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Everyday purchases are a great way to earn travel rewards, but paying with a credit card isn’t always the best option. Today, TPG Contributor Richard Kerr introduces the bill payment service Plastiq, and explains how you can take advantage of new promotional rates to boost your loyalty account balances.
If you’re like me, the thought of making a purchase with cash or check makes your stomach sink. Any points and miles I leave on the table after a cash transaction stay in the back of my mind for the rest of the day. Even if you don’t put as much thought into maximizing your purchases as I do, it’s important to have a strategy that allows you to earn travel rewards on as many of your expenditures as possible.
To that end, many award travel enthusiasts look to online bill payment options to help boost spending on rewards cards. By using these services to pay for expenses that often can’t be paid with a credit card, you can more easily meet spending requirements for the best sign-up offers and annual spending bonuses. However, these services aren’t free, and the added fees can negate the value of any rewards you earn.
In this post, I’ll explain how a new promo rate from the online bill payment service Plastiq can get you off the hook for some of those fees, and I’ll analyze a few spending scenarios to help you determine when using Plastiq makes sense.
Plastiq is currently offering reduced rates. The following rates are available beginning today:
- American Express and MasterCard – 1.99% service fee for payments using an American Express or MasterCard
- Visa – 2.5% service fee for payments using a Visa card (standard rate)
Note that TPG receives a small commission on transactions.
Functionally, Plastiq is similar to many other online bill payment options, as funds from your credit card are sent to the payee either by bank transfer or by check (in the mail).
I registered without issue, and after quickly verifying my email address, I was able to add my first payee. The payee search function is a bit unwieldy — it doesn’t seem to recognize any mainstream utilities, banks or mortgage companies, and instead populates a list of obscure (to me) Canadian businesses in the search results. However, you can skip the results and manually enter your payee by adding basic contact information and an address to mail a check, or routing and account numbers to pay via bank transfer. After adding contact information, you manually select from nine payment categories to describe the business of the new payee.
Other bill payment services like Evolve, Radpad or RentPayment have limitations on which payees are eligible. However, Plastiq lets you send payment to any business or person in any industry/category (within the US and Canada) and for any amount so long as there is a good or service being provided. Payments to savings accounts, trust accounts, retirement accounts, health savings accounts or similar accounts are not permitted. You cannot pay yourself.
When Using Plastiq Makes Sense
The difference between Plastiq and other online payment services is the flexibility to pay anyone for any good or service. This means you can use Plastiq to pay rent, mortgage, personal loans, taxes, college tuition, a friend who is selling you something or your local car dealership (if they’re willing to accept a check or bank transfer).
Paying a fee to earn rewards isn’t always a good idea, but there are certain scenarios where it makes sense:
1. You need to boost spending to earn a sign-up bonus — Most credit cards that offer sign-up bonuses require you to meet a certain minimum spending threshold (though there are some notable exceptions like the Bank of America Alaska Airlines Visa Signature Card, which offers 25,000 miles upon approval). Some spending requirements are fairly easy to meet, but others can be daunting, especially if you open multiple cards at the same time. If paying a modest fee will help you earn a bonus, it’s likely worth doing.
2. The rewards you earn are worth more than the fee — You can consider the fee as a transaction in which you’re buying points or miles. If you qualify for the 1.99% fee by using Plastiq’s service with a MasterCard or American Express, then earning points that are worth more than 1.99 cents apiece will yield a net profit. You can use TPG’s most recent valuations or your own; once you know the value of your points, the math is pretty simple.
For example, if you paid a $1,500 mortgage for six months with a 1.99% fee, you’d end up paying $179.10 to earn at least 9,000 extra points (possibly more depending which card you use). With the Barclaycard Arrival Plus World Elite Mastercard (which earns 2 miles per dollar), you’d earn 18,000 miles worth 1.1 cents apiece, for a total value of $198 and a net profit of $18.90. That won’t pay for your next vacation, but every bit helps.
TPG values Starpoints at 2.4 cents, meanwhile, so if you use Plastiq with the Starwood Preferred Guest® Card from American Express or the Starwood Preferred Guest® Business Credit Card from American Express, you’ll earn one point for every dollar spent. Assuming the same six months of mortgage payments at $1,500 a pop, you’ll have 9,000 Starpoints at the end of that period, worth a total of $216. Subtracting the $179.10 you’ll pay in fees will leave you with a $36.90 return. Sure, your take on this one expense is nothing to write home about, but the points can quickly add up.
3. You need to boost spending to hit an annual bonus — Many credit cards offer perks for spending a certain amount during the year. Much like sign-up bonuses, these spending bonuses can be pretty lucrative, so incurring a convenience fee might be worthwhile.
For example, the Citi Hilton HHonors Reserve Card and Hilton Honors Surpass Card from American Express both offer Hilton Honors Diamond elite status to cardholders who spend $40,000 within a calendar year. In his valuation of Hilton Honors status, TPG Senior Points & Miles Correspondent Nick Ewen listed the Diamond level at over $1,300, so paying to boost your elite level would make sense for a 1.99% fee.
This can help with airline status as well. United, for example, waives the Premier-Qualifying Dollar requirement when you spend $25,000 on a co-branded credit card in the same calendar year. You can earn 40,000 MileagePlus miles with the United MileagePlus Explorer Card after spending $2,000 in the first three months, and if you pay an additional $23,000 worth of expenses via Plastiq, you’ll have enough to waive the PQD requirement for elite status, excluding 1K. Note that the United card is issued by Visa, so you’ll be subject to a 2.5% Plastiq fee in this case.
Maximizing the Promotional Rates
Digging through the site led me to the discovery that Plastiq accepts American Express Gift Cards for payments. This is useful because select shopping portals routinely offer cash back for buying Amex gift cards, and you can use a rewards credit card to buy those gift cards to begin with. You can get as much as 2% cash back a few times a year, meaning you could actually earn points or miles and make money when paying bills through Plastiq.
To see how the math works out, suppose you purchased a $2,000 Amex gift card, which is the maximum allowable denomination for cash back. You would earn $40 from a 2% shopping portal offer. Each card has a $3.95 fee, and each order entails a shipping fee of $8.95 (note that you can often find promotional codes to waive fees, but those codes may prevent you from receiving cash back, so you’re better off just paying).
Suppose your mortgage is $1,000 per month, and you use your Platinum Card® from American Express to buy three $2,000 gift cards to pay your mortgage for 6 months with Plastiq. Your purchase of $6,020.80 (three card fees and one shipping fee) will earn $120 through a portal offering 2% cash back. You then use the $2,000 gift cards to pay your mortgage for 6 months, incurring a 1.99% fee totaling $119.40. Your net profit would be 60 cents plus 6,021 Membership Rewards points, which is worth roughly $120 according to TPG’s valuations.
The more $2,000 gift cards you buy per order, the less the shipping fee affects your profit margin. However, there is a limit of $10,000 in consumer gift cards and $100,000 in business gift cards in any 14-day period. Naturally, you should consider the effect this strategy may have on your personal finances, as you’ll need to have the cash on hand to pay your credit card bill even though the mortgage payments won’t come due for months.
Plastiq’s special offer of 1.99% is a significant discount on what most competitors charge for online bill payments. Large tuition, tax or mortgages paid with American Express or MasterCard will also incur a 1.99% fee, so you’re still likely to come out ahead if you’re working toward a sign-up or spending bonus.
This is a good alternative for earning rewards on expenses that might not count normally. As always, you should run the numbers for your own circumstances to make sure you’re coming out ahead.
How would you use Plastiq to help you earn travel rewards?