Saving money through credit cards

Wednesday, February 20, 2008

When I finally got fed up with hearing, “I’m sorry, sir, we don’t accept Discover”, and went looking for a new credit card, I started off at Fatwallet, looking for a good deal.  I looked through their list of rewards cards for something with a 2% return on something that I would actually use.  The one that jumped out at me was a Chase/Countrywide card (Even though I hate Chase).  If you, like me, have a mortgage through Countrywide (Which I do, on our rental condo in Falls Church), this card will pay $50 towards that mortgage for every $2500 you spend on the card.

They just applied the first payment to my mortgage, and I was wondering what my long term savings were.  I have 27 years, 8 months left on the loan.  The wife and I intend to continue to rent out the condo as long as we can afford it (And that should get easier from year to year, as rents inevitably go up while the mortgage stays basically the same).  Now, it’s likely that we’ll refinance at some point, although the rate is 5.375%, so it probably won’t be until we can get a 10 or 15 year fixed mortgage instead of the 30 year.

Anyway, I found a mortgage calculator that would tell me my savings based on a one-time extra payment.  I don’t know how accurate it is, but it tells me that my one-time payment of $50 in the 27th month of the loan will save me $177 over the full remainder of the loan.  So my 2% reward turns into a 9% reward (I know, adjust for inflation, present day value vs future value, blah blah blah I dropped my econ major, remember?  It’s not a perfect calculation.).

So that’s pretty awesome.  And it shows how much a small early prepayment can help in a long-term loan.  So, while Chase’s customer service is, in my experience, unbelievably bad, this credit card is a great deal if you have a Countrywide mortgage.  I have no idea whether Bank of America will mess with this or not, but I hope not.

Posted in: Anti complaint , Money