Money To Live

August 19, 2009

The Modern Way to Float

Filed under: banks,spending,Uncategorized — by moneytolive @ 5:00 am
Tags: ,

Decades ago, it was common to float a check. For my reader(s?) born after 1990, here are two examples:

  • I go to the grocery store and write a check for $200, even though I know I only have $150 in my bank account. I expect to receive my paycheck tomorrow, so I can count on the paycheck being deposited before the grocery store cashes my check (it used to take several days to a week).
  • Watch the Leonardo DiCaprio movie, Catch Me If You Can.

With the rise of debit cards and check scanning technology, the time between writing a check and the funds being withdrawn has shrunk from a span of days and weeks to a span of seconds and minutes.

The modern way to float a check is to use a credit card.

Credit card users fall into two buckets:

  • “floaters” who use the card for its various perks (rewards, convenience, consumer protection, etc.) and pay the balance in full each month
  • – “debtors” who don’t have the money to pay the balance in full each month

When talking with “debtors,” I have sometimes had trouble explaining how I use my credit card, but now I found a good way to explain it: I use my card the same way people used to float checks. For each transaction, I used to have a grace period of 2-6 weeks to pay for the transaction. With recent legislation (sec. 163), the grace period is now 3-7 weeks!

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