How to Pay a Federal Agency's Credit Card Bill

This page applies to all government-wide commercial purchase cards. That includes centrally-billed travel cards, fleet cards, and other credit cards. On this page, we refer to all of these as "a credit card."

If your agency uses a credit card, you must pay the bill for that card on the date that is best for the government.

Sometimes, the card issuer offers "basis points," and paying early saves money. Sometimes, paying as late as possible without incurring late fees and penalties is best.

To figure out when to pay the credit card bill, you can use either:

• an Excel spreadsheet that automatically calculates the answer for you, or
• a formula to calculate the answer yourself

Using the spreadsheet

On the spreadsheet, you enter:

• the total amount the agency owes
• the maximum discount the card issuer offers
• the basis points the card issuer offers
  (This is in your agency's contract with the card issuer.)

Excel then shows you what the government will save if you pay

• as early as possible
• as late as possible – at the due date

If paying early will save more money than paying at the due date, you should accept the card issuer's rebate and pay early. If paying at the due date will save more money than paying early, you should wait and pay as close to the due date as possible.

The spreadsheet includes an example.

Using the formula

With the formula, you are seeing whether what the government earns in interest by holding on to the money is more or less than what the government saves by paying early.

To calculate the best time to pay your agency's credit card bill, use this formula:

• (CVF/360) * 100

To use the formula, you need 2 pieces of information:

• the basis points that the card issuer offers, which you get from your agency's contract with the card issuer
• the government's current Value of funds rate

You compare the results of the formula to the card issuer's basis points:

• Result of the formula is LESS than the card issuer's basis points — Pay as early as possible
• Result of the formula is MORE than the card issuer's basis points — Pay as late as possible

Seeing an example of the formula

Agency X has a contract with a card issuer that gives them 1.5 basis points.

Every day the agency delays paying, the agency loses 1.5 basis points in savings.

The 1.5 basis points equals a maximum discount rate of 1.06 percent

Using the maximum discount rate of 1.06%, the CVF is 6%.

To use the formula, convert 6% to the decimal .06

(.06/360) * 100

Dividing .06 by 360, we get 0.00016666667

Multiplying that result by 100, we get 0.016666667

Rounding that number to 0.0167, we have the result of 1.67 basis points for the government.

Comparing 1.67 (government's basis points) to 1.5 (card issuer's basis points), we see that the government is earning more in interest each day than it would save by paying early. Therefore, Agency X should hold on to the money as long as possible. It should pay as close to the credit card bill's due date as possible.

Purchase Card Questions