Credit card cash back programs.
- Thread starter macarose
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The credit card banks get a mercantile discount from stores-- it's around 2.5%. Stores know that the *average* shopper buys significantly more with plastic so it's worth the hit for them. Banks kick a portion of this back to the user, hoping to trap said user into paying fees or interest willingly or accidentally.Free money? Now how can that possibly be legal. Credit, pay in full and earn cash rewards? Now explain this to me like I’m a six year old….
No bank does 5% on everything, all the time, so they do it for "conquest", to steal a customer from another bank then hope they get lazy and stick around with the card even when it drops the promo kickback to an actually profitable 1-2%.
I have a citi card and a chase card that offer 5% on rotating categories-- gas, food, utilities, travel. They top out at $300 a year in kickbacks so I have to track them and switch out when I near that mark. It's work keeping track of it all. There's a subreddit, /r/churning for people looking for ideas. My NFCU Visa pays 1.75% on everything and is the default when I can't do better.
That's the truth ...brief statement but well said!
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Must not know about my PenFed gas card. 5% 24/7/365. Not everything, just gasoline.
Nothing to redeem. 5% is deducted every statement. No idea how many years we’ve had it but we’ve never needed any gas rotating category as a result.
Another part of the equation is, although there is a cost to accepting credit cards to the merchant, it’s probably cheaper in the long run than accepting cash. Cash is labor intensive and there is always shrinkage.
I don't know about some of you folks. I use cash back credit cards to pay for utility bills, gasoline, groceries, drug store prescriptions. Never, ever have I thought to myself, "Gee, I am getting a couple percent rebate, so I better buy MORE utility service, gasoline, groceries, or prescription drugs."
And GM cards got me some healthy discounts on my Corvettes
And GM cards got me some healthy discounts on my Corvettes
My GM card got me nice discounts on my old Malibu and the Cobalt SS currently in my garage.
CC APR is like 30% right now and their business model is to lure people in with those rewards who think they are financially responsible and think they won't pay interest but then they spend a little bit too much because they maybe lost their job for a few weeks and now they're paying interest on the $500 of necessities and it doesn't take any amount of time for them to get their money back on whatever rewards they paid out with the interest you paid them. The accounting is quite simple really they will never pay out more rewards than the amount of money they get paid in interest, late fees, and cash advance fees. You can tell how an issuer is doing because sometimes they'll reduce the rewards by like half a percent or increase it slightly and that tells you if they have customers who are being responsible or irresponsible. if the customers are being very irresponsible they issuer can crank the rewards up a little bit more to get more people to come in or give a sign up bonus instead since they're very cash flow positive on that particular program and can re invest those profits to get more to sign up to then make more profit and if the customers are being too responsible they'll have to lower the rewards a little bit to stay profitable. I have multiple credit cards and I never once felt the urge to spend more than I was already going to spend with a debit card anyway. 'm still going to have to still pay for it anyway whether it's on credit or debit. Can't pay a penny of interest if you have all your cards auto pay from your savings. And Dave Ramsey's argument against credit card rewards is just nonsensical.
I used to use different cards for this and that but it gets to be a chore. No more. I have one card. An amex gold. I have one backup that I use for places that won't take my amex. The rest I still have but they don't get used.
Except...I was going to spend it anyway...lol. Literally, I HAVE TO BUY supplies to make money. I HAD TO BUY a $60K panorex machine because I can't practice without one. I HAD TO BUY $50K in new computers because the old computers were 9 years old and ran a Windows version that was no longer supported my MS. I HAVE TO BUY groceries to feed myself and my family and that pays me 4.4%. I HAVE TO BUY gas for my three vehicles and that pays me 3.3%. You can keep doubling down that this isn't a legitimate reason to use CCs and get +2% but you're just wrong. I have literally generated SIX FIGURES out of CC rewards in SIX YEARS. I maybe an extreme example but there are others just like me and Dave would chastise us all the same. Why would I NOT do what I'm doing. Why would I now want +$100K dollars earning 30% in the last year? Why?!
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Financial security though spending, and receiving what amounts to 2% for doing it. Not you of course, your way too smart for that. I fully understand you have the ability to game the system, and come out ahead. It's a good thing there aren't more like you, otherwise these banks and CC companies would all go broke giving away, "free money"!
It's not free money. They give just a portion of what profit they make on those cards in the form of rewards because they get more from people using them wrong paying interest and fees. At worst it's break even for them.
There are FB groups and forums with people who make my "gaming the system" look like child's play. So I fully understand I'm an exception, but we exist, and that fine, except Dave leaves no room for any exceptions in any of his "products", and that's my point. Dave is a millionaire because he sells a product that he needs to be a consistent message for fear that if he acknowledges the exceptions, fewer people would buy what he's selling. That's also fine, except he's so insistent about it and so his acolytes are so insistent about it, that they obnoxiously come into every conversation believing they and Dave are the smartest people in the room, and anyone who thinks differently is an idiot, that includes comments in this thread.
That is what I'm railing against here...not that CC companies make money or that people act irresponsibly, but that you're somehow an idiot if you know how to play the game. Plus, I can't stand his preachy crap and the fact that he uses his platform to proselytize as a hook to make money, but that's a different issue for me.
Oh it's free alright and I love it. If I dont take it someone else will. For those who want to buy on credit, that is their choice.
No different than buying a car on credit or home with a 30 year mortgage. Choice is good and so is being a free individual instead of a superior "being" telling you what you can and cannot do.
For those who are weak and need help, Dave Ramsey is a solid place to start. Choice is good. He has some good points for sure.
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I agree, and that is the overall problem. I'm giving these guys jazz. The problem is for every person who doesn't spend a single dollar more than they otherwise would, there are literally tens of thousands who do, and misuse it, and get themselves more into troublesome debt.
This weakens our overall economy. Credit card debt already is way out of kilter in this country. Money translates into power, and we've become a nation of debtors. And all of this "cash back" and "points" nonsense just makes a bad problem even worse overall.
The banks obviously wouldn't be doing it if it wasn't making them money. Just like Amazon with their nonsense with, "Add an additional $38.00 to your cart, and get $5.00 worth of, "free shipping". Spend more than you otherwise would, and you'll end up with less.
That's the name of the game. Like Robert De Niro said in the movie, "Casino".... The name of the game is to keep them playing. The more they play, the more they lose. In the end, we get it all".
Look at how many people are underwater on their car loans. They all think they got a, "good deal" as well. Just ask them. This type of crap ruins economies over time. We have far too many people out there that require financial protection from themselves.
And all of this type of financial gamesmanship doesn't help, it only hurts. With that said, we are a capitalist society. So why not kill off the starving, seeing as it costs too much to feed them anyway?
https://jalopnik.com/everyone-is-underwater-on-their-car-loans-as-values-plu-1851340337#:~:text=Every year, the price of,over-leveraged trade than ever.
That's what we do and get a nice payback from the bank. There is never a carryover amount owed by us from month to month. I know that makes us fortunate and we don't feel the need to go into debt for anything.
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Unfortunately the practice of "living within your means", makes no sense to many folks.
