Jeffrey Paul

radonc1

You cannot pay for treasury issues with MOs. So it appears you would need either a bank account that will be your conduit for payment to the government or a brokerage account that will accept MOs and then pay the treasury when you buy their paper. (I don't think the latter is going to fly for very long, it looks way too much like MLing).
Just doing some of the math.
If you bought $20K of MOs, the cost would be about .09% or about $180 (cost of cards at say SM and MOs at WM). You earn 2.5% on your $20K or about $41.66 for the month you hold them ($500 annual interest pay/12 months). Your net gain would be -$138.33. Even if you presume that it will take you 2 months to pay off the credit card, that will only double your interest to $83.32 (which still leaves you substantially in the red). It only goes further South the higher volume you go. This of course does not include your time investment in procuring the MOs in the first place.
Not my type of investment

lumangoy

I think OP might be looking to use CC.

why even bother buying bills with MOs if he can deposit them to a FI.

its already compilcated to buy an MO and youre adding another step.

radonc1

Do you know any CC that would code the purchase of a Treasury as anything other than a cash advance? And I think the cash advance fees are onerous, to say the least.

Jeffrey Paul

Sorry, I didn't explain myself well. I'm looking to churn points with either AMEX or Chase and use the TBills to recoup more of the fees and expenses.

Simon Mall = 40 $500 Visa fees = -$158.00
Gas to Simon RT = -$6.50
Gas to Walmart = $5.50 x2 = $11.00
MO from WM = $17.60
Total Expenses = 193.10

I'll deposit the MO's into my checking account like normal but instead of paying off the CC with it immediately I will by TBills with them and they will mature before the statement is due.

I value UR point less than other at 1.6c each.

20,000 Points = $320.00
Interest on TBills at 2.5 over 4 week = $49.87 (Depending on that Tuesday's auction. It hasn't gotten to 2.5 yet but I'm using a round number)
Total value = $369.84
Minus Expenses I think gives me = $176.74 gain

My question is under this scenario is there a reason not to take advantage of the TBills over that 4 week period? I know it's only $50 but i can do it all from my computer in about 2 minutes after I've deposited the MO's into my checking account. Then when the bill matures in 4 weeks in drops right back into my checking account at which time I still have a week or so to pay the CC bill.

I know $176.74 a month gain in points is not a lot for many people here but for me it gives my wife and I that one really nice vacation a year. The TBill thing just seems like an easy way to recoup some more of the fees and the gas expense.

I think the numbers work. I'm just curious if there is a risk I'm not thinking about outside of the typical MO, WM, and Checking account risks.

Sorry for the confusion.

Klemhuzzah

It looks good to me. But some things to mention
1) Make sure you get the timing right. Even one month's of CC interest can ruin the plan. I've never bought T-bills before, but make sure you know how long it takes for the money deposited into your account to become settled money (or whatever the word is that means you can actually spend it)
2) There have been changes to buying MO at WM. You may have to make several trips to reach $20,000.
3) I haven't experienced it, but I've heard some banks object to that much in MO. Use a bank that you don't mind being banned from.
4) Amex is not a debit card. I don't think you can buy MO with it.
5) Your FICO score may take a beating from being $20,000 in debt, especially if you're close to the credit line. It should rebound once it's paid off. Some insurance companies tie their rates to your FICO score. Probably nothing to worry about, but you did ask for things you haven't thought of.

Good luck!

knopfler

I usually just park my $$$ in an Amex online savings account. It's paying 2.1% currently, but it rises when the interest rates rise and I can take the money out any time I want. You do have to account for a five business day deposit time during which I believe you earn interest on your deposit, but the deposit shows a pending on your total balance and is not available for withdrawal. On the other side, you just have to allow 1-2 days for the money to hit your account after you withdraw it. At least with my local banks it is 1-2 days.

Jeffrey Paul

!! Looking at it now. So do you move your money into it from your checking and then back out to your checking? Understood on the timing in and out. It doesn't pay quite as much but i like the idea of being with AMEX... I think?

knopfler

Yes, exactly. Deposit MO's into my local bank checking account, then transfer the money to AMEX savings, then eventually transfer it back to the same checking account. I end up transferring about 50% to Amex and leave the other 50% in the bank so they can earn some money off of my account as well. Technically right after I pay the bill off, I'll transfer 75% of deposits for a week or two, then down to 50%, then down to 25% so it probably averages out to about 50%. I figure I'm giving up some interest, but hopefully keeping goodwill with the local bank.

sbft77

20*$500 is $10K, not $20K.

There are savings accounts paying higher than 2.3%. Though, Treasury Bills don't have state tax, so if you're in a state with a high tax rate, they might be a tiny bit better than a savings account. Maybe you'll make an extra $2 per month vs. a savings account.

Jeffrey Paul

Thank you!. Updated numbers in post above in case anyone ever reads this. Do you mind sharing your savings accounts? Are they easy to push and pull from home computer? I'm glad I posted this because off the bat the AMEX saving account seems better simply for the speed of getting in and out.

redtop43

You are letting the tail wag the dog here.

I am old enough to remember when I was getting 15% or so on my money market fund. In those days my wife had some very high medical expenses, and I would try to get the insurance company to pay me as quickly as possible and wait as long as I could to pay the provider. $5000 for a month at 15% was $62.50.

That said, I'll start by saying that a money market fund or online saving account will pay yields comparable to T-bills but with much less complication.

But again, you're letting the tail wag the dog.

Simon GC fees are 79 basis points. WM fees run 9 basis points for MO's and 8 for bill payments. Using a 2% cashback card (I know you're doing this for miles) gives a profit of 110 basis points on each turnaround. By comparison, 2.4% annual is 20 basis points per month, so the potential interest - taxable, remember - is less than 20% of the basic profit.

But (and it's a huge but):

Your proposed strategy locks up your CC credit limit for basically two months. You're getting maybe 40 basis points of interest, but if you paid off the CC immediately and bought more GC's, you'd get the 110 basis points all over again. Not a great trade.

I "cycle" my credit cards. I know many people think that's high-risk, and I have had some accounts shut down. But I can use the same dollar of credit limit 3-4 times a month, so a $10K credit limit will let me earn $330-$440 a month.

Now, if you perceive yourself as having a cap on the time and effort you want to invest in this hobby, you could certainly optimize things by buying the GC's right after the statement close date, buying the MO's quickly, and waiting to pay the CC bill. (Bill payments obviously wouldn't work.)

But I think it's an inefficient use of your CC credit limits.

knopfler

I do both. I cycle my 2% cash back cards, but I try to keep it under a full 2x cycle and I use my travel cards to earn points/miles and a little extra cash from savings.

sechs

I think that we've all figured out that this isn't a manufactured spending strategy. It's a float strategy -- MS is just the source of the float.

You can MS at an apparent loss if the value in points/miles/cash back is greater than what you pay. I think that there are better sources of money for this, and that it is an overly-complicated way to make money on float.

Jeffrey Paul