The Theory and Implementation Of Float and the Value of Credit Card Use

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Editor’s Note: This column is designed to provide food for thought and should not used to replace financial advice from a qualified expert. Colorado Citizen Press Does Not offer financial advice.

The Concept of Float

A basic definition of Float is making a purchase first, and have the expense later.

In an Economic class I attended at Colorado State University (CSU) in the 70s, float was discussed as the time it takes for a check written to a merchant to actually hit your checking account.

I know very few people that write checks anymore, but the theory of float still works with credit cards.

Using most credit cards allows you a float time with no interest to pay for a purchase, usually 30 days from the statement date.

Unfortunately, nearly half of millennials do not use credit cards like this. (According to George Washington University)

What are they doing wrong?

Nearly half of millennials only pay the minimum payments on their credit cards.

Yet, from the same study, 74% claim they are good at dealing with day to day financial matters.

Using credit cards with float in mind should mean that you have a mindset and the ability to pay that charge off when due or you need to find a way to defer or delay the credit card interest.

Credit-Cards

The Value Of Credit Card Use

Using credit responsibly can have a positive affect on your credit score. This can open the doors for low interest loans and favorable credit decisions in the future.

Many credit cards offer cash back options or other perks like airline miles or discounts at hotels.

Fraudulent charges on your credit cards, if disputed in a reasonable time, usually will result in no financial obligation to the real card holder.

Some credit cards offer free extended warranties with a purchase with their card.

Some cards will allow you to have deferred or delayed interest on major purchases.

With most credit cards you can now track your purchases online.

In Conclusion

Credit card use can be clean, convenient and safe.

However, if not controlled it can wreck havoc on your financial situation.

Once you get to the point where you can pay off your balances every month, or even just pay the minimum due on time to a deferred or delayed billing charge, don’t look back.

It should become an obsession with you.

Pay off most cards and find one that pays you back with something you like, either cash or some kind of reward, and one that you feel comfortable with.

Bottom Line Boomer has lived in Colorado for 40 years and has been a lifelong student of personal finance. His goal is to help provide a much needed education on personal finance for today’s world.

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