On our other Facebook page for BaldFinance, one of my readers (and good friends) submitted a question wondering whether she would receive her miles if she paid her balance off before the statement date.
One of our readers is the wife of a friend I used to play softball with a few years ago. I haven’t seen them since they moved to Arizona several years ago, but through the magic of Facebook, we’re able to keep up with each other’s lives. Here’s her question:
I have a question.. With the Chase Southwest premiere card….if we were to pay balances on the card before the end of the statement period, would we still earn points on that spending?
I also wanted to say thank you for taking the time to divulge your tips and tricks. We’ve already hit our 50k bonus thanks to the use of bluebird and vanilla reloads. I was bummed when I realized I couldn’t pay the rent or our car payment (our two highest monthly expenses) with a credit card but only days later saw your article on the reloads. It quickly turned my frown upside down.
The Quick Answer
The short answer is yes, you do get to keep all your points, no matter when you pay your bill… as long as you don’t pay late and cause the bank to forfeit your points. The other way to lose points is if you return an item, that is why the credit card companies use the term “net spend”. Net spend is the amount you spend on the card, minus any returns.
Corrina has the Chase Southwest Visa, which is my favorite card because it earns points towards the coveted Southwest Companion Pass that allows my wife to fly for free everywhere I fly.
Application link – The Chase Southwest Visa currently offers 50,000 points when you spend $2,000 within 90 days of approval.
She read my series on the American Express Bluebird account and how you can use credit cards to pay for bills that normally can’t be paid with a credit card or where they charge really high fees.
The Long Answer
Corrina is paying her bill off before the statement is generated, which is really smart if you’re looking to boost your credit score! Banks report the balance as of the statement date and if you are paying your account on time, not whether or not you pay your balance off in full each month.
Here are two scenarios of people that look exactly the same when reported to a credit bureau:
- Person A no longer uses their credit card, but carries a balance of $3,000 and pays the minimum payment of approx $100 each month on time (for simplicity, I am assuming all $100 goes to interest and nothing towards the balance).
- Person B charges $3,000 per month and pays off the balance in full each month on time.
BOTH of these people would have their credit card reported to the credit bureaus as “paying as agreed” and with a $3,000 balance.
In Corrina’s case, if she’s paying the balance off before the statement is generated, her balance would report as $0. Doing so reduces the overall debt reported to the credit bureaus, which decreases debt utilization. How much you owe vs your credit limits (aka debt utilization) is worth 30% of your FICO score.
Since Corrina has already met the minimum spend for the Chase Southwest Visa personal card and earned her 50,000 bonus points, if she earned the 50,000 points this year, I would recommend that she also apply for the Chase Southwest Visa business card to earn another 50,000 bonus points.
Both 50,000 point bonuses count towards the 110,000 points qualification for the Southwest Companion Pass. So, if she earned both bonuses this year, she would have 100,000 from bonuses + 4,000 from minimum spend requirements = 104,000 points. She would only need 6,000 more points to earn the Southwest Companion Pass that would be good for the remainder of 2014 and all of 2015!
Southwest resets the counter each January, so if she earned the personal card 50,000 points in 2013, the business card would still give 50,000 bonus points, but she would be only halfway towards earning the Southwest Companion Pass. Using the American Express Bluebird and Vanilla Reloads to pay her mortgage and other bills, however, would still enable her to earn the Companion Pass, provided that she put approximately $58,000 in spend on the card (110,000 – 50,000 bonus – 2,000 spend).
Not everyone has a business… or do they?
While not everyone has a business, you can still qualify for a business card if you are starting a business! And, there are many things that we do every day that count as a business. For example, I own rental properties, so those are my businesses which enable me to have business cards. My friend works an electrician for a company, but does some electrical work on the side for friends and family, so he has a business. Another friend fixes up computers and sells them on eBay, so that is a business as well.
Even if you aren’t doing anything today, you can always start something tomorrow! When you apply for the business card, just be honest and don’t inflate your revenues since lying on a credit application is a federal offense. Miles and points are not worth federal prison time!!!
Just fill out the business application and estimate the amount of revenue you would earn the first year, even if it is only a couple thousand dollars. When they underwrite your application, since it is a new business, they’re really focused on you, your credit score, and your income from your primary job.
By paying off your bill before the statement closes, you will still earn the points for that month’s credit card spend. The added bonus is that your credit score will be a little higher thanks to a reduction in the amount you owe being reported to the credit bureaus.
Great job Corrina in being financially focused and earning some great miles towards family vacations! You deserve 5 out of 5 Razors. =)