Archive for credit

“Rewards” credit cards are scams

Posted in simple living with tags , , on 03/18/2015 by Fox

When I was young, people lived from paycheck to paycheck. Today, it seems like they live from credit card payment to credit card payment.
~Robert Kiyosaki

I know I’ve said it before (and I say it a lot more often in person), but “rebate” or “rewards” credit cards are scams. Not in the overt sense, but in more subtle ways.

One is the simple fact that it costs retailers to run cards. The more people who use cards, the more clout credit card companies have to set pricing for card readers. I work for a company that doesn’t regularly deal with the general public, and we don’t have a card reader. I had someone try to pay for something in our shop and get pissy with me because we didn’t have a card reader. Fuck you, too, dude. He was an old guy, which surprised me. Cash or check, the old fashioned way.

The more cards get used, the more retailers pay to accept payments, the more prices for goods rise to compensate. You will pay for those airline miles, one way or another. So will I, and everyone else.

The other way is more direct. I was recently offered a credit card that supposedly would “help reduce [my] mortgage principal balance by making everyday net purchases.”

Let me tell you internets, that’s actually kind of tempting. Then, being a tightwad and not a fool, I ran the numbers. The rebate (after the bullshit introductory period, which should never even be considered in such things), is one percent of purchases. Disbursements to your mortgage payment only occur once twenty-five dollars are gained in rebates.

I would need to spend $2,500 to earn $25 back in “rewards.”

In the meantime, if I carried a balance like 34% of Americans do, I’d be charged about 20% APR.

One percent cash back.
Twenty percent APR.
Does that seem worth it to you?

My biggest reason for not doing this is the temptation aspect. If I wanted rewards, I’d need to use the card for more than just the occasional internet purchase. And then I’d lose control and fall off my financial tightrope. I’m not a financial god, and if I was, I’d be some flawed Greco-Roman version. I fail (often, recently) and my main mode of financial control involves using cash to promote artificial scarcity. I’d have to become MUCH more stringent if I used a card for everyday purposes, and that’s hard for me. The system I have now works great. Fucking with it for a mere one percent rebate applied to my mortgage would be catastrophic.

There are a few situations in which credit cards are viable options, and in those situations, a rewards card (if the APR and other detriments were comparable) may be ideal. If you can manage to budget despite using a credit card and pay off your balance monthly, sure, get the card you want. But I’m not going to be able to get past that 1%/20% thing. That’s past Sketchytown and right smack dab in the middle of Areyoufuckingkiddingmeville.

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