So in the 0% APR thread, it came up again about using services like Square to earn reward points or to effectively lower the interest rate on a loan by charging that amount onto a credit card.
I'd like to talk about the process, pros/cons (let's skip the obvious con of paying the credit card rate if you don't pay the balance in full) etc. in one place because I see the idea bandied about but it never seems to be worked through.
I assume any use of Square to provide benefits would entail having cash on hand in the amount you wish to charge to avoid the credit card interest rate from kicking in and overriding the 2.75% "rate" you pay to Square.
So, if you are charging $5,000, you want $5,000 in cash on hand (+2.75%). Then swipe the card. Now you have 5,000 still owed on the loan, 5,000 owed on your credit card(+2.75), and 5,000 in your "Square account."
You take the 5,000 in cash + 2.75% and pay off the CC. You take the 5,000 in assets in the Square account that is now in dollars and pay off the loan account. If the loan was for 8%, you are saving the difference between it and 2.75%?
Is that how people are making this work? I also have looked into paying rent with Square, but it seems like you end up paying 10 to 20 dollars for the privilege of converting your rent into points, which would "gain" points faster, but in reality, you are losing money on the transaction.
Sorry for the long post, was hoping we could get a discussion about the merits of this at the current rate they are charging.
ETA: The simplest solution would be if my loans accepted Credit card payments, but they only allow checking/savings accounts, unless I'm missing something.
This post was edited on 1/20 at 11:21 am