Yesterday, I read a great post called Credit Cards Don’t Suck…You Suck at Free From Broke. In it, he makes the point that most of the downsides of credit cards can be avoided if you don’t misuse them.
I’m not entirely anti-credit card either, if you’re able to use them responsibly and find a way to benefit from doing so (e.g. reward points, credit history). But even when you’re a financially responsible person, there are still some things about credit cards that suck.
One of my friends uses Citi’s “Thank You” card. One of the things he liked about it was the option to get rewards in an Amazon gift card. However, Citi recently dropped the program. Citi can drop any of its programs, change the points-to-money ratio, and pretty much do whatever it wants when it comes to rewards.
Of course, it’s in the company’s best interest to have a lot of different programs and to make people feel like they’re getting the best deal by using the card. As consumers, we can (try to) go elsewhere.
What matters most is that we take all of this into consideration when we use credit cards. Don’t buy things you wouldn’t buy in cash just to get rewards. Those potential rewards could evaporate.
I think that rewards cards are a great idea if you’ve proven yourself to be financially disciplined and choose to make all or most of your purchases with them. Just remember that the rewards are an added perk. And if your sole motivation for getting a rewards card is a particular reward that fits your life or is a great gift option, then think hard and have a backup plan because it may go away.
Also, remember that you don’t have to carry a balance to earn reward points or build your credit score.
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I don’t carry a balance month to month, and I tend to use my CC mostly when I travel for vacation and such, then we just pay it off when we get back. My rewards kind of suck just 1 point for every dollar spent. I got a $20,000 set of pots and pans with them a year or two ago.
Kyle’s last blog post: An Attempt to Understand My EIUL
I rant about blaming credit cards all the time. People will blame everyone but themselves for their money issues sometimes.
We’ve stuck with Upromise cards this whole time because although the rewards are lower, the program didn’t seem likely to disappear (and Mr. racked up some spectacular student debt.) We’d be buying food, gas, etc. anyway so we figured we’d take advantage of it.
I read that post and loved it. Yes credit card companies are sneaky, but that’s their job. We are all responsible for our own behavior. I loathe credit card debt and have spent my entire adult life avoiding it. Right now I have quite a bit, a necessary cost to my career transition, but I would never think to lay the blame on any doorstep outside my own.
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I use my Amex Blue whenever I can (we pay it off monthly) because of the points. We see it like you say, as an added bonus. We never go out of our way to buy something just for points but we will use it for the points. And it’s paid of for us too!
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Fair warning, though, re: your last comment. As you probably read in the WP’s Color of Money article this week, credit card companies are starting to take away credit cards which have been held long-term with no payments.
Obviously, you don’t have to hold a balance, but I know some people have advised keeping old credit cards alive without using them in order to up the credit score. This new trend, esp. combined with a downward trend in credit limits, negates that option…
Good thought. The Visa card that used to send a donation to my favorite left-wing cause with every purchase just withdrew from that program. Now you get points toward various products that don’t interest me much. The Costco AMEX card offers an annual cash kick-back. While I don’t buy stuff just for the sake of racking up up the kick-back, I do use that card for all my routine purchases (paying it off at the end of each month).
It’s true you need to use “dormant” cards now and again to keep them from being canceled. A charge of just a couple of bucks will do it.
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Love the points! Every now and again I check in to see what I can buy with them. This week it will be new running shoes for two.
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