Mar 21st, 2008
Frugality in Practice: Card Timing
This is what is known as a “money hack“; a kind of financial trick to play that may end up helping you a bit in terms of keeping money in your pocket for a longer period of time. This is covered in the linked article above as “Plastic High Finance”, but I thought I might be able to explain it a little better.
I have a number of credit cards for a number of purposes, but primarily I use one of two cards that have staggered closing dates (the closing date being the day that the bill for the month is finalized and sent to me)–one is the 2nd of the month and the other is the 17th. For card timing, what I do is try to “time” any large purchases for the 3rd or the 18th of the month.
How does this help?
With these particular cards, I have an almost month long “grace” period–the time between when the bill is shipped (the 2nd, in one case) and when the bill is due (the 1st, in the same case). So if I charge something on that card on the 3rd of April, it’s billed to me on the 2nd of May, and due on the 1st of June. In other words, I have just two days short of two months to pay it off. That’s 58 days that money can sit in a “high” (see my post a few days ago) yield savings account and earn a few more cents of interest versus paying cash. It’s essentially an interest free loan for a term of almost two months! It also gives me the psychological benefit of holding onto my money longer.
The usual concerns of using credit cards apply; if you’re someone who believes they spend more with cards, then by all means, consider going to an all-cash lifestyle. Also, if you’re using this to buy something before you actually have the cash to pay it off, you’re playing with fire.
So here is an option that could help you financially; if used properly, it at least helps you hold onto your money a little longer when you make big purchases, which can, at the very least, mean a little more interest–a little more interest can certainly mean a few more snowflakes, and we all know what snowflakes can do!
