Bill Payments After Your Credit Card Cut-Off Dates

March 22nd, 2008 by

Just a few days ago I started doing my monthly credit card charges to pay various vendors and as usual I try to take advantage of the monthly cut-off dates for transactions on my credit card to keep more money for myself such as earning more interest in a savings account.

What I mean by this is that credit cards have a billing cycle where if certain transactions do not get posted on your credit card by a certain time period of the month then the charged amount will be posted on your next month’s bill instead. Therefore, you get to keep the money in your bank still and won’t have to worry about it for more than 30 days later.

As an example, for myself any transactions that do not get posted to my credit card by the 16th of any given month won’t appear on the upcoming bill but rather the next one. So let’s take a phone bill that I receive monthly usually around the first to second week of the month. Like most bills, it indicates that payments need to be received by a certain date like say the 28th of the month or else you will incur a late penalty.

Now, if I just paid the bill right away with my credit card upon receiving the bill like say on the 12th of the month then that means I would need to withdraw my own money to pay for it in the upcoming billing cycle. Instead, because there is a rather good grace period for the bill I wait until the 17th of the month to pay the bill with my credit card. Therefore, it satisfies the vendor as they got paid on time and I don’t really have to withdraw money to pay for it until more than 30 days later.

One thing to keep in mind is that if you try this technique then it would be wise to make sure you pay the bill with at least two to three days before the actual due date of it as many times there is a delay in receiving your payment. If your due date was the 28th and you submit your payment on the 27th with your credit card there is a good chance that the vendor won’t receive it on time and hence you will incur penalties. This technique has worked very well for me personally and is another example on how a credit card can be a great tool if used responsibly.


3 Responses For:
“Bill Payments After Your Credit Card Cut-Off Dates”

  1. Stewart Marshall

    This is a very valid use of a credit card, but is it not true that it could be considered a one off benefit. If you the next month you did the same thing, all that really happens is you pay this months bill with next months money? Assuming your telephone bill stays the same you will gain the benefit the first month only?

    One other thought. Many credit cards have loyalty points of some description driven by the spending you do. You are rewarded for spending on the card. What about receiving reward points for not using your card, say based on how much of your credit card limit you have left available. The math may work, but I guess the credit card company wouldn’t make any money by promoting responsible use ;-)

  2. Alan Yu

    It would be a one month benefit I suppose in that sense if your bills were always exactly the same. But at the same time, that one month benefit has continuous growth potential depending on your situation. I guess I have to use a high number to demonstrate it. For example, let’s just pretend that we earn 20% interest a month in a bank starting with $10,000 and every month you make and spend say $5000 (I know, crazy numbers but just a sample).

    So let’s say I didn’t postpone my bills and decided to charge the $5000 to my credit card before my cut-off date. So now, that means I will need to deduct $5000 immediately from my bank account and will only earn 20% of my initial $10,000 which equals $2000. So as the months go on, I will continue to earn 20% starting with that base figure and my savings will continue to grow to something like $14,400, $17280, etc.

    Instead, I will delay it till the 17th like with my post example and now in my bank account I have $15,000 while earning 20% on that. That would be an extra $3000 that one month instead. With this base figure, my savings growth can instead look like $21,600, $25,920, etc. So, that one month benefit while keeping the cycle going can have an extreme impact when you think about it.

    Now obviously if you are savvier you can instead think of what you can do with that extra $5000 a month in terms of different types of investment and as you generate more funds you can try bigger things.

    Getting paid to not use the credit card? That would be an interesting thought. I can’t see how that would benefit the credit card companies too though as it would benefit the consumer only it seems. They want your money.

  3. Stewart Marshall

    Ok, I accept that if you actively do something with the money for that one month, the power of compounding will apply. But I was thinking far more short-term, as always I suspect :-)

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