Purchase Card Information
If your agency uses a government-wide commercial purchase card, you must pay the bill for that card on the date that is most economically beneficial to the government.
To figure out when to pay the purchase card (credit card) bill, you can use either
- a downloadable spreadsheet that automatically calculates an answer for you
- a manual formula
Using the spreadsheet
On the Excel Rebate Spreadsheet, you will enter:
- the total amount the agency owes to the card issuer
- the maximum discount the card issuer offers
- the basis points the card issuer offers
(You will find this in your contract with the card issuer.)
Then, Excel will then show you
- what the government will save if you pay as early as possible
- what the government will save if you pay 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 also contains an example to help you.Download Rebate Spreadsheet
Using the formula
To find the best time to pay your purchase card (credit card) bill with the formula, you need to know:
- the basis points that the card issuer offers, which you get from your contract with the card issuer
- the government's Current Value of Funds (CVF) rate
The formula is: (CVF/360) * 100
Here is an example formula calculation: agency X uses a card where the card issuer offers 1.5 basis points. That means that 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%.
With a CVF rate of 6%, the daily basis points of the CVF rate equals 1.67. That is, the government earns the equivalent of 1.67 basis points for each day it delays paying the card issuer.
Here's how the formula gives us the government's basis points:
(CVF/360) * 100
(We write the CVF rate of 6% as the decimal .06)
(.06/360) * 100 = 1.67
Divide .06 by 360.
Multiply the result by 100.
That gives .0016666 = 1.67 basis points.
Agency X must now compare the card issuer's basis points to the government's basis points from the formula.
Card issuer's basis points: 1.5
Government's basis points: 1.67.
Because 1.67 is more than 1.5, Agency X should not pay early. It should pay as close to the payment due date as possible, so the government continues to earn interest on its funds.
However, in another situation, the formula might show that the government's basis points are less than what the card issuer is offering. In that case, the agency should pay as early as possible to maximize savings.
Purchase Card Questions
Yes. The rule defines government-wide commercial purchase cards as "internationally-accepted purchase cards available to all Federal agencies under a General Services Administration contract for the purpose of making simplified acquisitions of up to the threshold set by the Federal Acquisition Regulation or for travel expenses or payment, for purchases of fuel, or other purposes as authorized by the contract." For more information, read 5 CFR Part 1315.2(x).
Maybe. You must figure out whether the government benefits more by taking the rebate (paying early) or by earning interest (keeping the money until the bill is due). Use the interest calculator or formula to figure out when to pay the purchase card bill.
Last modified 08/07/18