Update: Since the time I originally wrote this, Plastiq has raised their fee to 2.85%, which makes this maneuver much less profitable. The post below includes the previous fee amounts. This still might be worth doing if the Plastiq fee is lowered during a special promotion.
I’ve written before about Plastiq, the website payments service that allows you to pay almost any bill with a credit card. It works like this: You provide the name, address, account number, and dollar amount for the bill you want to pay, you enter your credit card information, Plastiq pays the bill as you’ve specified and charges your credit card that amount plus a 2.5% fee (although sometimes you might get a discount). Of course, that means you have to pay the new total (the original bill + the 2.5% fee) charged to your credit card.
Generally, it doesn’t make sense to use Plastiq just to get the usual cash-back reward from a credit card, because you’d be paying a 2.5% fee to get a cash-back reward of 1% to 2% (likewise, if your rewards come in the form of “points” or “miles”). But Plastiq is useful for getting the bonus for opening a new credit-card account. For example, you might get a $150 bonus when you spend $1,000 within three months of opening a new credit-card account. Of course, it would be foolish to buy $1,000 worth of stuff you don’t need just to get the bonus. (That’s the risk you’re taking: The credit card company is betting you won’t be able to control yourself and you will charge $1,000 and then keep on charging right up to the card’s credit unit. If you aren’t absolutely sure that you will be able to control yourself, don’t do this!) But it’s worth it, at least to me, to pay $25 (2.5% of $1,000) to get a reward of $150 or more. It’s still a bummer that you have to pay that 2.5% though. At least with a normal cash-back reward, you do get part of that back (that is, the 2.5% Plastiq fee is partially offset by the credit card’s cash-back reward of 1% to 2%).
But what if there were a card with a cash-back reward of more than 2.5%? A cash-back reward of that size would offset the Plastiq fee and then some.
I recently saw a Mastercard with a typical offer ($200 bonus for spending $1,000). I thought it would be worth my time to use the new card with Plastiq to pay my monthly mortgage. When I went to the new card’s website, I saw that they had the usual 1% cash-back on all purchases, but I could get 3% on a category of my choice, the choices being things like gas, dining, travel, and … online shopping. Did “online shopping” include Plastiq? Wouldn’t that be a hoot? Pay a 2.5% fee to Plastiq and get 3.0% cash back from the credit card?
I tried it and it worked. I had to pay an additional fee of a a little over $25 to make my usual mortgage payment, (which is a little over $1,000) via Plastiq. For that $25 I got the account-opening bonus of $200, plus an a cash-back reward of $32 for choosing the “online shopping” as my 3% reward category! Eureka!
I can only get the account-opening bonus once, but my credit card will, in effect, pay me $7 every time I use Plastiq to pay my mortgage. Also, the credit card charges 0% interest for the first 12 months, so I can pre-pay my mortgage a few months in advance, thus reducing my mortgage balance and reducing the amount of mortgage interest I will have to pay. I thought it might be a good idea to pay the mortgage 12 months in advance and then pay off the card with the money that I would normally pay the mortgage with anyway. This would make the maximum use of the credit card’s 0% interest period and save the maximum amount on mortgage interest, but my new card’s credit limit isn’t high enough. Also, there is a quarterly limit on the dollar amount of purchases on which the 3% cash-back is applied. So I only get the maximum cash back for 2 mortgage payments in every three months.
I gotta get my wife to apply for one of these cards.
One more note, kind of an oddity. The bank whose credit card that is lending me money at 0% to pay my mortgage, and giving me a $200 account-opening bonus, and paying me 3% cash-back to use their credit card to pay my mortgage … is the same bank that currently holds my mortgage.
Note that Visa cards cannot be used to make mortgage payments with Plastiq.
(Finally, here’s a link you can use to sign up for Plastiq. If you click it and sign-up you might be able to pay a bill via Plastiq for a reduced fee and I’ll get similar reward too. I only ask, if you sign up for Plastiq, please use it responsibly. I thank you.)
