Can You REALLY Win with Credit Cards?
January 5th, 2008 by Ana
Welcome to the third day of the Great Credit Card Debate! Madison wakes up much earlier than I do, and has already addressed the points I made yesterday in her post this morning And the Credit Card Debate Continues…this may end up as a long-term ongoing thing! LOL Madison contends that most of my points against credit cards all involve carrying a balance and paying interest, which she says she does not do. Then she says she makes about $11,000 a year on her credit card arbitrage.
Credit card arbitrage sounds like a major hassle to me! It takes a huge amount of organization and vigilance, and TIME when mistakes happen. I don’t know about y’all, but nothing will put me in a bad mood like being on hold for 20 minutes or more while listening to inane commercials instead of hold music to talk to an alleged “customer service” representative who may or may not be able to fix the problem…and if not you get put on hold again to wait for someone who is supposed to be higher up on the food chain to finally answer the line who again may or may not be able to fix the problem. Even when you have TWO of them say it’s fixed, Lynnae has discovered it still might not be fixed (read about her continuing war with the evil Citibank here). In general I detest the automated menus and long wait times on hold, but today I am particularly cranky after getting my cell phone bill straightened out.
The thing Madison and many others who “love” their credit cards keep saying is that they love their rewards. I view rewards as a fishing lure for people: it looks great and often you don’t see the hooks on it. I can honestly say I have not seen any credit card reward that is enticing enough for my to put up with credit card companies’ games.
I’m one of these bothersome consumers who will not sign anything until I have both read and understand the fine print, because “What the large print giveth, the small print taketh.” (If anyone knows who originally said that quip, let me know so I can give proper credit, because I love that saying!) And I cannot understand those user agreements because they have so many “gotchas” written into them. Professor Elizabeth Warren of Harvard Law School says she isn’t even sure what they say (watch the movie Maxed Out to see her interview) and she has a PhD.
Along with the technicalities of the intentionally ambiguous user agreements, let’s step back and take a look at the big picture. In a contest of You vs. the Multi-Billion Dollar credit card companies who each have a team of business lawyers on staff, who is more likely to win? The occasional lucky or super-smart person will triumph from time to time, but the majority of people will lose against odds like that. It’s like trying to win in a casino, where the odds are always in favor of the house. Credit card user agreements are written to stack the odds in the company’s favor, not yours.
Finally, Madison says she doesn’t think credit card companies are like venomous snakes (as I likened them to yesterday) but asks:
What I’d really like you to consider is if you only use a credit card for what you can afford, you don’t carry a balance and don’t pay interest aren’t credit cards more like soft cuddly teddy bears?
Not TEDDY bears, Madison…real bears. Big, impressive, massive teeth and claws! They are wonderful subjects for works of art, but I sure don’t want one in my house. In fact, I’ll even skip on the opportunity to simply pet one. And my beef isn’t with the little plastic rectangles themselves, but the behemoth corporations behind them. Credit card companies are out to get you financially, although they put a little spin on it to say their goal is corporate profitability.
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January 5th, 2008 at 3:11 pm
You know I’m not a fan of credit card companies right now. Grrrrrr.
January 5th, 2008 at 9:00 pm
I haven’t seen Maxed Out, I’m going to have to check that out!
January 5th, 2008 at 9:05 pm
What about what the guy from www.mymoneyblog.com does?
~Chris Jones
January 6th, 2008 at 12:24 am
Yeah, well. Some people get a benefit from using credit cards, some get a headache. So, the problem is most likely with the user, not the product itself.
I’ve used credit cards over twenty years and always pay it off in full each month. I only use it to pay bills I would pay anyhow eg. electricity, water, council rates, insurance, petrol, grocery shopping at the supermarket. So the rewards points I get for purchases made on the card give me around $300 each year back (I use to rewards points to get a credit paid onto my card). In recent times I’ve also done credit card arbitrage using 0% balance transfer offers on new cards, and it works out at around $1000 for an hours work filling in a form and setting up the minimum monthly payment to come out of my savings account automatically each month. If you don’t use the CC for anything but the balance transfer offers there are generally no “fine print” issues to worry about.
Of course, if using a credit card encourages you to spend more than you would otherwise, or if you get into debt and end up paying interest on the balance, they don’t appear so hot.
Regards
http://enoughwealth.com
January 6th, 2008 at 3:59 am
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January 6th, 2008 at 8:13 am
[…] the rewards programs in her post yesterday: I can honestly say I have not seen any credit card reward that is enticing enough for me to put up […]
January 6th, 2008 at 10:16 am
Elizabeth Warren is not just a PhD…she is a contract law professor at Harvard Law School, and says she doesn’t quite understand the terms of her credit card agreement.
Yeah, I read the miceprint, although that’s getting more difficult with middle age presbyopia. (I suppose I can call the CC company and invoke ADA and get a large print version for the visually impaired. LOL)
I used CCs for twenty years, but the debit card terms at my local bank, plus being able to solve any problems there locally, face to face, with my former students who have a sense of gratitude towards me, makes me win every time. Much more preferable than being on the phone with an idiot CSR.
There is NOTHING I can do with a credit card that I a) can’t also do with a debit card and/or b) don’t care about.
I don’t need float because I have money. Big piles of money. My investments clear more than any CC arbitrage scheme could make me, and with much less contract risk. (Fairer terms.)
I don’t need a house-of-cards moneymaking scheme like CC arbitrage because a) I am paid well and b) the sideline jobs I have are actually enjoyable activities that I’d rather spend my time on. They also yield a desired product or service that fills a need that someone else has. (OK you can sense me sittin’ on my high horse there.)
I don’t have the time to monitor 89 credit cards like Madison does. It is not my definition of fun. I check accounts daily to reconcile (and it would detect errors or fraud lightning quick), over breakfast, and I just don’t have enough time or energy or caffeine in the morning to check 89 freakin’ credit card accounts! Imagine checking those three bureaus every year. Man, that would be worse than taxes.
Madison is one injury, illness, or layoff away from that house of cards falling down, her rates getting jacked to 33%, and her calling the Dave Ramsey Show begging for help.
January 6th, 2008 at 7:32 pm
Excellent post. I’m staying tuned!
January 7th, 2008 at 2:13 am
Hi Ana,
Like Green3 has pointed out, the view points are really illuminating.
I am reading both yours and Madison’s views.
Thanks.
January 7th, 2008 at 8:31 am
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January 7th, 2008 at 10:21 am
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