thru June 15th, the payment won’t be due in full until June 30th so you have 15 more days to pay for the expenses on credit card A. On June 15th, you switch to credit card B and charge all your expenses until August 14th. By doing this, you’ve effectively borrowed money for 45 days interest free. You got 15 free float days on Credit Card A and 30 days free float on Credit Card B for a total of 45 days. Rinse & Repeat. Be sure to PAY OFF your cards at the end of the month or you’ll incur interest fees.
Is it worth the hassle? For me it is worth it and I’ll give you a few reasons why.
1. It’s about managing cash flow. The more time you can keep cash in your high yield savings, the more money you’re earning. Free 45 day floats help.
2. Reward credit cards have reward limits and at some point, you’ll need to switch cards to maximize rewards. It’s likely you’ll be switching anyway so better to take advantage of 45 day float.
3. Credit Report help. Inactive accounts can actually end up hurting your credit score. It’s usually a good idea to charge something on your card every now and then to keep the FICO people and your bank issuer happy and make them feel useful. Using and paying back accounts shows you’re responsible and worthy of credit.
May 23rd, 2007 at 11:22 am
This “system” only works if you have the cash flow to pay off BOTH credit cards at the end of the payment cycles.
Good point w/o having the cash to begin with, this game is useless to you.
Paying my student loans and mortgage on time keep my FICO score content, not a credit card.
Your point is valid, but it is not to everyone’s advantage. If you are a day late, the cc company wins and you lose.
May 23rd, 2007 at 11:25 am
This “system” only works if you have the cash flow to pay off BOTH credit cards at the end of the payment cycles.
The key word w/o having the cash to begin with, this game is useless to you.
Paying my student loans and mortgage on time keep my FICO score content, not a credit card.
Your point is valid, but it is not to everyone’s advantage. If you are a day late, the cc company wins and you lose.
May 23rd, 2007 at 2:20 pm
Well doesn’t everyone have the cash flow to pay off their bills at the end of the month? If not, then you probably shouldn’t be using credit cards
May 30th, 2007 at 5:09 pm
I can usually push it close to 55 days. I have a card with statement date 5/29. If it has a $0 balance and I use it today it wont be due til around july 23.
I also also never understand the “No Credit” people when they say there is a problem paying it off before it is due. If you have the cash to actually pay your bills it doesn’t make a difference. If you can’t afford to eat and pay your bills, you need to worry more about making more money, not being a Ramseyite.