I have written before about our experiment with credit card arbitrage. This is where you borrow money at a very low rate (preferably 0%) and stash it in a high interest savings account. Since we have come to the end of the 1 year period on our Chase Freedom card, I got set up to make a large payment to pay off the card — $44,061.30 to be exact.
I know that the payment is due on September 17, so I decided to play it safe and get all my ducks in a row in plenty of time. Last Friday, August 29th, I logged into my money market fund account at Vanguard to make the transfer to my checking and billpay account at Everbank. I got the Sell order all set up only to find that “electronic transfer” to my checking account was not one of the options for cashing out our money. The next day, I called Vanguard to find out why. It turns out that since this is a joint account, Vanguard needs to have a signature card on file for ScrapperMom before it can let me transfer money from a joint account. It didn’t matter that the checking account is also a joint account.
The only option available to me was a check. I started doing the math in my head — the market doesn’t reopen until Tuesday, September 2, they can’t sell the money market funds on my behalf until the end of trading, the earliest they could cut a check would be the 3rd. First class mail would likely get the check to me by September 7, then I have to turn that around and mail it to Everbank, which is another 3-5 days until it hits our account. Now we’re up to Sept. 12. A payment sent on that day should arrive at Chase on time.
After explaining the situation to Vanguard, and not wanting to cut it too close, they offered to overnight the check to us. This will incur some fee, of course, and I don’t know what that is yet. I’m assuming that it will be in the $20 to $30 range, but the representative could not tell me when I set up the order.
Fast forward to last night: I logged into Everbank to set up the bill payment. I entered the full amount in the payment box, set the payment date for Sept. 10, and clicked PAY. The bank came back with an error saying that I could only pay $15,000 in a single payment. Okay, I thought, I’ll just set up 3 payments to take care of it — no problem. So I reduced payment number one to $15,000. Then I set up payment 2. The bank thought it was smarter than me, and decided that this was a mistake — a duplicate of a payment that I already set up. So I tried $14,999 instead. Then the bank told me that the daily limit on bill payments in total is $15,000.
This was starting to get frustrating! Eventually I ended up setting up 2nd and 3rd payments for the total amount due on the 11th and 12th. According to the bank, a payment made on the 12th will arrive by the 16th. How’s that for calling it close? Usually the payment gets sent on the 10th, and usually gets credited to my account on the 13th. So this should still work out.
Today I received the check from Vanguard and we immediately turned it around and mailed it off to Everbank. There is the off chance that the check will arrive at Everbank and be credited to our account earlier than the 10th. That will give us a little more breathing room if true. Another option we now have through the billpay service with Everbank is to expedite a payment by sending it electronically or by overnight check. As you might expect, these options are not without cost: $4.95 for the expedited payment, and $14.95 for the overnight check.
What are the consequences of a late payment? I’m not really sure, but my expectation is that since the interest rate for purchases is 14.99%, the interest for one month at that balance would likely be about $500. So it certainly behooves us to do everything possible to make sure the payment gets made on time. It’s not as bad as it seems, since I estimate that we made over $700 on the arbitrage over the last year.
Lessons learned: If you have to move large sums of money from one bank to another, make sure you know in advance what the limitations of the system are. It’s also a good idea to understand what the limits of your bank’s billpay system is also. We’re not sure yet what this means for future credit card arbitrage… but we’ll be sure to let you know soon how the whole thing turns out!
Have you ever experienced a close call with a payment or a problem moving money from bank to bank?