We have a compensatory mortgage account connected to our mortgage, and whatever we earn goes directly into it, to reduce the mortgage. We lived on our credit card for daily expenses for years, as you suggest, and paid off the credit card every month. However, I began to realize that we had to pay a cash advance amount for every transaction we made. I called Heritage Bank and they said, “Yes, every purchase is classified as a cash advance, so you immediately pay interest on that transaction.” I’m sure we weren’t used to charging interest in the past, as we’ve been doing for years. We have therefore decided to no longer use our credit cards and to make purchases only from our clearing account. Unfortunately, it comes out of this account right away, so doesn’t stay on our mortgage any longer. I would really appreciate your thoughts on this. Maybe it’s different with the other banks? Trac, Queensland
Well done for cleverly exploiting the banking system, with what I call the “steroid compensation strategy”. It helped me a lot to pay off my mortgage in just seven years, saving me about $ 200,000 in interest.
So let’s get it back because something is wrong with the charges you described.
If you wipe your entire credit card balance every month – as you say you do – you shouldn’t be paying a dime in interest. You should use the bank money for free to save yourself a lot of interest on home loans.
On an average loan of $ 400,000, if you have $ 30,000 in compensation (six months’ salary plus savings for your next vacation, car, couch), plus salaries of maybe $ 10,000 (like you live conservatively off your credit card), you save almost $ 85,000 in interest and save three years over the life of your loan.
Heritage Bank confirms that these are the only circumstances that would trigger a cash advance charge:
♦ Transfer of funds from your credit card account via Heritage Online or Heritage Access Line.
♦ Cash withdrawal, check withdrawal, manual transfer or over-the-counter transfer at a Heritage branch. This includes periodic payments established to transfer funds from your account to another account.
♦ Withdrawals at ATMs and EFTPOS.