A little hack to stop paying credit card interest

In this episode, we talk about a fun way to game the system and save money on credit card interest. You should not need to pay the bank unnecessary interest so tune in to learn more!

Welcome to the Material Retail Dumps podcast. If you've listened to us before, thanks so much for coming back. If it's your first time listening, welcome Material Retail Dumps is a short form podcast with briefly valuable content for independent retailers. As business owners, we don't have time for a 30 minute lesson with a ton of banter. We get straight to the meat of the topic and aim to give you actionable information and will help you optimize your retail operation and make more money every day. Welcome to Material Retail Dumps episode 23. In this episode, we're gonna change it up a little bit. We're gonna talk about a little hack I learned a little while ago that can help get you through those. You know times we have a little bit of a cash crunch where maybe you have a credit card due and rent at apparel at the same time.

And usually what you'll do is you just won't pay the credit card cuz maybe you don't have the money at that minute to pay the credit card and you know it's okay. You pay the minimum payment and what happens is you end up paying interest and nobody likes paying interest. And what happens when you pay interest is it just makes things worse, right? It doesn't help the problem just makes it worse cause you have more money that you need to pay to the bank. Now what normally happens in these situations is you get out of these slow seasons as you get into your busy season and then you're able to, you know, have a little bit of excess cash and you pay in all your credit cards and you get back to operating in a profit. And you know, these cash crunches and cash surpluses are pretty common in the retail industry, especially with seasonality.

The winter months stink, but the fall and Christmas season is amazing. Sometimes the spring and summer is great. Um, it just really depends on your business. Now this little hack maybe will help you just avoid some interest payments that are unnecessary and we all like saving money and every dollar that we don't have to pay to the bank for interest is just another dollar that we get to keep for ourselves. So let's jump right in. The way that any major credit card works, let's say from Chase Bank or Bank of America or any of those big banks, is that if you get a refund in that month, so if you return something, it counts as a payment on your account. So it's the same thing as if you paid your account. So if you get a $200 refund from a vendor, it says if you went online and clicked payment.

Now if the original purchase and the refund happens in the same month, the refund actually goes against the prior month's balance and the, the purchase that you made in that same month you pay the next month. So let me explain that a little bit further. Let's say, you know, it's January 1st and you have a $0 balance on your credit card. You just paid it off in full and it's great and January 5th comes along and you spend, you know, 10 grand on inventory and then the statement closes on January 31st and it's due on February 28th. Now going into February you have a $10,000 balance that you need to pay by the end of the month. So you don't have to pay interest. And let's just say for whatever reason that you can't pay it back, it's your slow month, you're buying a lot of inventory for the spring season and it's just not in the the cards right now.

You know, you have to pay your landlord, you gotta pay your payroll and you know what, you can maybe get away with just paying a minimum payment for two months. And then when spring season comes, you pay the merchandise. Now what I recommend doing is on February 2nd in this new month, go on hotels.com or go on any website with a cancellation policy that you can cancel for free or you know, go on Amazon and buy some stuff. Go to the Apples store and buy something. And what you're gonna do is you're gonna buy the item and in the same month you're gonna return 'em. So now in our example, you have a $10,000 bill that you, that's due February 28th. So now what we're gonna do is we're gonna go on hotels.com, find a fully cancelable reservation, just make sure it's fully cancelable. Very important. We don't want a book of vacation that we're not going on and you can spend five grand on the vacation, wait a day and then cancel it.

What that does is it creates two transactions on your credit card statement. One is the positive and one is a negative. So one's positive 5,000, one's negative 5,000. Now the positive 5,000 counts towards that February month. So that 5,000 is not gonna be due till March 28th because your closing date is end of February and you don't pay your closing balance until the next month. But the refunded 5,000 actually goes against your January balance that was due in February. So now you don't owe 10,000 at the end of the month of February from your January balance. You only owe 5,000. The difference between what you spent and what was refunded in that next month. Now it's just a quick little hack on, you know, maybe not paying interest or delaying interest payments for a little bit. Now with any sort of debt, credit cards, financing, you have to be really careful cuz you definitely don't want to get into a position where it becomes a habit.

Um, but if you need to do this once or twice a year and you could save yourself, you know, 500 or a thousand bucks, you know, once or twice a year, it's just basically free money by clicking a few clicks on your, um, on your computer. And again, I want to caution you to be careful and you definitely don't wanna go out there and, you know, make this a habit and then all of a sudden you find yourself six months later with a huge credit card bill you can't pay off. But in reality, you're not spending any extra money, you're not actually going on these vacations. All you're doing is delaying the amount of time it takes till you have to pay it back. Now this doesn't always work when you already have an interest bearing balance on your credit card cuz a lot of credit cards will take your total balance and charge you the the interest on that. But if you're not paying any interest on your card and you're paying it off in full every month, this is definitely a way where you can go out there and just, you know, kind of game the system a little bit. And it's the bank system and it's for you to, you know, do with it what you please. Um, I think not everybody will agree with this,

But at the end of the day, like as a business owner, you gotta do what you gotta do to, to save every penny and put that into growth. Go put that, you know, instead of paying the bank interest, go and give your employee a bonus so that they're more motivated to make you more money or go give your customers more discounts so they're more motivated to spend more. Well that's it. Hope you enjoy this one. A little bit different than what we normally talk about, but it's a fun one for me cuz it's like a little hack and everybody loves little hacks. Looking forward to the next episode. Thanks.

A little hack to stop paying credit card interest
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