The Card Companies Are Winning
Do you think that you got one over on the credit card companies? Is your credit score so high that you have scored one of the premier credit cards on the market? Well, one look at the profit lines of these companies will tell you one thing, nobody is winning against the credit card companies.
The credit card companies are the house at the casino and nobody beats the house. Everything that they do is designed to make you spend, spend, spend and then carry that balance month after month. Take a look at some of the sneaky ways that these companies encourage your spending.
Credit Card Rewards
Those reward programs are not the way for your credit card issuer to give back to their clients. They are in place to get you to put more charges on your card. After all, if you are getting rewarded, why not put your monthly bills on the card and fill your gas tank up with it as well. Then, you can just pay it off at the end of the month and get rewards without the interest.
It is a great plan but it does not always end up that way. Most people will see the low monthly payment come in the mail and decide to not pay off the card in its entirety. This means carrying a balance, just like they wanted you to do.
You might have more discipline, but most will not. Enough people will carry a balance to more than make up for the little bit of money that the companies spent to give you those rewards.
Does it give you a warm and fuzzy feeling to use a card with your families picture on it to pay for your fast food meal? Maybe you feel a bit of pride in your favorite sports team when you see their logo on your Visa.
Maybe yes or maybe not but there is one thing for sure. If you have three cards in your wallet and one is personalized, you are far more likely to grab the personalized one, even if one of the other cards is a debit card.
This means that by allowing you to personalize your card for free, they are increasing the odds of you using your card. And you thought it was just a free perk.
0 Percent Interest Periods
These are great for attracting new customers and getting them to immediately charge up their new cards. Sure, they might have to wait 6 months or more to start earning interest off of you but your card company is patient.
In a perfect world, you would take those low interest card offers and transfer high interest balances over to them. Then you would use the no interest period to pay off your cards quickly. A few people probably actually even do this.
For most, you will use the zero interest period as a time to spend elsewhere. We are too accustomed to immediate gratification to want to pay off a balance that is not being charged interest.
In the end, the card company gets a nice charged up credit card to earn interest off of.
High Credit Lines
The financially responsible are not immune to credit card company tactics.
Let’s say that you have a 3000 dollar balance and you have been carrying close to 800 dollars of balance for nearly a year. Next thing you know, you get a balance increase to 5000 dollars. Why do you need that?
Perhaps because it looks like you were trying to stay under 30 percent like you are supposed to in order to maintain a good score. With a bigger balance, perhaps you will charge your card up to closer to 1500 dollars. You get to maintain your high credit score and the credit card company gets to charge interest on a higher balance. It is a win, win for everyone. Well maybe not everyone but for the card company it sure is.
The bottom line is this, the card companies are like any other company out there, they want to make money. It is silly to think that they make any move unless it is designed to make them more money.
So, next time that you see a nice credit card perk or option, think about the motivation behind it. You can still take advantage of the incentives but know that they are trying to trick you. Perhaps that will help you stay disciplined enough to pay the cards off completely and then pay off the balance each time you receive a statement.