Until about age 7, I would ask my parents, with concern, if we had enough money to pay for whatever we were taking to the cashier to ring up. Sometimes they told me, “Don’t worry, we’ll charge it.” But they never explained the concept.
To a youngster, that can be confusing. It’s as if having that magic piece of rectangular plastic meant one wouldn’t have to pay.
But boy oh boy, that’s not what it means.
By the time I was 8, I had figured it out. Charging just means you’re not paying right now, on the spot. But you still end up paying. In full.
In the past few years, I’ve started to notice there are times when using a credit card means you end up paying for more than the full price.
For instance, at the clerk’s office in Claremont, where I pay municipal bills, a sign informs payers that 2.79 percent will be added to their bill if payment is made via credit card.
I don’t fault the town. If a credit-card company is dinging the merchant for being the middleman in credit card usage, then the merchant should be allowed to require the purchaser to share (or take on entirely) the burden of that fee. As long as it’s all aboveboard, no problem.
Just realize that if you have an annual property tax of $5,000 and you always charge the payment, then you are paying $139.50 extra per year for the privilege.
This summer we had a new oil-burning steam boiler installed in our house. The old one, dating back to the Eisenhower presidency, had become unreliable, needing extensive maintenance each summer to last another season. It took a decade, but we finally saved enough for a new system. They’re expensive. Like buying a gently used car.
Just as today’s cars offer better miles per gallon than cars from the 1950s, chances are new oil heaters create more heat per gallon.
At the bottom of the heating company’s invoice, in bold capital letters, was this sentence: Please add 3 percent to your bill if paying by credit card.
By putting that sentence prominently on the invoice, the business was making it clear ahead of time. Otherwise, lots of folks would mindlessly push computer buttons and type in their card number without realizing the amount being charged was greater than the amount due.
I had been contemplating charging this bill. Frankly, I wanted the extra time that charging would buy me.
Each credit card has a monthly cycle that does not usually correspond to a calendar month. For instance, our credit card’s cycle is the 15th through the 14th. Our most recent credit card bill, with a due date of Oct. 14, contained a charge made on Sept. 13. In that instance, the charge allowed us a full month and a day before paying for the provided service. However, an expensive root canal on Sept. 16 was charged too. That won’t show up until the next monthly bill arrives, in the second half of October, and will have a due date of Nov. 14; in that case, the charge is bringing us nearly two months extra to pay for the service.
If you have more than one credit card, take the time to learn each card’s monthly billing cycle. By choosing carefully which card to use, you can buy yourself additional time to pay off the debt.
Generally, I don’t like to use credit cards. I prefer paying in cash or with a check and being done with it. I feel if you don’t have the money to pay for it now, then perhaps you can’t afford it. But for necessities (like root canals and heating systems), that extra time to pay makes a credit card most worthwhile.
The heating system, with installation and removal of the old system, cost $12,550. In states with sales tax you could expect another $1,000 and change on top of that. If I were to charge it, let’s see … 3 percent extra would mean $376.50 extra. About $400 extra if the state had sales tax.
I’d rather not spend $376 or $400 more than necessary. So I arranged to get the money into the bank and wrote a check for the full $12,550. I am not buying time on that purchase. The price would be too high.
On the other hand, back at the root-canal-performing endodontist, because we approved the charge before leaving the building, we received a 3 percent discount. Which, when applied to a $1,719 root canal, means $51.57 in savings.
We also would have received a discount using a check or cash. The discount was for paying right away. Your paying right away means the service provider doesn’t have to worry about tracking you down and getting you to pay later. To many a service provider, such certainty of payment is worth the discount provided.
So, sometimes you get penalized for charging. Sometimes you get rewarded. At the very least, charging can buy you time.
But if the time bought still won’t allow you to pay in full, then maybe you’re buying something you can’t afford.
Arthur Vidro is one of the Eagle Times’ recurring financial columnists. His “EQMM Goes to College” appeared in the May/June 2021 issue of Ellery Queen’s Mystery Magazine.