Avoiding Credit Card Float with Chad Clark

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Because they always have a float to fall back on. Hi, I'm Rob West. A touch of humor to start today's broadcast but the truth is credit card float is no joke and it could lead to unwanted interest charges. Chad Clark joins us today to talk about credit card float and how you can avoid it. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, our guest today is Chad Clark, Executive Director here at FaithFi. Chad, great to have you back.

Thanks for having me. Chad, I know that lately you've been thinking a lot about credit card float which is something most people don't do and may not even know what credit card float is. So why don't we start there? Yeah, well, this comes up because it's a common question we get with our FaithFi app users.

So I get an opportunity to help people kind of address this question. Credit card float is a period of time between when you charge something on your credit card and when you actually pay for it. Because remember, when you put something on a credit card, you're borrowing that money to make the purchase. Alright, so maybe an example will help.

What is it? Yeah, so let's say at the start of your statement period you buy a pair of shoes. Let's say that's January 1st.

The statement closes on January 31st, but the due date for that statement isn't actually until another 21-25 days after the statement closes. So if you buy something on January 1st, you could potentially not pay for that purchase until February 25th. That's 55 days between when you made the purchase and when it's actually paid for. And that time period is what is known as the float.

Yeah, that's helpful. So in other words, living off the float is this period of time between when you bought something and when you pay for it. But credit card float doesn't mean you are paying interest for that purchase, so explain that to our listeners. Yeah, as long as you're paying your credit card statement off in full by the due date, you actually won't pay any interest for this purchase. So using our previous example, you would get up to 55 days to borrow that money interest-free. Yeah, which sounds like a pretty good deal if you pay the statement in full by the due date.

So what's the catch? Yeah, unfortunately the float creates an interesting situation where you may unknowingly be one payment behind. And what I mean by that is if you're able to pay off your credit card statement in full each month, you might be using this month's income to pay for last month's expenses. Yeah, interesting. So even if you pay your credit card statement in full each month, you might unknowingly be doing what's called riding the float, and maybe one payment behind from a cash flow perspective.

Unpack that just a bit more. Yeah, so the key is to make sure that you are always fully funded when you are using credit cards. And by that I simply mean you can pay off your credit card balances in full at any time. So not just the statement balance, but the full credit card balance.

And you can determine this rather simply by adding up your current credit card balances and subtracting it from your checking account. If you don't have enough money to pay for those credit cards in full, you're riding the float. Yeah, so it's really all about making sure you have the money in your account before you buy something with a credit card. When the bill comes in, you can then pay it out of checking, for example, without having to dip into your savings.

Yeah, that's exactly right. And this is where sometimes people get caught off guard. I've had several conversations with people recently who pay their credit card statement in full each month, but they don't realize they're riding the float.

And then they come up to this decision to make a big purchase, not realizing that they actually don't have enough money to cover that expense. And so the float can catch people off guard if you're not fully funding your credit cards. Now, Chad, I know you discovered this as you were helping some of our FaithFi app users. So explain how the FaithFi app helps with this. Yeah, so the FaithFi app is a great system to help you actually address this float issue, specifically our envelope system. We have this unique capability where you can actually reconcile your credit card envelopes to make sure that you always have enough money set aside to pay your credit cards off in full. And so we really encourage people to check out the FaithFi app if credit card float is of any concern or you want to make sure that you stay on top of it.

Excellent. Yeah, we don't want you to ride that float and the FaithFi app can help you make sure you have the money set aside to pay those cards in full. Check it out, faithfi.com.

Just click app or head to your app store. Chad, thanks for being here. Thanks, Rob. That's Chad Clark, executive director here at FaithFi. Again, if you want to download the app today, go to faithfi.com and click app. All right, your calls are next. The number 800-525-7000.

That's 800-525-7000. I'm Rob West and this is Faith and Finance. We'll be right back. If you enjoy this radio program, you're going to love all of the many different resources waiting for you at faithfi.com and the FaithFi app. You'll find powerful wisdom, free podcasts, articles, videos, and more from leading voices such as Randy Alcorn, Howard Dayton, Ron Blue, and our own Rob West.

Grow in wisdom and knowledge by connecting with a community of thousands of Christians striving to be good and faithful stewards at faithfi.com or by downloading the FaithFi app. Faith and Finance is grateful for support from Sound Mind Investing. For more than 30 years, they've offered financial wisdom for living well. SMI provides step-by-step guidance for do-it-yourself investors, from those just getting started to those getting ready for retirement. More information, including a short video webinar on profit and peace of mind, no matter what's happening in the market, is available at soundmindinvesting.org. Well, I'm so glad you've joined us today for Faith and Finance.

I'm Rob West. We're going to begin taking your calls and questions here in just a moment. This is the program we dedicate to helping you live as a faithful steward. Now, we're stewardship over all kinds of things. Once we surrender our lives to Jesus, we're stewards of our time and we're stewards of our gifts and abilities. We're stewards of God's word and our relationships, but we're also stewards of God's money. That's right, it all belongs to him and whatever you have been entrusted, however little or however much, no matter what season you're in, a season of struggle or a season of plenty or surplus, we want to be found faithful. That means putting everything under the Lordship of Christ, accepting our role as steward with stewardship responsibilities, not ownership rights. As a caretaker of the King of Kings resources and heeding the Council of Scripture, a biblical worldview that should inform our view of money and its role and place in our lives as a tool to accomplish God's purposes, which includes enjoying it and providing, but it also includes, I think, giving it away and even deploying it through our investments. Remember, the purpose of investment is to supply capital to businesses that are providing goods and services and getting a return in exchange for that.

Well, what if we align our values with our investments? So all of these things are kind of wrapped up in this idea of financial decision making and we want to help you on that journey as you get very specific about the questions you're wrestling with in your financial life. So the question for you is, what's on your mind today?

Let's talk about it. I've got lines open, you can call right now, they will be filling, so this is a great time to call with your financial question. The number 800-525-7000.

That's 800-525-7000 you can call right now and we'll begin taking those questions here in just a moment. In the news today, it's common knowledge that the Social Security Trust Fund will be empty by around 2035. It's a bit of a moving target, but that's kind of the consensus at this point. Estimates are that benefits would then have to be reduced to about 83% of current levels. I've seen numbers as low as 75%, but certainly 75% is on the low end. That's though, of course, unless Congress takes steps to correct the problem.

But what should those steps be? That's a subject of a lot of debate. A new survey of 2200 Americans by the National Academy of Social Insurance shows that 85% of respondents want benefits to stay the same or increase. That's not surprising. What is a little surprising is that they don't mind raising FICA taxes on employees from 6.2% to 7.2% to solve the funding shortfall. Only 15% of respondents said they wouldn't mind reducing benefits if it meant avoiding a tax increase. Even more popular among those surveyed was eliminating the payroll tax cap for individuals earning over $400,000. Without the cap, those taxes could increase on higher income earners even though their Social Security benefits would stay the same.

They cap out. Also, those surveyed were not enthusiastic about raising Social Security's full retirement age, now at 67, as a way to solve the problems that we have and the program's funding shortfall. This, of course, will be a subject of much debate, especially as we draw closer to that 2035 date where the trust fund runs dry. But again, keep in mind, that doesn't mean without changes everything, you know, those entitlements go away. They will just be reduced to somewhere between 75 and 83% of current levels. But my thought is that's not going to happen.

That's just too unpopular for today's legislators. And so as a result, we will see changes. It will probably be a combination of some of these things that we talked about today. Higher FICA taxes, perhaps pushing out the full retirement age, perhaps lifting that payroll tax cap for individuals that are high earners. I will say another piece of this is growing our economy, which is why I think President Trump's focus on deregulation and energy and really getting out of the way of business to do what business does, you know, can also be a part of the solution here as well.

But with all that said, it's something we'll continue to watch for sure. All right. Let's dive into your questions today.

I've got room for you. If you have a financial question today, whether it's your spending plan and trying to stay on budget, maybe it's paying off some debt. Perhaps you want to get that credit score up or invest wisely for the future.

Maybe you're just wrestling with something you see in scripture related to money management. You want to talk about it. All of those topics and more are in play today. Eight hundred five, two, five, seven thousand you can call right now. Let's go to Marilyn. Hi, Denise. You'll be first up. Go ahead. Hi. Thank you for taking my call.

I just have a question. The thing is, my husband had heart surgery in 2021 of October. And from that operation, he became bed bound and paralyzed. Oh, he was in two years. He was in two and he just heard sixty five.

He was in two facilities for eight months and he almost died four times. And I said, you know what? I got to bring him home. And he's been with home with me since twenty twenty one. So I'm his caregiver. I'm about so I don't have a job.

I take care of him full time. I'm like twenty thousand dollars in debt. I called National Debt Relief yesterday and to try to get some guidance from them. And they said that I would have a payment of three seventeen for forty eight months. And I'm like, OK, right now I don't have an income. He's just getting the Social Security.

And that's how we like making it, you know, to live. So I was wondering if you can give me some guidance. What can I do? I did apply for a waiver program that they have in Maryland that you will get paid to take care of your loved ones. However, I did the application in twenty twenty three and I'm still is pending and I know they said the funds are like tied up. So if you can help me try to figure out and navigate through this, because I feel bad that, you know, I'm in this situation. And the next thing I had an account with Lending Club for four thousand dollars and I had got the payment down to eighteen hundred dollars.

But because of not having any money, the payment is back to four thousand dollars. I found that out yesterday. So I don't know. But thank you for taking my call. Well, happy to, Denise. And I'm so sorry to hear about your husband and grateful for your willingness to step in there. I know that's created some challenges financially.

And so we want to certainly help you make a step forward here. The last thing you said about the two thousand going to four thousand, what was that related to? That was a personal loan that I had got. I had got a four thousand dollar loan with Lenders Club and I got them from Credit Card Karma. I got them off of there and I had paid everything down before life happened, paid everything down to like eighteen hundred dollars. But I found out yesterday that the balance is back to four thousand.

I guess with them adding all the fees and stuff. Yeah, yeah, yeah. I understand. Is there a possibility that, you know, have you checked, for instance, with Medicaid about possibly getting some in-home assistance? I know some states Medicaid programs offer home and community based services. Well, believe it or not, they denied me. Interesting.

Several times. They denied me for food stamps and I'm like, I'm not working. And basically what my husband gets is paid the rent. OK. Well, what I want you to do is reach out to our friends at Christian Credit Counselors. I also want to connect you with one of our certified Christian financial counselors as well to walk alongside you just to help you think about the budget, your steps forward.

And then Christian Credit Counselors can get those interest rates down if we can schedule a monthly payment. Stay on the line. We'll talk more off the air.

We'll be right back. We are grateful for support from Crossmark Global Investments. They are a faith based firm with a goal of offering values based investments to help align financial choices and faith, ensuring a portfolio that reflects what matters most. Crossmark does this through investment solutions that span the capital market spectrum from large cap to small cap strategies, including equity, fixed income and balanced strategies. They are led by industry veteran Bob Doll, CFA, a regular guest on the faith and finance program.

More information is available at Crossmark Global dot com. Do you feel like your hands are tied with debt, preventing you from serving God? If you have credit card debt, Christian Credit Counselors can help through our debt management program. We can get you out of credit card debt about 80 percent faster while honoring your debt in full. For more information on how Christian Credit Counselors can help visit Christian Credit Counselors dot org. That's Christian Credit Counselors dot org or call eight hundred five five seven one nine eight five eight hundred five five seven one nine eight five. Thanks for joining us today on faith and finance. Well, you know, it comes up all the time.

And by the way, we will be headed back to the phones here in just a second. But the question that we get is, you know, should I leave or is it OK to leave different amounts to my kids? And, you know, the state planning can be challenging. I mean, here's the reality. It's natural to want to treat our kids equally. However, I think the answer to this question lies in a principle and you'll find it in Ron Blue's book Splitting Airs. He calls it the uniqueness principle. And it's this. If you love your children equally, but you treat them uniquely.

And here's the idea. Each child, of course, is different financially, emotionally and spiritually. And, you know, good stewardship means recognizing these differences and allocating resources accordingly. Now, we can often think that treating our kids uniquely shows favoritism, but it really doesn't have to be that way. The Bible warns against favoritism, of course.

We see that in the story of Jacob and Joseph in Genesis 37. So, you know, but I think equal love often requires unique treatment because the stewards of God's resources, we're called to manage them wisely and ensure that our decisions reflect both love and responsibility. And I think a critical aspect of estate planning is considering each child's ability to manage wealth responsibly. So giving a significant inheritance to a child who struggles with financial discipline can do more harm than good. And so perhaps the big idea is that stewardship requires us to make decisions not solely based on fairness, but also on what is ultimately in their best interest.

Remember, you are the steward and this is the last stewardship decision you will make choosing the next steward. Now, many parents worry that unequal distributions will cause resentment. I think the key to avoiding that is communication. Honest, open conversations while you're living can help your children understand your reasoning and help to prevent future conflicts. But I think ultimately, wealth transfer needs to reflect God's wisdom, not just human emotions, because we're accountable for how we allocate his resources. And so that's why I think we look at financial need.

We look at spiritual maturity. We also look at life circumstances and prayerfully consider all of them as we're making these decisions. And remember, it's not a one and done decision. You see, your wealth transfer decisions around inheritance and everything else can change over time until the Lord calls you home. And so I think, you know, so often folks will call the program and they're stuck because that's just weighing on them that decision. Well, what if you go ahead and make the decision now based on everything you know today and the prayer that you put into it, knowing that we may change this a year from now or six months from now or five years or ten years from now. And that perhaps gets you off the fence to say, all right, we're going to put this in place knowing that this isn't a forever decision. And as we watch our kids mature, we watch how they progress in their spiritual journey, we may make changes over time. By the way, if you want to explore this topic further and really all of the kind of biblical underpinnings of wealth transfer, that book Splitting Errors from Ron Blue is the best, in my opinion. It's splitting errors, giving your money and your things to your children without ruining their lives.

You'll find it wherever you buy books. I hope that's helpful to you. All right. Let's head back to the phones.

Tennessee is where Lindsay is located. Go ahead. I have a question. So about 10 years ago, I was with the company and I had a 401k open with them for, I'll say, about 10, 13 years. We, the business end up having a name change and we had the option to either transfer our 401k to their new 401k company or keep it there. So I made the decision to keep my funds in the original account that it was in. So then I've been contributing to the new account. Now I'm unable to find the old account. I've tried to search for it. I reached out to different companies that thought that the account was there.

I can't find it. Can you provide any recommendations or maybe a website or some way I can try to find this old 401k account that I have? Yeah. So it's the same employer, just a new plan administrator that you have now? Actually it's a name change, a whole new company. Whole new company. Okay. Yeah.

So it was bought out by a company. Got it. And do you have the name of the custodian from an old statement or something that you received from that old 401k? I don't. I can't find anything.

Okay. So no paperwork, no emails. I mean, what you need to figure out is, and maybe you need to call the current HR department and just say, listen, you know, I need to know who the term you're looking for is the plan administrator. I need to know who the plan administrator was from the 401k before the merger or buyout occurred. And they should know that because there was a massive process for the new plan administrator to take over or to assume that responsibility for that old plan administrator. And, you know, that's what you're looking for.

Is it Fidelity or, you know, is it TIAA-CREF or is it Schwab or, you know, any of the big firms that they typically use? And then you can call that company, give them your social security number and they should be able to chase that down. I mean, there are some national databases, you know, like unclaimed retirement benefits.com and things like that. But I would probably, I think you're going to have more success in starting with your current HR department and saying, you know, I need to chase down that plan administrator from the previous company. And if they don't want to be bothered with it, don't take no for an answer.

Keep moving it up to somebody who can, you know, has the know how to get that information for you. Okay. Sounds good.

I'll take that route. Thank you so much. All right, Lindsay.

Absolutely. All the best to you. Thanks for calling today.

Lucille is in Illinois. Go right ahead. Thank you so much for taking my call. I have an opportunity to do a three year special catch up.

Yes. So I'm going to be able to contribute like double what you contribute. I'm 58. And I was wondering, what should I be considering? Should I just do it all as 457 or because within the 457, I have an opportunity to invest some of that as Roth. I don't have a lot of Roth account, you know, balance on my Roth account.

What should I be considering to split it or am I better off doing all of it as deferred? Yeah. Yeah. You know, I've mentioned before there was a study done by some researchers that looked at thousands of actual retirees to determine what is the optimal mix between tax free and tax deferred retirement accounts once they got to retirement, started drawing it down. And what they found is and this was just based on the study they did that the optimal scenario was if you take your age and you add 20 to it. So you're 58 add 20 to it.

That's 78. That that would be the portion you should put in traditional. And then you put the rest in the Roth. And the idea was that you're probably at the peak of your earnings year, so you could really benefit from the deduction. But the fact that we don't know what tax rates are going to be in the future, you at least want something going into Roth.

So whether you do 80 to traditional or 70, you know, I think somewhere between 70 and 80 to the traditional and 20 to 30 to the Roth is probably, at least based on this study, an optimal scenario for you. I hope that helps Lucille. Thanks for your call. Big thanks to my team today. Amy, Taylor, Dan and Gabby T on our phones today. We'll see you tomorrow. Faith and Finance is provided by Faith Buy and listeners like you.