Rewards when building a new house

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Joined: Sat Jun 23, 2012 7:58 am
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Rewards when building a new house

Postby lucky » Sat Jun 23, 2012 8:25 am

Does anyone have any thoughts on a good strategy for using a rewards card to float new construction purchases? The payment to the credit card would ultimately come from a construction loan.

The only hick-up I currently see is possibly being limited by available credit. Would this not be overcome by simply prepaying the credit card the necessary amount out of the construction loan account?

For example:

  1. Lumber company invoices me $30k on delivered lumber.
  2. I submit a draw request to the bank for $30k.
  3. Bank deposits $30k into my construction loan account.
  4. I send $30k check to credit card and allow a few days for it to be applied to my account.
  5. I call lumber company and charge the invoice to the credit card.

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Location: USA

Postby JNK » Wed Jun 27, 2012 1:14 am

In regards to your idea, I don't think it's a bad one especially if you already have a financing plan set up to pay for your homebuilding because your card would be guaranteed to be paid off in full which would negate any concerns about generating additional interest or finance charges.

The best card for you (if you decide to use a card) would depend on a few factors including: Where do you plan on making most of your major purchases? Are you planning on making most of your major purchases during a certain time period or will it be scattered over the course of a longer period of time? Is this a long term continuous project or will you be engaging in other major home improvement projects once this project is finished? Is this for personal or business? How much on average do you anticipate you would want to charge on the card during a single billing cycle?

Also, what kinds of rewards would you like to earn? Are you the traveling sort of person, cash back sort of person, or gift cards sort of person or everything else or anything else sort of person?

That said, when it comes to credit cards offering rewards that especially reward home improvement, the card I would recommend doesn't exist anymore. Instead, what is out there are all the reward cards that ROTATE their best categories around every quarter so that during one quarter home improvement might earn 5% but on the next quarter it might be back down to 1%. Furthermore, many of the rewards cards that may especially reward you for home improvement categories CAP your rewards after a certain level of spending.

I would figure out which cards would offer the best bang for your buck in terms of rewards (what kind of rewards and how you like them) and investigate what cards out of these are rewarding the highest in the home improvements tier (if any) and then see if you can get a gauge on what CL you might be able to get with them (if they are credit cards) and if they'd be willing to let you 'prepay' your account. The fact that you would have a dedicated payment system for the project might help in this aspect.

A particular possibility to consider might be a charge card as charge cards don't have a preset spending limit per se (and conversely MUST be paid off in full at the bill's due date unless the card is a hybrid) and might be more lenient on allowing you to make a 30K charge in one go without even having to bother with pre-paying.

Also, if you intend to do a lot of shopping at Lowes or Home Depot, you might want to consider looking at their credit card/store credit/financing options perhaps in conjunction with whatever other financing options you will be utilizing. For many people, saving a little extra in-store or having special store benefits wouldn't be worth the card/credit, but for you, it very well might be and if you're doing this for business, you might have even better opportunities available to you.

Sorry I can't be of much more help otherwise; I've financed home improvement projects before, but not nearly to the scale that you are about to do so I don't have much experience, but I hope other people might be able to offer more concrete suggestions!
Personal Collection:

AMEX: Everyday (MR), Macy's (cobranded)
MASTER: Citibank Dividend Platinum Select (non-World version)
VISA: Chase Amazon Signature, Chase (bank issued)
GE: Care Credit (medical expenses), Macy's (store), JCP (store)

Business Collection:

AMEX: Costco True Earnings
VISA: Chase Ink Cash

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