Investor · Birmingham, AL · Member since 2020 · 82 posts · 27 votes
Credit cards are an "investment"? EMPHATICALLY, YES! This literally just occurred to me in the shower. I pay off all my balances each month. I earn up to 5% cash back on my credit cards. THIS IS A STREAM OF INCOME. I'm going to buy things each month. Why not get FREE MONEY! :)
Rental Property Investor · Raleigh, NC · Member since 2016 · 396 posts · 995 votes
4y
I don't know if I would call it an investment per se, but it is certainly a large stream of income if done correctly. My Crypto.com debit card offers 8% back on all purchases, which can easily add up to very, very large sums of money. It's that lightbulb moment where you realize that even after paying the surcharge to pay a mortgage with a card, you still earn positive cashback, making your net interest rate on your mortgage effectively a negative percentage.
8% cashback - 3.5% pay by card surcharge = 4.5% free money, and considering my mortgage interest rate is 2.75, that effectively means I pay no mortgage interest and still earn 1.75% free cashback.
And the best part is that this passive cashback is generally speaking not treated as taxable income.
Investor · Durham NC (and Brenham, TX) · Member since 2018 · 302 posts · 197 votes
4y
Haha - hello from a fellow lover of free money from credit cards! I guess I don't think of it as an investment as much since you're not putting any money in - it's just free money! The I suppose the cash back and sign up bonuses are a return on the very small amount of time it takes to track them.
For the lower cash back transactions like 1% can consider replacing with Yotta debit card. Small chance of getting a full reimbursement for each transaction.
Rental Property Investor · Raleigh, NC · Member since 2016 · 396 posts · 995 votes
4y
I don't know if I would call it an investment per se, but it is certainly a large stream of income if done correctly. My Crypto.com debit card offers 8% back on all purchases, which can easily add up to very, very large sums of money. It's that lightbulb moment where you realize that even after paying the surcharge to pay a mortgage with a card, you still earn positive cashback, making your net interest rate on your mortgage effectively a negative percentage.
8% cashback - 3.5% pay by card surcharge = 4.5% free money, and considering my mortgage interest rate is 2.75, that effectively means I pay no mortgage interest and still earn 1.75% free cashback.
And the best part is that this passive cashback is generally speaking not treated as taxable income.
Rental Property Investor · Member since 2018 · 826 posts · 810 votes
4y
@Ben Zimmerman most lenders don’t allow you to pay mortgage via CC for this reason. Most businesses start factoring in CC transaction costs into their sales prices, so eventually this comes back as a pass-through cost to customers. In short, if you are not using CC to pay for services, you are subsidizing businesses.
You're spending the money anyway, the difference is I'm getting paid to do it. On a 250k loan I can knock off about 3 years from a 30yr mortgage and save $14,000 in interest simply by paying my mortgage with my debit card and using the cashback reward as an additional principal payment.
Is paying a mortgage via debit and saving 14k a groundbreaking technique that will revolutionize my business? -Nope
Is a technique that saves 14k per property, and takes no extra effort something for you to laugh at and ridicule? -Also Nope
@Allan C. Most companies don't let you pay your mortgage with a credit card, but with third party services like Plastiq you can pay just about any bill including a mortgage for a 2.85% surcharge. Paying 2.85% to earn 8% is a no-brainer. On a 1k/month mortgage that nets a profit of about $62/month which can be used as an additional principle payment. Once you start using your card for all your spending habits, all mortgages, all utilities, all expenses, groceries, travel, paying your taxes via card etc, it can quickly add up to tens of thousands of tax free dollars per year.
8% cashback is pretty insane for high earners. With taxes many people end up paying 30, 40, or 50% of their total income in taxes. So imagine having 8% more total spending power that you never have to pay taxes on since credit card cashback is not taxable per the IRS. While 8% is pretty hard to come by for the average person, there are plenty of other options in the 2-3% cashback range for all purchases. This means that it's no longer worth paying the mortgage in this way because of the 2.85% fee, but it certainly is worth putting any and all expenses you can on the card.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
4y
Yep! I rack up all my rehab expenses other than labor with my no interest for a year credit cards or cash back credit cards. I gave my contractor one credit card a year ago so he can go get whatever he needs. I use my other LLC credit card as needed when I buy for my rentals. I'm loving all the free money to pay back later and cash back. It adds up!
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
4y
@Champ Leong glad to see someone else gets it. You’re going to spend the money anyway might as well get a 2% rebate on every penny. All my cash sits in a money market account earning interest where it belongs. It’s also a lot safer to use a cc to protect against identity theft. Dave Ramsey says it’s stupid because it makes us spend more. He’s obviously never met me lol. There’s nothing that makes me want to spend money trust me. Mastercard loses money on me every month.