Holly Johnson and her husband Greg, founders of the blog Club Thrifty, took their children on a Mediterranean cruise funded, in part, with credit card points earned by paying off their home.
“Instead of funneling cash via paper checks or online banking, we charged our mortgage payments to a credit card,” Johnson writes in GOBankingRates. And they didn’t have to pay any fees or interest on the card, either.
By paying off the final $100,000 on their house in Noblesville, Indiana, with their Barclaycard Arrival Plus World Elite Mastercard, they were able to earn 200,000 points, which were worth $2,000 when used on travel. Then, by using their card to pay for a portion of what it cost to build a new patio and family room, they earned even more points.
The average cardholder would have a hard time doing exactly what they did. The Johnsons were able to make use of advantages that aren’t available to everyone.
Still, thanks to their creativity, the renovated home is now worth $250,000-$300,000 and they own it free and clear.
What worked for them
Some traditional lenders let you use credit cards to make mortgage payments if you use a third-party service, but that will usually end up costing you money. Plastiq, for instance, allows users to place larger purchases on their cards for a 2.5 percent fee.
But the Johnsons found a workaround. Plastiq waives the fee on $1,000 in purchases for every person you refer to the service who makes a qualified payment over $500.
“This strategy worked so well for me because I have referred almost 300 people now with my website,” Johnson tells CNBC Make It. “At $1,000 in fee-free dollars per referral, that is $300,000 in fee-free payments I have earned.”
Without your own financial blog, it’s not as straightforward to load up on referral bonuses, Johnson admits: “You could try referring people to the service using social media, but I’m not sure how easy it would be.”
What could work for you
It’s possible but unlikely that landlords will accept credit cards without tacking on a fee. If you can find one that does, that’ll make it easier to load up on rewards.
If you’re like most renters or homeowners and would have to pay some kind of fee to pay with plastic, the trick is to find a way around it, like the Johnsons did, or to offset it with credit card rewards. But finding a credit card that offers rewards that exceed the cost of fees is rare, too.
“Like Holly and her husband, our customers are savvy spenders who use their cards to their advantage whether to better manage cash flow or maximize rewards,” Eliot Buchanan, founder and CEO of Plastiq, tells CNBC Make It. “We encourage our customers to use Plastiq in ways that drive value for them, and we love hearing stories about the creative uses that cardholders find for our service.”
Credit card blogger Keith Rosso bought a $60,000 Tesla with a credit card last year using the Chase Ink Business Preferred. That earned him 3 points per dollar on the purchase, which outweighed Plastiq’s 2.5 percent fee. Depending on how he redeemed those rewards, he estimated that they could be worth as much as $5,000.
The Ink Business Preferred no longer rewards Plastiq purchases with 3 points per dollar, a representative from Chase tells CNBC Make It, so this particular strategy may no longer be a profitable option.
Many cards require you to spend thousands in order to qualify for their sign-up bonuses. If the only way you’re going to reach that spending threshold is by making a large purchase through Plastiq, that could help justify the fee, says Johnson.
Consider the card she and her husband used: the Barclaycard Arrival Plus. It has a 60,000 point bonus if you manage to spend $5,000 in the first three months of having the card. “If you spent $5,000 on your card paying down your mortgage, you would only pay $125 in fees to earn more then $700 in flexible travel credit,” says Johnson.
That’s $600 for the bonus plus $100 for the 2 points per dollar you’d earn spending $5,000. After deducting the $125 in fees, you’d come out with $575.
Barclays did not respond to CNBC’s request for comment.
Read the fine print
Beyond doing the math to make sure using a service like Plastiq won’t end up costing you money, there are other things to think about if you want to try this at home.
“Keep in mind though that you can’t pay your mortgage with Plastiq with an American Express card or Visa,” Johnson says.
Some cards also register Plastiq purchases as a cash advance, and cash advances are usually accompanied by a fee of around 5 percent.
Consider how your spending will affect your credit score, too. Making large purchases can be problematic in that they increase your utilization rate, or the ratio of your card’s balance to your spending limit.
Johnson says she maintained her excellent score by consistently paying off her balance a few days after each Plastiq purchase. That also helped her avoid owing any interest. “The key to using credit card rewards,” says Johnson, “is making sure you have the money to pay your balance in full so you never pay a dime in interest.”
Don’t miss: This 29-year-old bought a $60,000 Tesla with a credit card and earned an estimated $5,000 in rewards
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