Do you keep miles if you pay credit card off before the statement date?

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On our Facebook page for Travel More, Spend Less, Live Better, a member asked whether she would receive her miles if she paid her balance off before the statement date.

The Question

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 Southwest Rapid Rewards® Premier Credit 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. πŸ˜‰

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.

Her Situation

Corrina has the Southwest Rapid Rewards Premier credit card, which is one of my favorite cards because it earns points toward the coveted Southwest Companion Pass. This awesome benefit allows my wife (or any other designated companion) to fly free everywhere I fly. All I have to do is pay the taxes for the flight, which are just $5.60 each way within the U.S.

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. They pay 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.

Suggestion

Since Corrina has already met the minimum spend for the Chase Southwest Premier credit 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 Southwest Rapid Rewards® Premier Business Credit Card to earn another 60,000 bonus points.

Both bonuses count towards the 125,000 points qualification for the Southwest Companion Pass. So, if she earned both bonuses this year, she would have 110,000 from bonuses + 4,000 from minimum spend requirements = 114,000 points.  She would only need 11,000 more points to earn the Southwest Companion Pass that would be good for the remainder of the current year and all of the next year!

Southwest resets the counter each January. If she earned the personal card 50,000 points last year, the business card would still give 50,000 bonus points. However, she would only be about 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.

She would need to spend approximately $62,000 on the card (125,000 – 60,000 bonus – 3,000 spend). Or she could earn the necessary points through a combination of credit card spending, points from flying Southwest, and points from Southwest partner offers.

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 the businesses that enable me to have business cards.  My friend works as 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.

Conclusion

By paying off your bill before the statement closes, you will still earn 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!

a plane flying in the sky


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