MilesBuzz! - Pay Mortgage with CC - Another Idea

OK. Braintrust, pick this one apart.....

1. I have a Paypal Account (PPA) linked to my DL skymiles Amex card.

2. My wife has a PPA linked to her savings account.

3. I send a payment of $2243 to my wifes PPA account.

4. PP extracts $65 fee and puts $2178 into my wifes PPA

5. My wife transfers the $2178 from her PPA to her savings account (no fee).

6. My wife transfers the $2178 back to our joint cecking account.

7. I pay our mortgage with a check from the joint checking account.

So, I earn 2,243 miles for $65 (per mile cost of roughtly 2.9 cents per mile. Except
during 5/15 - 7/15 period when I earn double miles and the cost is 1.5 cents per mile.

What do you all think?





[This message has been edited by AnotherFATflyer (edited 04-16-2003).]

Sorry for the typos....



[This message has been edited by AnotherFATflyer (edited 04-16-2003).]

2.9 cents per mile? Why bother?

Why not just "launder" your entire credit limit through this series of transactions each month? I don't see why you have to pay just the mortgage. Say your credit limit is 5K, send that to your wife every month, eventually get it back into your checking and pay off the credit card that initiated the transaction. This of course assumes you get miles for paypal payments on the Skymiles Amex.

I guess it depends on what you do with your miles. If it is strictly for free air vs. upgrades, I would not do it. It would take 11 rounds (approx) of 65.00 fees . At that rate I could just buy an airline ticket for less and earn miles on the flight.

I think you are paying too much for those miles. There are plenty of ways to get "free" miles. This one is too costly.

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Ms.DtG

The idea of paying to put the funds thru paypal makes no sense.... just pay as many bills as possible thru your credit card and then pay your credit card with the cash.

I'm not convinced I'm paying to much -DURING THE DOUBLE MILES PROMOTION (DMP).

Here's why:

My wife and I generally take a winter vacation that involves a cross country flight. I use the miles to buy two first class tickets. The cash price of my tickets for next January are $1400 each. The ticket costs me 40k miles which equates to 3.5 cents a mile. If, I earn the miles during the DMP this May-July using the Paypal method I described, I'm only paying 1.5 cents a mile which effectively discounts the first class ticket by 57 percent to a price of $600. I checked Delta's RT coach airfaire and it's running $441. So the "premium" I'm paying amounts to $80 each way for first class. I don't consider that to be too bad of a deal.

The other issue is that the bulk of my miles come from traditional purchases on the CC. So in effect, when I average the cost of the miles obtained through paying my mortgage with the miles that are earned without paying transaction fees, the cost per mile decreases even further.

Anyone else have further thoughts?

AFF

I agree with chfenton.

I don't get it. If you're going to do this is the first place, why are you just doing enough to pay your mortgage? Why not just send $10000 (or your AMEX credit limit) to your wife's PayPal account who (after fees) sends it to your joint checking account?

If you're going to do this for the miles no matter what, why the limitation?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by AnotherFATflyer:
The other issue is that the bulk of my miles come from traditional purchases on the CC. So in effect, when I average the cost of the miles obtained through paying my mortgage with the miles that are earned without paying transaction fees, the cost per mile decreases even further.

Anyone else have further thoughts?</font>

The dollar averaging logic does not make sense. Consider an extreme example: you fill up your car's tank at an excellent price (in the northeast U.S. these days) of $1.20 per gallon. The next day, after you have used two gallons, you pass a station selling gas at the exorbitant (again, in contemporary local terms) of $2.40 per gallon. Do you fill it again, arguing that your cost is still good on average despite paying too much this time? Of course not. Too high is too high. The fact that you previously bought the same item at a lower price is irrelevant. It would be equally irrelevant if you had previously bought it at a higher price. That's history. You can't change it. The only thing under your control is whether you'll buy something now at the price you now have to pay for it. That has to be evaluated on its merits, based on how much you want it and how much you think it's worth. I don't think miles are worth 2.9¢ each, unless you also get a trip to someplace you want to go along with them.

That said, you can buy miles directly from most airlines at less than 2.9¢ per, so why bother? And if you want them from PayPal at that price, what does the mortgage have to do with it?

For double miles, if you have a use for them (which it seems you do), I'd do it.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by AnotherFATflyer:
So, I earn 2,243 miles for $65 (per mile cost of roughtly 2.9 cents per mile. Except
during 5/15 - 7/15 period when I earn double miles and the cost is 1.5 cents per mile.
</font>

Too complicated for too little effect.

I don't know which airline do you fly but some sell miles in the increment of 1000 and the price is around $25 per 1000 miles. Bad deal but worth it if you need couple thousand miles to top off your account and get an award.

Economically it doesn't make sense. Instead of paying $65 in PayPal fees you could spend $50 for 2k miles.

Or, another example using yout PayPal numbers:
Let's say you will need to repeat your transaction 10 times to get a domestic economy ticket. (rounding 22430 to 25 for simpl.). You would pay $650 in fees. Why not to buy a trans con ticket for let's say $500 (or less) and even earn 5000 miles on it?

To me it doesn't make sense at all. The whole credit limit or 2k a month - either way it's not worth it.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by AnotherFATflyer:
OK. Braintrust, pick this one apart.....

</font>


Looks like the votes are in.
The Nays have it.

I vote "nay" as well. Another drawback to this is that if "big brother" happens to see that you are consistently "laundering" money through a paypal account like that, your credit may be scrutinized and you may be suspected of illicit activity.

Prior to the introduction of services fees with the C2it service from Citibank, one could do the same senario, though there was a daily limit, if I recall correctly. A charge was made against a Citibank issued credit card, the funds were deposited in ones C2it account and then transferred into a checking/savings account.

While many have posted that accounts are closed if Citibank feels that they are simply charging ones credit card for miles, there are others who have been able to charge tens of thousands of dollars without any problems.

With the recent introduction of fees, one now essentially pays for the miles, such as the original idea mentioned in this post.

And of course there is the ever present risk that Paypal will accuse you of fraud for no apparent reason and freeze all your Paypal funds till the "investigation" is complete.

I think chfenton may be on to something.
Is the $65 fee a transaction fee or a fee based on the $ amount? In other words do you pay $65 based on the $2,243 or if you depoisted $5,000 would it still be $65? If it's a transaction fee then you should transfer the maximum you can and decrease the expense per mile. This would really be worthwhile when you can get double miles.


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"A day without Points/Miles is like a day without SUNSHINE"

At this rate, why not get a vendor account for a charge card yourself and charge away. I think you'll beat or match the 2.9 rate!

All seem to be in agreement that 2.9 cents a mile is too much. During the double miles promo - 1.5 might be worth it.

The real question is whether or not you believe 1.5 cents is a reasonable price. Not whether you should pay your mortgage this way. As others point out, if you decide this is a good price, then don't stop at your mortgage. Pay that the usual way, and just transfer as much money as possible to your wife's account, effectively buying as many miles as your credit limit will allow.

I don't want to presume anything about your finances or credit limits, but if you have available cash in low-interest or no-interest bearing accounts, a better bet would be to buy US Savings bonds (do a search and you'll find a lot). There is no fee - and with double miles you could get a lot of miles for free and earn better interest than in current savings/money market accounts.