MilesBuzz! - Anyone ever overpaid their credit card before a large purchase?

This year is the first year that you can pay your UK tax using a credit card, for a small fee.

My tax bill is literally 15 times the limit on my BMI credit card. I am planning to put my BMI credit card (issued by MBNA) into credit by making a massive payment to MBNA, and then immediately paying my tax bill. MBNA has confirmed that I can do this.

My only concern is that I may not get the miles for the tax payment (it IS treated as a purchase, not a cash advance) because I am paying it from a credit balance and not actually using MBNA's money. The terms & conditions of my card don't mention miles once, yet alone how they would treat this situation!

Does anyone have experience of successfully getting miles from using a credit card when you have put it into credit beforehand?

Amex took 2 payments by accident putting my card into credit when I spent the money over the next month the miles were credited as normal, this month I paid on the 5th and they took the same amount yesterday so I am in credit again, I expect the same thing will happen again

I tried this with my HSBC card and I got a call from the bank saying they had reversed the payment (it was an intra-bank transfer) because it violated a money laundering law/policy in the UK.

I've done this with my Amex cards both in France and the Netherlands without any problem. Miles posted for the purchases as it should be. The same for my German Visacard and later my German Mastercard.

But I don't know the UK-rules/laws, so it is the MBNA who could help you out.

Wow. I am surprised that the card issuer allowed that. Several years ago I attempted the same thing with my visa card prior to a trip to antwerp on an engagement ring excursion and got shot down.

check the fine print

most miles/points earning cards are based on the type of purchase, not the payment

We have done this before with our UK MBNA Business Card that earns BMI miles & not had any problems.

It usually gets "overpaid" in circumstances where an employee has been stuck for foreign currency & either used the card @ an ATM or Travelex & by "overpaying" when the statement comes round they are not constantly adding interest.

Only thing we had to do was get them to change the D/D to be something like "dynamic" so that they calculate the D/D a few days before taking it & not by the statement date.

From reading that you are paying your Tax bill I wonder if you can also pay Corporation Tax, that would be an easy way for some "cheap" miles.

Slightly OT, but how "small" is the fee that is charged? In the USA it is usually around 2.8-3% and that makes it a very expensive way to try to earn points.

Last year I used Amex to pay a substantial amount (well over my normal monthly "limit") of taxes in the US. Called Amex in advance and wired the funds to my account. With the credit in the account, the tax payment was promptly processed and my miles credited on the next cycle. I paid 2.49% which I considered a good deal since I use my miles mostly for premium international award travel... so $2,490 buys SFO-FRA/MUC-CDG in LH F, normally an $18,000 ticket.

Generally a pre-payment does not increase your credit limit, so as mentioned above you probably need to call your bank after you make the pre-payment and let them know what you plan to do and see if they can give you a temporary credit limit increase.

Slightly OT, but how "small" is the fee that is charged? In the USA it is usually around 2.8-3% and that makes it a very expensive way to try to earn points.

0.91%, on a credit card giving 2 BMI miles per £1. This is 0.455p per BMI mile.

As an example, a First Class flight UK-North America would be effectively £410 ($600) plus tax on this basis.

So you can see why the opportunity to earn 1/2m or so miles on this basis is interesting!

In the United States have done this with Bank of America Visa. I called BofA fraud department after I overpaid and told them where the payment money came from ( there own bank account) and where it was going and the use for three +$100,000. purchase in dollars.

There was a very common fraud commited with overpayment on a credit cards and that is why many people will have problems doing this.

If/When the bank becomes un-cooperative, one might consider "installments", rather than "lump sum" payment strategy; surely, the tax-man will gladly accept whatever you send -- and the final %-fee is unchanged.

Caveat: some banks are known to cap the number of ACH payments per month
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Some banks allow this, some do not. When allowed, it will not increase your actual limit, but it will effectively have the same impact, as you will have more "room to spend" before triggering a cut-off. Prepayment doesn't alter the awards earned - the type of purchase/charge determines this. Keep in mind that prepaid or not, very large charges often require preauthorization. I spend millions on credit cards through my business each year, but even we run into preauthorization issues at times.

I can confirm this works for both the Chase UA Visa and multiple American Express cards. I used to do this all the time with tax payments. Sometimes I would notify them, sometimes I would not. I think when they see the charge request from a source like pay1040 or officialpayments they know what you are doing.

0.91%, on a credit card giving 2 BMI miles per £1. This is 0.455p per BMI mile.

That is a MUCH better rate than we get over here. Definitely worthwhile at those rates.

I can confirm this works for both the Chase UA Visa and multiple American Express cards. I used to do this all the time with tax payments. Sometimes I would notify them, sometimes I would not. I think when they see the charge request from a source like pay1040 or officialpayments they know what you are doing.

How did you overpay the credit card? I just tried online and it didn't let me pay more than my current balance.

Just send in a check, or call and request wiring instructions for a payment to your account.

I have done this many times without incident. I simply transfer whatever amount is needed beyond my available credit to my credit card electronically a couple of days before I make the purchase. Works like a charm with my Amex.

Generally a pre-payment does not increase your credit limit, so as mentioned above you probably need to call your bank after you make the pre-payment and let them know what you plan to do and see if they can give you a temporary credit limit increase.

I possibly do not understand the issue that well, but doesn't credit limit mean credit, i e something that you borrow from the bank? Using your own funds and not the bank's money has nothing to do it with your credit limit.

I also find it strange that some banks apparently can prevent you from using your own funds put in a card account, or not give the miles such a transaction earns.

I possibly do not understand the issue that well, but doesn't credit limit mean credit, i e something that you borrow from the bank? Using your own funds and not the bank's money has nothing to do it with your credit limit.


It's simple, really. If you pay off your credit card bill entirely - so now you owe the bank nothing - and then pay them even more money, you are effectively raising your limit (Don't think of it as a "credit limit" now - think of it as the amount you can charge to your card in the current billing cycle without running out of funds).

Or to take a specific example - say your card has a limit of $1,000. At the moment, your card has a balance of $0 - but if you lodge $2,000 of your own money into the account - i.e, the bank now owes you $2,000 - you can now charge up to $3,000 to the card (effectively increasing the "limit", or rather, allowing you to put larger transactions through on your card than would be the case without overpaying) without problems.

get it now?

It's simple, really. If you pay off your credit card bill entirely - so now you owe the bank nothing - and then pay them even more money, you are effectively raising your limit (Don't think of it as a "credit limit" now - think of it as the amount you can charge to your card in the current billing cycle without running out of funds).

Or to take a specific example - say your card has a limit of $1,000. At the moment, your card has a balance of $0 - but if you lodge $2,000 of your own money into the account - i.e, the bank now owes you $2,000 - you can now charge up to $3,000 to the card (effectively increasing the "limit", or rather, allowing you to put larger transactions through on your card than would be the case without overpaying) without problems.

get it now?

I used to do this back in 1998 when I was just establishing credit. I was using the 'GM Card' (issued by Household at the time).

My credit limit was a piddly $500.

Every month I was pretty much getting painfully close to my limit (I put everything on the card at that time, fuel, food, etc.).

This was in the days before I used online bill pay (not even sure if it was readily available then). So, one day decided to write a check for the balance plus $500.

It processed perfectly. When my bill came at the end of the month it deducted the extra $500 from it, and I only had to pay about $20 or something.

The following month I overpaid by $2500, and ended up with a credit balance of $1800ish.

Here's where it really got interesting. They applied a 'negative finance charge', basically took my credit balance and multiplied it by my APR (around 30%), and then further credited my account.

I was absolutely amazed! Thought that I had found some bug in their system that actually allowed me to treat my credit card as a 30% savings account :D

However, I tried to do this the following month. That same mistake never happened again. However, they didn't take away the 'free' money they had given me the previous month.

At any rate, I continued to overpay my balance until they finally upped my credit line above $2500 six months later.

That said, I know things have changed, as although I haven't done it, I have been warned by CSR's at Chase NOT to simply go and overpay my bill if I want to be able to spend more on a card purchase. She actually called it a 'de facto credit line increase' (questionable definition, but, nonetheless their perception).

I do know that Citi will allow you to go into a credit balance -- to a large sum, if you do it through CSR and they do an ACH transfer. I was very recently tempted to do this in order to procure a bunch of thank you points while funding a new Citi account, however, after consolidating credit lines, I had more than enough to max out my thank you points for the year).

I've used a credit card to make taxpayments several time. The 2.49% fee makes it a poor deal, with a couple of exceptions:

1. I needed a couple thousand points to get to a threshold on a hotel card. I got them and was able to book a very nice hotel, for which I otherwise would have had to pay something.

2. I needed 5000 points to get to a threshold with my *wood amex, so I pre-paid my taxes just before I filed them. Got the money back in time to make the cc payment, and the 5K got me to the 20K->25K mile transfer point.

3. I got two Citi cards last year, which required a $750 spend to trigger the bonus. Made two payments to the IRS ($750 on each) and got 50,000 miles. Not a bad return for the $37.75 it cost me in fees.

I did this back in the days of US savings bond purchases with credit cards. IIRC, the computers will still only let you buy up to your credit limit per day, and if that's the case it would take you 15 days even if you prepaid the card.

Some real experiences from many years ago:

(a) My Citibank visa had a credit of 10 cents. I wasn't using the card and the credit stayed on file for a couple of months. Citibank was very nice and mailed me a letter and check for 10 cents. The letter clarified that their policy was not to keep a credit on file. The postage was 28 cents and it probably cost them a few bucks to send out the payment. That was the day I decided never to ever open an account with Citibank.


(b) It was the due date to pay my credit card bill and not being one to carry a balance, I called up the credit card bank to find out my options. This was before online payments and they gave me two choices. Make a last minute payment by phone for a meaningless $20 fee or do a western union transfer, which would cost less than $10. The grocery store on the corner had a western union office so I decided to give it a try. At the store, the girl in customer service was very nice and processed my wire transfer efficiently; happily accepting my credit card as payment towards the wire transfer. The same credit card whose full payment I was making. So I made a $1500 payment to my credit card bank, charged it back to the same credit card as a new purchase and in essence delayed a $1500 payment for another 28 odd days by paying a $8 fee to western union.

This was too tempting so when the next due date rolled by, I was back in line at the grocery store. This was more out of curiosity to see if it worked again or it was a fluke. By this time, the charges on the card had accumulated to around $2500 ($1500 previous + 1000 new). The wire transfer fee this time was about $11. I charged the western union payment back to the same card and I had a hard time walking out of the store with a straight face.

Yet another month went by and the due date rolled in. I wasn't sure if I should try the same approach again, but there was nothing to lose and I wasn't doing anything illegal, so I landed up back at the grocery store. Sadly, they had wised up and the customer service dude informed me that I had to pay cash to make a wire transfer.

And oh, I was enrolled in a miles program with the card, so I ended up getting 1500 + 2500 + 2500 miles for what was really a net $2500 spend.

:)

If I have an unusally large purchase coming up, I simply will call AMEX and give them a heads up. I've done that several times when buying a car.

Before I was using an SPG AMEX, I had a United VISA, which had a $35,000 limit. Many years ago, when I wanted to buy a care using the VISA, I asked then about making a $20K or $25K payment ahead of time. Back then, they told me that it would not work, because even though I would have had a $20K+ credit on the account, when the computers tried to process a $50K charge, the VISA system would have shown a balance due of $20K+. The automated approval process back then could not distinguish between a positive balance (amount due) or a negative balance (a credit).

Thus, I started only using my AMEX for large purchases.

Overpaying works fine with Amex.

However you can't pay your UK Tax Bill (HMRC) with Amex.
Amex isn't as widely accepted here. I recently bought a car and they were going to charge a few percent to use Amex (which would have cost me hundreds). OK if you can afford to "buy" miles this way. But I didn't want to part with 300 quid.

It's simple, really. If you pay off your credit card bill entirely - so now you owe the bank nothing - and then pay them even more money, you are effectively raising your limit (Don't think of it as a "credit limit" now - think of it as the amount you can charge to your card in the current billing cycle without running out of funds).

Or to take a specific example - say your card has a limit of $1,000. At the moment, your card has a balance of $0 - but if you lodge $2,000 of your own money into the account - i.e, the bank now owes you $2,000 - you can now charge up to $3,000 to the card (effectively increasing the "limit", or rather, allowing you to put larger transactions through on your card than would be the case without overpaying) without problems.

get it now?

Thanks. That part I have no problem understanding (although I'd still challenge the use of "credit limit" in relation to one's own funds deposited in a card account).

I wonder, however, why banks would have a problem with the customer's using their own money rather than borrowing from the bank - or more exactly, why are the banks allowed to get away with such restrictions bordering on the illegal.

I've had numerous Canadian credit cards where this works too. When my limits were lower, I often had to do it in order to fit a pre-auth for car rental or to book a flight. I know with one card I had I learned it's a one-way street. I had a small credit on the card and decided to transfer it into my bank account. I got dinged the cash advance fee and interest.....somehow.

Last year Citi Rewards was offering 5% rebate on purchases so I was over paying but they would only take 3 overpayments a month. Was a nice way to make some money and even made money on paying my taxes.

I have done this many times, both with AMEX and Citi. No problems whatsoever. I use to do this a few years ago when I would charge business expenses that were much, much, much larger than my established credit limit. Sometimes you can't make an online payment that is larger than your outstanding balance. Just mail in a check and they will credit your account for the overpayment.

The only hiccup you may encounter is that the card issuer's system may by default only allow you to charge up to your established credit limit. As soon as that charge is processed (applied against your credit balance), you can continue to charge. This may take a day for the charge to flow through their system. Just to be safe, break your tax payment into increments lower than your established credit limit to lessen your risk of having the entire charge denied.

Ive tried to do this on my BoA AS Visa... and no dice... I think I once talked to an agent over the phone, and they said even if I overpay xxx dollars, I still will have a preset spending limit... which impaired my ability to purchase airline tickets :(

I have done this many times, both with AMEX and Citi. No problems whatsoever.

I've done this many times with Citi, without problem, but never for a charge over my limit.

Sometimes you can't make an online payment that is larger than your outstanding balance. Just mail in a check and they will credit your account for the overpayment.

As noted in a similar thread, with Citibank, if your checking account with them there is no problem making a transfer payment to them even with a zero balance on the credit card.

I tried this same strategy recently w/ the double miles Escape card. Having been denied a credit line increase request I made ahead of some large transactions (first puzzling thing--never been denied by anyone) I thought I would be creative and simply overpay ahead of the sales effectively increasing my "credit limit" (in the loose sense of the term).

However, because I did not want to be embarrassed by a denial on these sensitive transactions, I called CS first to make sure it was cool. They told me that any payment in excess of 110% of the balance would be denied!:mad: Very frustrating and baffling considering that a merchant pays a % of every dollar run through their card! Why don't they want me to use this thing!?

So what I'm probably going to do instead (since it's impractical in this instance to divide up the transactions any further) is to put it on the Citi AA card that has no pre-set. That is, unless someone here has a suggested work around? Anyone? Bueller?

This really seems to vary by bank. I was buying an engagement ring a few years ago for an amount that exceeded my credit limit. I zapped off an online bill payment to cover the difference with a credit in my account, and got a phone call a few days later saying that wouldn't increase the amount I could charge to the card, since "Its a credit card, sir, you can't use it like a debit card!" That never occurred to me, since I'd done the same thing one other credit cards in the past.

Ironically, they were more than happy to send me a check for the overpayment at no cost to me, which I then deposited and applied to my other credit card, which took it fine. It cost them fees on a reasonably big purchase, and delayed my engagement for about 10 days.

Michael

Edited to add: So the moral of the story is to check with the CC company before doing this.

It can be done...I have done it. The reason why can not be done by many is the mechanics of the actions fit the profile of a very common fraud that is done to credit card companies. Enough said. Waste your time discussing this issue. If you want to do it contact your credit card company and do go beyond the customer service agent that answers the phone.

we new we were having a huge bill on amex and did not want to have it disallowed since it was an new cardd...we called and told them to expect a pre payment...no problem