Math question about paying down debt with cash back card

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I have a 3% fixed mortgage rate on my house.  I know it's pretty much impossible, but hypothetically speaking, if I could pay my mortgage with the 2% cash back Citi DoubleCash card, would that effectively make my mortgage rate 1%? (3% rate - 2% cash back = 1% mortgage rate)

I feel like that's not accurate so could somebody explain how to calculate what 2% cash back would look like when paying down interest-accumulating debt?  At what interest rate would a 2% cash back card completely cancel out the interest?
 

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Really?

2% of your payment is different than 2% of the principal balance of your mortgage. If your payment is $2000, 2% back is $40. I'm guessing that for a $2000 payment that somewhat less than $1960 is going to the principal.

Making a mortgage payment with a credit card is in all likelihood a cash advance. Wouldn't work.

lol you pay interest on what you owe not what your monthly payment is

If you get a mortgage with a 1 month term then the OP may be on to something. 

Someone that needs to ask this question shouldn't be getting a mortgage in the first place so I'm guessing that this is just message board bait.

jpfern15 said:   would that effectively make my mortgage rate 1%? (3% rate - 2% cash back = 1% mortgage rate)
No.

cme4oil said:   lol you pay interest on what you owe not what your monthly payment is
 

This. To put it in sample numbers, if your mortgage payment is $2000 and let's say at that particular time it is broken down as $800 principal and $1200 interest. The 3% interest for that month cost you $1200. The 2% cashback of your $2000 payment gave you $40.

If you really want to look at the big picture, on a $200K 30 year loan at 3%, your total payments will be $303,555. Your interest payment for 30 years is 103,555. If you had used your 2% cash back card to make all the payments for 30 years, that would've saved you 303,555 X 2% = $6,071.

anthonyu said:   
cme4oil said:   lol you pay interest on what you owe not what your monthly payment is
This. To put it in sample numbers, if your mortgage payment is $2000 and let's say at that particular time it is broken down as $800 principal and $1200 interest. The 3% interest for that month cost you $1200. The 2% cashback of your $2000 payment gave you $40.

If you really want to look at the big picture, on a $200K 30 year loan at 3%, your total payments will be $303,555. Your interest payment for 30 years is 103,555. If you had used your 2% cash back card to make all the payments for 30 years, that would've saved you 303,555 X 2% = $6,071.

This is what I was looking for.  Thanks for the explanation.

Guy's prolly a business major too....

kenblakely said:   Guy's prolly a business major too....Or accounting.

OP all you have to do to reduce your interest to 1% is pay your whole mortgage with the credit card, get your 2% back and pay off the card before the statement closes.



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