What Would You Do: Pay Now or Pay Later?
I have a little financial puzzle before me, and I thought it would be fun to get feedback from the Wise Bread community on it.
My daughter's preschool had a software glitch and failed to bill us for most months since September. We now owe them around $1,000. (Before you get all up in my grill about this, let me assure you that I called the office several times to point out their failure to charge our credit card.)
We have been given the following options: Pay it all now, pay it in a few installments, or start paying the regular $200 a month now and continue paying for about 6 months after the school year ends.
Normally, I would choose the last option. After all, being allowed to pay in installments, interest-free is a gift. That would also allow us to take the tuition out of our budget each month, as we had originally hoped to manage, instead of paying the lump sum out of our home-improvement account.
However, I have the Citibank CashReturns card, and the 5% introductory cash-back rate ends next week.
If I pay up front, I'll get 5 percent back. I'll also get the good karma of helping out our village, which runs the preschool. If I keep that $1,000 in my money-market account instead, I'll make 2.7 percent on it, and still get 1 percent back from each payment once my credit card reverts to the regular cash-back rate. However, I'll also lose the opportunity to spend that money right away on home improvements. And I will have to feel that uncomfortable feeling of dipping into savings to pay for a regular expense, which should have come out of the monthly budget.
As a side note, I was surprised how angry the other parents were when they got a letter notifying them of the autopay glitch. I was actually thankful for the unplanned billing delay, since despite our intentions I would have had a hard time paying the tuition out of my monthly budget last fall.
Do you consider it your responsibility to check that you are being properly billed when you sign up to pay monthly expenses on your credit card? If someone hit you with a $1,000 bill instead of five monthly $200 bills, would you be angry? Or would you feel like you lucked out because you got to keep your money longer?