Inspect What You Expect, The Follow Up – Stories From Home, A Podcast

Inspect What You Expect, The Follow Up – Stories From Home, A Podcast

*** SHOW NOTES ***

A quick follow up to my “inspect what you expect” episode.

My American Express Hilton card is paying off a bit even when I’m not traveling – Hilton points for May 2020 17,721 thanks to them increasing point values.

 

Within hours of last week’s episode where I talked about credit card points, the Points Guy posted 13 expenses that you should not put on your credit card. I should say Katie Genter posted her take.

Taxes 

You’ll pay a fee between 1.87% and 1.99%, depending on the processing service you choose. Although no credit card bonus categories cover tax payments, some everyday spending credit cards may provide a high enough return to justify using a credit card – assuming you can pay off your balance before accruing interest.

I’ve done it, and I did pay a fee, but the points outweighed the service fee.

Medical bills

First, check that the medical bill is correct and any insurance you have has been factored in. Then, if you aren’t able to pay the bill outright, it may be worth calling the number on your bill to discuss your options. You may be able to negotiate a lower payment or a payment plan that will charge you less interest than your credit card APR. Some medical providers may even be willing to set up an interest-free payment plan.

My copay is about the only medical-related expenses that I’ve put on a card. However, we did have a Chateau’ Relaxo resident that experienced an insurance lapse which just so happened to coincide with a fairly substantial medical bill and they were able to negotiate a lower charge, close to sixty-cents on the dollar in exchange for a cash payment.

Tuition

Some schools accept credit cards, often charging a fee. If you’re able to pay your credit card balance off in full before you start accruing interest, paying tuition with a credit card can be a great way to rack up rewards. 

I’ve done it, and didn’t absorb a fee. Racked up some great points, and yes paid it off within the billing cycle.

Student loans

So, if you want to use a credit card to pay your student loans, you should consider the fees involved in doing so. Also, make sure you’re able to pay off your credit card in full before you start accruing interest on the balance. Alternatively, you may be able to refinance and consolidate your student loans to obtain a lower interest rate, especially if you have good credit. 

I’ve never done it, and I’ve never made it to higher education.

Monthly rent or mortgage payments

It is rare to find a way to pay your rent or mortgage without paying additional fees. Although some tenants were recently allowed to pay their rent with a credit card without additional fees due to the coronavirus outbreak and associated financial hardship, this isn’t normal.

I’ve never done, not sure if I ever would and if I’m missing a mortgage payment there’s probably a whole lot of other things wrong in my world.

Cash advances

Although many credit cards advertise that you can withdraw money from an ATM using your card and send you convenience checks, you’ll usually pay a cash advance fee when you use these services and will not earn points. You will start accruing interest — oftentimes at a high APR — as soon as you get a cash advance.

I’ve never done, and look at your statement cash advances do have a higher interest rate.

Large purchases that put you close to your credit limit

So, when you make a large purchase that puts you close to your credit limit, your credit utilization will increase, which may cause your credit score to decrease. Of course, if you pay off your credit card balance quickly, the long-term effect on your credit score will generally be insignificant. But, you also face an increased risk of going over your credit limit as your balance approaches your credit limit.

I’ve put lots of large purchases on my card, so large that American Express has actually called me for verification of the purchase. If you’re planning to finance a new house, motorhome, boat, or car then avoid increasing that debt to income ratio on your credit report.

Impulse splurges

But, if you’re short on money or already in debt, impulse splurges can cause you issues and should be avoided. To reduce impulse splurges, you may want to make a budget, avoid shops or situations that usually lead to impulse purchases and only provide yourself a set amount of cash each month for fun purchases and splurges.

I’ve bought lots of stuff on impulse, that’s what Amazon was built on. Again I’ve paid them off during the billing cycle and I have a closet full of dumb impulse purchases.

Gambling expenses

The primary issue with using a credit card for gambling is that your use of the card will likely be coded as a cash advance. This is because most credit cards consider gambling charges to be a cash equivalent, regardless of whether you use your credit card to fund online gambling or at a casino to withdraw cash. 

I’ve never done this. When it comes to gambling I play with scared money, which means I’m so conservative that I’ll never hit it big. Besides I’m broken enough without having a gambling problem.

Wedding expenses

Weddings are one type of event where some consumers are willing to drop a lot of money. But, you won’t want to put your wedding expenses on a credit card if you won’t be able to pay it off before you start accruing interest. You could also consider saving up or having a lower-cost wedding. 

I’ve never done it. Our wedding was small didn’t cost much and we used points to book everyone’s hotel rooms. I know folks that have dropped $20,000 or $30,000 on their kid’s wedding. I’m more inclined to offer the kids $10,000 and keep $10,000 or $20,000 in my own pocket. I’m getting older and I’m going to need it.

Vacation expenses

Vacations can be a good way to recharge and reconnect, but they can also get expensive. You shouldn’t pay for your vacation using a credit card if you won’t be able to pay off the balance before you begin accruing debt.

Instead, you could take a vacation on a budget or take a less-expensive staycation. Or, you could save up points and miles earned on everyday purchases to take a vacation once your balance is high enough to cover most expenses.

I’ve done it and paid it off during the billing cycle. Most of our vacations are planned, we pay for as much as we can before the trip and use points for flights, hotels, and rental cars. 

Vehicle purchase

If you want to purchase a vehicle, it can be tempting to use a credit card for some or all of the vehicle purchase to earn rewards. But, you’ll only want to use a credit card if you’ll be able to pay off the balance before you start accruing interest. Otherwise, you’ll end up paying an interest rate many times higher than what it would cost to finance the vehicle.

I’ve put several down payments on vehicles. Want to save money on your next vehicle purchase? Never buy a new car.

Discretionary spending

Whether you’re looking at a new TV or a luxury vacation, you should avoid putting discretionary purchases on a credit card if you won’t be able to pay off your credit card balance in full. Instead, it’s better to save up the money you need before making the purchase. This way, you can avoid paying interest on your balance while you work to pay off the expense.

I do this every month, and I pay it off during the billing cycle.

Katie, I hate to inform you, but you missed the mark on this one. I covered all the stuff I’ve put on cards, tuition, taxes, and vehicle down payments. I’ll use a card for anything that I intend to pay cash for. I haven’t built up huge point balances by purchasing fast-food and fuel.

My two rules for credit cards

  1. If you pay off your card in full every month, and there are no extra fees associated with putting a charge on it, go ahead and charge it.
  2. If you can’t pay off your card in full every month, don’t use it unless the interest rate is 0%.

The day after this was posted TPG posted Which credit card should I use to buy an engagement ring? 

Not sure if you file an engagement ring under  – Discretionary spending, Wedding expenses or Impulse splurges. Possibly Gambling expenses since half of all marriages end in divorce.

Not looking to bust the TPG’s chops, but they are a business, they even post an advertiser’s disclosure.

Many of the credit card offers that appear on the website are from credit card companies from which ThePointsGuy.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). This site does not include all credit card companies or all available credit card offers. Please view our advertising policy page for more information.

 

Also spoke about Hertz and it’s impending bankruptcy where two things came to light – 

First Hertz was selling off 100 of their Corvette Z06’s for 60k approx 20k less than street price. They have all been sold. However, you can purchase a 2017 Kia Forte LX Sedan with 80,000 miles on it for $7200.00

Second, and check this out – According to CNN Hertz Executives Receive $16 million In Bonuses Days Before Bankruptcy Filing

New York (CNN Business)Hertz paid out millions of dollars in bonuses to its executives just before its bankruptcy — and a month after it started laying off thousands of employees.

Retention bonuses are typical for bankrupt companies that want to prevent their management from abandoning ship. But they’re always awkward: the company can’t pay its employees or its debts to lenders, but it prioritizes payments to its already handsomely paid bosses.

 

What is up with that? I completely understand retention bonuses, as they serve a purpose. In this case, the executives will be required to return the money should they leave Hertz on their own before March 31, 2021. Whoa, a 10-month commitment it sounds like these guys are in it to win it. I’m not a financial prognosticator, but the car rental market will be nowhere near where it needs to be in the next 10 months

Wait, it gets better, Paul Stone, who was just promoted to CEO three days before the retention bonuses were awarded, got $700,000 under the plan. 

My summary of his job interview. 

HERTZ: Paul we’d like you to take over the helm of Hertz.

PAUL: That’s great, thanks

HERTZ: I just want to let you know that we’ll be filing bankruptcy in the next few days.

PAUL: Whoa, that won’t look good on my LinkedIn profile

HERTZ: Paul, there’s a $700k bonus for a 10-month commitment

PAUL: Screw LinkedIn

I’ve said it on almost every single stories from home episode, we are all in this together. If we all stick together and work together,  we will all come out of it positioned in the right direction. Hertz looks as if they’ll be climbing out of a 16 million dollar hole in order to get back on the playing field.

One guess as to who will get to help fill that 16 million dollar hole with money? Us, the consumer.

Find me on:

InstagramTwitterYelpUntappd or the Book-Of-Face