Many personal finance bloggers like to write about hacking trips with credit cards. As you can see from this link, I am one of those bloggers who wrote it in the past.
Last year, we had a lot of expenses for the renovation of investment condos. This required us to invest considerable sums in the projects. That's the money we had in our various emergency funds. My wife and I asked for a number of credit cards with bonuses to spend a minimum. Most of them reported the equivalent of $ 500 for a trip if we spent $ 3,000. This equates to recovering more than 16% as long as you use the points.
At the time, I kept track of what all our points / miles and value. It was around $ 6,000, which is rather exciting! It was not all credit cards. This came in part from the Marriott points economy for years through our timeshare. This came in part from my wife's work trip.
We used a few at the end of last year and we will use others later this year. We are saving a lot for a potential return to Australia. Let's hope our trip will not collapse the US financial system as it was 10 years ago.
You will notice that this article concerns my hacking trip last year. Why? We have not been able to do that much this year. Many of our expenses are not those we can pay with a credit card. Our mortgage can only be paid with one. The children's school can not be paid for with one. We do not pay for electricity because of our solar panels. I like to reduce our expenses on all other things, so there is often no guarantee that we will reach the minimum of expenses necessary to earn the rewards.
Then I read an article by Joe of Retire by 40. He was striving to travel for free with credit cards. I have been Joe's blog for a long time and we have a lot of financial similarities. One of the differences is that he pays estimated taxes on the income of his blog. We do not pay estimated taxes. I am an employee of my S-Corp blog (and taxes are deducted from the payroll). My wife also chooses to withhold a little more money for her daily work.
It turns out that you can pay taxes with a credit card. Processing fees vary, but it seems like it can be as low as 1.87%. (Why would someone choose the other options to pay more?) If you had to pay $ 10,000 in taxes and $ 187 in fees. At first, it looks like a raw deal.
However, if you use three credit cards for which you spend at least $ 3,000, your travel points could earn $ 1,500 based on credit cards. Would you like to pay $ 187 for $ 1500 in travel rewards? Of course not? In any case, if you plan to travel, you will receive $ 1,300 in free money.
I must admit that I really did not consider changing our payroll deductions. It's been almost two decades since I even thought about how it works. I usually like it "Set it and forget it". This fits all my Lazy Man brand. However, I am willing to change my habits if it means a trip of a thousand or two a year on a free trip.
I must admit that I have never heard of anyone. (That's not to say that it was never written, because it's pretty close to the Retire By 40 plan.) Maybe there's something I do not see?
So, to recap, here's the plan to hack free travel with credit cards and taxes:
detentionbenefits so less tax is levied on your paycheck. (Need a fix there.)
- Get a $ 500 reward credit card for spending $ 3,000 in the first 3 months. (This is an example, I saw a lot of them around.)
- Use the credit card to send a tax payment in order to reach the minimum.
- Pay your credit card with the money that was not withdrawn from your pay check in Step 1.
- Repeat steps 1 through 4 quarterly or as often as possible based on the amount of tax you pay.
- Enjoy your reward bonuses (minus a small charge for using a credit card).
What do you think? Does it work?