Credit-card points are a joke. Get this kind of card instead...

Since I last posted a blog about this topic, I bought an apartment in Austin, Texas and took on a mortgage of $192,000. Having had a significant amount of student loans in the past (finally paid off in 2018), and not wanting to ever repeat that boondoggle of an experience, I'm trying to pay off my mortgage, STAT! Like many folks, my monthly-mortgage bill is due the first of every month. So it behooves me to throw as much excess cash as I can at the mortgage prior to the first of the month. This way, all that excess cash will be applied to the principle, thus lowering it prior to the mortgage interest rate being applied to the principal on the first of the month.

My annual mortgage interest rate is 2.5%. Therefore, my monthly interest rate is approximately 0.21% (ie, 2.5% divided by 12 months). It's a low interest rate and all, but when it's applied to a principal that's six figures, that's still a lot of money the lender is making off of me to borrow its money. For instance, let's say my outstanding mortgage balance is $100,000. That would make my interest payment for that month $210 (ie, $100,000 times a 0.21% monthly-interest rate). Now, I would never in a million years tolerate paying $210 in credit-card interest. So why view it favorably when it's attached to a mortgage? Debt is debt, and debt that is increasing in size via interest is my sworn enemy.

What does any of the above have to with me abandoning my cash-back credit cards? Good question. About 3 months ago, it finally dawned on me that the quickest path to owning my place outright would be to minimize my weekly credit-card payments. (Note to readers: I make pro-rated payments on all my bills on a weekly basis even though I only get paid every other Friday. I've found this to be enormously helpful in staying on track financially.)

This begs the question: Doesn't redeeming credit-card rewards for cash back help reduce my credit-cart payments (because I can take the cash back and apply it to my credit-card balances, thus lowering them)? Kinda, but not really. It reduces them nominally. But I'm gonna save a hell of a lot more money if I

1. Apply for a credit card with a fairly long introductory 0% interest rate for (12 months or more)

2. Use that card exclusively for all purchases

What I'll lose in redeeming my rewards points for cash back (typically at rates between 2–5%), I'll more than gain back by essentially taking out an indirect, interest-free loan on my purchases, and then using said interest-free loan to pay off the mortgage. Why? Because the 2–5% cash-back rate from credit cards is applied to such low balances (usually a couple hundred bucks), that it's chump change compared to what I pay in interest even with a very-low annual-mortgage rate of 2.5%. Low interest rates are nice on paper, but when the principal they're tethered to is high, that's still a lot of extra dough I'm shelling out

For example, in June I was approved for a Bank of America Mastercard with a 0% introductory interest rate for 18 months. Other pertinent card attributes include a $17,000 credit limit, no annual fee, and no rewards-points program. As I mentioned earlier, I pay my bills on a weekly basis (typically, every Friday). This means that I have approximately 78 weeks to pay off this credit card without a single red cent of interest being added to my balance. So what I'll do for the next 78 weeks is pay off a pro-rated amount of my balance, so that I'm always "on pace" to have it fully paid off by the time the no-interest period ends. What's the interest rate once it kicks in? I haven't the faintest idea and it doesn't matter anyway—I'm gonna make sure my balance is $0 by the time the introductory no-interest period is over.

What's the upshot of doing the above? It keeps my weekly credit-card payments really low. Right now, my weekly payments are in the $100 range, and I don't expect them to go much higher than that. Even if I theoretically maxed out my card on the day I activated it, that would only yield a weekly payment of $217.95 for 78 weeks before it was paid off.

If you've followed me thus far, you probably know where I'm heading with this. Having a low, interest-free credit card payment allows me to throw more cash at my mortgage on a monthly basis. My mortgage is the enemy (because of interest I pay on borrowed money). Any time I'm paying interest, that's a cancerous tumor that's getting bigger unless I wipe it out. That's due to the insidious nature of compound interest when you're the borrower. On the other hand, when you're the lender, compound interest is DYN-O-MITE 🧨🤪.

Ditching the rewards cards in favor the no-interest card has enabled me to throw at least another $1,000 to $1,500 at my mortgage on a monthly basis. And doing that allows me to save a hell of a lot more money in interest payments than trying to finagle cash back from dopey credit-card rewards.