Please Explain 30-Day Float

[Anonymous]

I know very little about using credit cards and would appreicate if someone could explain what the terminology 30-Day Float means? 

[laboi_22]

I assume you are speaking about one's ability to use a credit card until the statement end date, and then you have "30 days" to pay what you charged, in effect creating a cash float. Keep in mind that not all credit cards give you 30 days to pay after the statement cuts,and also keep in mind that floating will eventually catch itself up, and will factor out to paying monthly just as you normally would. Hope that helps

[Anonymous]

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@laboi_22 wrote:

I assume you are speaking about one's ability to use a credit card until the statement end date, and then you have "30 days" to pay what you charged, in effect creating a cash float. Keep in mind that not all credit cards give you 30 days to pay after the statement cuts,and also keep in mind that floating will eventually catch itself up, and will factor out to paying monthly just as you normally would. Hope that helps

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This sounds like a normal billing cycle for CCs.  

When I saw 30-day float I thought of certain companies that will, for a small fee, pay your bill now and give you 30 days to repay them.  Somewhat like "floating" a check way back when checks wouldn't get funded for a week or two.

[Anonymous]

I have read that some people put ALL their monthly expenses on a cc and SOMEHOW have the money to pay it all off before they even receive the bill in the mail.  The articles I've read talk about how "wise" this is and, they usually say something like: "people who do this are using 'free money.'"

But see, I'm of the same opinion as you are laboi 22, I believe that this trick will catch up to you.  It sounds dangerous to me! 

[Anonymous]

There's nothing dangerous.  What it does is allow you to avoid having a balance reported, helping your utilization, and also avoiding interest being charged.  You still get the same time period, you're just changine your own dates a little from what the actual statement date is.  If your statement date was the 15th, it's best to try and have a 0 Balance by then, so making a payment by the 12th or so will be the best way to do that. 

I think what they mean by "catching up to you"....is people who don't have the money to be charging what they're charging and yes, doing that will catch up to you, because at some point, you will have to make a payment and hopefully you can afford it at that time.

* And by the way, being able to afford ALL of your monthly bills every month is something that should be done and practiced...otherwise you will carry over a balance, and usually be charged interest for it...there is nothing wrong with either situation, just make sure you can afford the bill when it comes (or before), and realize when you're due dates are *

[Anonymous]

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AustinTex21 wrote: "just make sure you can afford the bill when it comes (or before)"

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That's the tricky (and dangerous) part to me.  But, I suppose for those who can afford living like that, the float system must be great!  

[barbaralee]

That is what I do, and I make less than 30k a year. I don't think so much of being able to afford it as much as that is just how I do my finances. I don't touch the money in my checking account other than to pay my cc bills. I run everything through a card, from gas purchases to groceries to frills. You name it, it gets charged. Every so often I will take out $50 from the atm, but I generally don't pay with cash. If you look at my online banking all of my checking account transactions are just to my credit cards (save rent/electric). I can't remember the last time I was charged interest for carrying a balance. I don't think it is a matter of being disciplined. I'm pretty content with what I have, and if I want to make a big purchase I plan and budget it in. I truly do think there are many people out there who are in the habit of putting things on credit and PIF every month... you don't have to be well off to utilize the float system.

[Anonymous]

It isn't too big of an issue for people who know what the are spending and have a plan. If you have the money to cover the expense, then this is a nice way to get a little extra out of the credit card comanies. Your earning interest on the money you have spent and you also get whatever rewards are tied to the card without paying interest.

[Anonymous]

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@Anonymous wrote:

I know very little about using credit cards and would appreicate if someone could explain what the terminology 30-Day Float means? 

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Most credit cards have a grace period of about 20 to 25 days.  This is the time from when the statement closes until the due date.  If you Pay if Full (PIF) by the due date there is no interest on the charge.    The float is the time from when you charge an item until you have to pay for it (without interest).    30-day float means you have to pay next month for what you by this month.    This is a normal way to pay your CC bills.  

[bobebob]

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discernment wrote:

I know very little about using credit cards and would appreicate if someone could explain what the terminology 30-Day Float means? 

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discernment wrote:

I have read that some people put ALL their monthly expenses on a cc and SOMEHOW have the money to pay it all off before they even receive the bill in the mail.  The articles I've read talk about how "wise" this is and, they usually say something like: "people who do this are using 'free money.'"

But see, I'm of the same opinion as you are laboi 22, I believe that this trick will catch up to you.  It sounds dangerous to me! 

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OP is bringing up two mutually exclusive terms to this thread.   The "30-day Float" or industry term "grace period" has been addressed.

The other practice of PIF before statement comes out can't be done if you are using the grace period to delay paying the bill until just prior to the due by date.

You can treat your credit and pay your credit card bills different ways:

1.  Pay min payment prior to due date. 

Smaller short term payment at the expense of paying sometimes large (huge) interest fees as balance grows over time.  Cons:interest fees, lower credit score (due to balances and higher util).  No, you aren't going overdue.  But this is a bad road to go down and gets many into trouble.

2. Pay in Full (PIF) before the due date.  This is what most of the more conservative credit consumers do.  You can use the grace period to put off payment of purchases until the due date which can give you a breather.  But it isn't good to spend so much on your CC that you need this. Benefits are that you aren't going to pay any interest fees.  Small con in that what you have as your balance on the statement is what gets reported to the CRA's.  So even if you PIF before the due date as the agreement states, The CRA's will see that as a balance that you are carrying month to month and your credit score won't be quite what it could be if your balance reported was $0.

Which brings us to:

3.  PIF  prior to statement coming out.

The reason some of us like to PIF before the statement comes out is so that when the credit card company (CCC) reports our account information when the statement comes out, we are reported as having a $0 or close to $0 balance.  This helps our credit rating by reducing our utilization(util).  Util is calculated by taking your total balances and dividing it by your total credit limit (CL).  The only cons to this are that you are giving up the grace period.  The benefit is a slightly higher credit score.

Putting all the monthly expenses on your CC can help you in a couple of ways:

1. You can hang onto your $$ just that much longer in an interest bearing account(ideally) before you have to give it up to pay your bill when the grace period is over.  IMO this is the least reason to pay monthly expenses by CC.  With interest rates where they are, you'd be lucky to buy a stick of gum with your interest.  It does give you some breathing room if you need it.  But if that breathing room is all that is keeping you solvent, you are in bad shape already.

2.  A better reason is to use a CC that gives you cash back or points that you will use.  For instance, I have a Costco AmEx card.  I put $2,000 to $3,000 per month on it paying mostly for things in my budget and the rest on personal items I know I have the money to buy.   I always PIF before the due date so I've not paid any interest.  But for the purchases I've paid with the card I've earned about $272 so far this year (prob be about $350 by end of year).  So that's $350 of free money AmEx gives me.  With no annual fees (AF) for the card that's a pretty sweet deal!  (and that's over and above the $188 I got as a Costco account rebate for the stuff I bought at Costco) 

Obviously, the CCC's are betting that you will carry a balance month to month and they will be charging you interest which more than covers the cash back that they had to pay you.  And on average that is just what happens.   Most people do make them money.  But if you are disciplined and only spend what you can afford to pay off every month, you can turn it around and make money off of the CCC's.  (one of the more pleasant feelings in the world, BTW)

And we don't "SOMEHOW" have the money to pay our bill in full.  It is by design.

Part in parcel of making this plan work for you is to be disciplined, make a good budget and stick with it.  Keep track of what you spend and make sure it's within the budget you set.  That way when the bill comes, you'll know that the money is there in the bank to pay it.

However, if you know that you won't be able to resist the temptation to spend more on the CC than you know you can pay, then you are much better off not trying it at all.

Good Luck,