Wouldn’t it be nice if every single expense in life could be paid by a credit card? Well it’d be nice for us travel hackers but I’m sure it would get other people in trouble since not everyone has self-control, discipline and organization. There are services like Plastiq that allow you to pay some bills that you wouldn’t otherwise be able to pay for a 2.9% charge. You can also pay your taxes with a credit card (for those of you that owe taxes) for a similar charge. Since your best card will only get you 2%, on the surface this seems like a waste of time. However, there are circumstances where this could make sense for some people.
We’ll consider a few scenarios and do the math for you to see if when it makes sense to pay to use your card. For all scenarios, we’ll assume that you are paying a bill for $10,000 to keep the math a little easier. The fee for this will obviously be $290 since 2.9% of $10,000 is $290.
Scenario 1 – trying to meet a big SUB
Let’s assume you would love to get the Chase Ink Business Preferred (or a similar type of card) but you have a hard time meeting the sign up bonus (SUB) which is currently just $8,000 in 3 months. I say “just” because it is usually $15,000. Let’s go with that $15,000 figure since it makes things a little easier. In exchange, you’ll get 100,000 Ultimate Rewards. You’ll earn just 1x on that spend. We’ll assume for purposes of this scenario that you paid the $10,000 loan and then were able to spend $5,000 over the course of 3 months with normal spend to meet the SUB.
The math here is really easy. $15,000 x 1 = 15,000 points plus the 100,000 points equals 115,000. Most people, including myself, value Ultimate Rewards at 2cpp so 115,000 x .02 = $2,300.
So $2,300 – the fee for the charge of $290 is $2,010. That’s a huge win!
For purposes of completeness, let’s assume you were able to get in on the reduced SUB requirement of $8,000 and then you put the balance of $2,000 on the Chase Freedom Unlimited to get the 1.5x on the remaining $2,000. The math would be the 100,000 sub, the 8,000 spend x 1 and the 2,000 spend x 1.5 (3000). That comes out to 110,000 points or $2,200 worth of points with a net value of $1,910. Still really good.
It doesn’t matter what card you use; you just have to meet 2 criteria. First, the total value has to be more than the cost of the service. So for every $10,000, you have to get more than $290 worth of points. I don’t think this is going to be a problem. Second, and more importantly, this has to be spend that you would otherwise be unable to do. If you could spend $15,000 in 3 months pretty easily, then you’ve wasted your money and effort in my opinion. I suppose the only way this would make sense is if you were under a time crunch and you wanted to accumulate a lot of points in a hurry for an upcoming redemption. But if you can spend that type of money, you probably have a lot of points anyway unless you are just starting out.
See the point here is to get a SUB that you otherwise wouldn’t be able to get. Therein lies the value.
Scenario 2 – trying to meet a higher spending bonus
This is very similar to scenario 1 except the difference is that you’re not trying to meet an initial SUB. You are trying to meet a higher spending bonus that some cards have. For example, you might see a card with something like, get 50,000 points after spending $4,000 in 3 months and you can also get X after spending $15,000 withing Y period of time. Sometimes the X is more points and sometimes it’s something else like a higher status. Regardless of whatever it is, the criteria from scenario 1 remains the same.
This has to be something you otherwise wouldn’t be able to do, and the value of the X has to be worth more than $290. I would also argue that the value has to be worth several times the $290.
Let’s assume this extra bonus requires you to spend an extra $10,000. Unlike scenario 1 where you’re getting around $2,000 worth of value, this extra bonus may only be worth $600. Still coming out ahead, right? Not exactly. You could have used that $10,000 worth of spend on 2 different cards that would have netted you over 100,000 points. Since it is possible to open up two cards within three months of each other, you could meet two SUBs at the same time.
This of course is a personal decision but as long as the math checks out for you, then go for it.
Scenario 3 – paying off a loan with an interest rate above 2.9%
This math is also pretty easy. If you have a loan with one year left with a remaining balance of $10,000 at 5% interest (assuming this isn’t an amortized loan), you’ll wind up paying $10,500 by the time the loan is paid off. Since $290 is less than $500, this already makes sense…assuming you’re not paying interest. There are several cards with a 0% APR for 12 months or longer such as the Chase Ink Business Unlimited. Even if it didn’t have a SUB, you’d still be coming out ahead by $210.
However, it does have a SUB and right now it is 90,000 points for spending $6,000. It also earns 1.5x on everything so that’s a 90,000 SUB and 15,000 points from spend for a total of 105.000. That’s worth $2,100. Add in the $210 you’re saving and you’re coming out ahead by $2,310!
CAUTION – these 0% APR cards exist for a reason. Credit card companies know that many people completely lack self-control. They run up a big balance on these cards and then spend this extra money they have. When the 0% APR ends, they don’t have the money to pay the balance off in full and here comes a massive interest rate. You have to have 100% self-control, discipline and organization if you are going to pull this off and not get yourself in trouble. If you were paying $800 a month on this loan, you have to pay that same amount on your card each month just like if you had the loan.
Scenario 4 – earning interest off of money you were going to spend
This is a combination of scenarios 1 and 3 but again, you could really get yourself in trouble here. In order to pull this off, you’ll need a large payment you were going to make anyway by check or cash, a credit card with a high enough SUB to be worth it, 0% APR on purchases for at least a year and high savings rates. As long as you have that large payment, the rest is already out there for you. For the card, we’ll go with Chase Ink Business Unlimited again to keep things simple. You’ll get 105,000 points worth $2,100 as previously indicated.
The twist here is that you are going to take the money you would have used, and you will put this in a high yield savings account. Let’s assume you’re earning 4% although it is pretty easy to earn 5% today. The math is once again simple, 4% of $10,000 is $400. That’s how much you’ll have at the end of the year assuming to other deposits or withdrawals. When the 0% APR is just about over, you’ll withdraw the money and pay the balance in full. Note that you’ll still have small monthly payments but those are so small they won’t really impact the calculations much at all.
So to do the math, you earned $2,100 worth of points, $400 in interest and spent $290 in fees. So you’re total is $2,210. What’s nice here is that you eliminated those fees plus you made money on top of it. Now of course, those online savings rates aren’t usually locked in as that would be a CD so this math could fluctuate with rates, but I don’t think we’ll see rates under 3% anytime soon so the math should still check out for quite some time.
Is all of this worth it? That’s a personal decision. For the right person, it’s a great way to earn free travel for money you would have just spent anyway. But again, this requires a lot of self-control. Many people cannot resist the urge to spend money when it’s just sitting there. This is how a lot of lawyers get in trouble. They have money sitting in their trust account and the urge to “just borrow it for a little while” is just too great. That alone is illegal but the “just borrow it” often turns into never being able to pay it back. If you don’t trust yourself 100%, don’t even attempt this.
A quick word on Plastiq
I used Plastiq as an example but I am in no way endorsing the company. A number of people in the travel hacking community do recommend them and at least some of these is likely due to their affiliate program. We don’t endorse anything that we wouldn’t recommend to a family member so we do not recommend Plastiq. It does not get the best reviews on Trustpilot, the BBB, or Google maps. You can do your own research and determine if this service is a good fit for you. Regardless of whether you use Plastiq or some other similar service, the math is still the same.
Conclusion
Perhaps there’s other scenarios that I didn’t even address so feel free to share them in our Facebook group. I just wanted to give you some food for thought and show you some scenarios where the math checks out. You have to do the math for yourself to see if paying to use a card works for you. Just be careful with those 0% APR cards if you go that route. Also keep in mind that not every card has 0% APR and not every card has a high enough SUB to make this worth it. The Chase Sapphire cards are good examples of both. They don’t have 0% APR and just about everyone should be able to meet their SUBs anyway.
It’s no fun paying a fee to use a card but sometimes it makes sense. No matter what the fee is and no matter how much you are charging, you can still follow this same math to see if it’s worth it for you.