Credit Card Conundrum

[OldShooter]

... It's a harmless hobby that actually creates value - unlike other hobbies that cost money - and it certainly doesn't prevent anyone from investing or creating wealth in any ways.

I think this is a good way to look at it. I have no interest in this hobby, but I had a SCORE mentoring client who was an accountant and she played the game with gusto. She traveled quite a bit with hubby but I don't think she ever paid actual money for the tickets. She was kiting balances as well as paying the points game when she bought things. I think the kiting of balances with consequent rewards for signing up for new cards was her main strategy.

 

[Sunset]

You haven't been doing it right The only way it makes sense is if you DON'T spend more than you normally do and NEVER pay interest - your charges must be settled monthly. Which is not that different than paying cash for everything - except not actually carrying it in your pocket. Fairly easy if you're fiscally responsible adult. I assume we all are on this forum?

I have 15 cards right now (it changes periodically) and use them at different places depending on what benefits they offer. Amex Green gives me $10 off my phone bill, Chase Freedom pays 5pts/1$ spent at Amazon, Chase Reserve pays 10pts/1$ for Spotify and Netflix... etc. These are all purchases I make anyway - why not let banks sweeten the deal? Obviously this is not about $10 savings - I was doing it to fly in business and first class for peanuts (I won't say "free" since premium travel cards have annual fees) and stay in expensive hotels that I normally consider overpriced.

Last year I flew in JAL first class from NY to Tokyo for $5.56 and 72k AA miles and came back in business via Europe on Thai airlines and Lufthansa (maybe 80k Chase UR points?). In 2018 I went to HKG and SE Asia in Finnair business. A year before that, I was in South America... I still have 500k Chase UR points, 300k Amex MR points and 400k AA miles in my accounts. And my credit score (not that I care) is 820. Will those perks be worth anything if travel comes back? Who knows but accumulating these points didn't cost me anything...

It's a harmless hobby that actually creates value - unlike other hobbies that cost money - and it certainly doesn't prevent anyone from investing or creating wealth in any ways.

Exactly.
I just live my life normally, but do pick which CC pays for which item/service rather than simply use 1 card all the time.

The rewards are simply a bonus for my normal activity.

I don't even optimize as I leave bonus cash on the table since I'm not going to be tempted into extra spending, or work at getting any bonus.

 

[teetee]

You haven't been doing it right The only way it makes sense is if you DON'T spend more than you normally do and NEVER pay interest - your charges must be settled monthly. Which is not that different than paying cash for everything - except not actually carrying it in your pocket. Fairly easy if you're fiscally responsible adult. I assume we all are on this forum?

I have 15 cards right now (it changes periodically) and use them at different places depending on what benefits they offer. Amex Green gives me $10 off my phone bill, Chase Freedom pays 5pts/1$ spent at Amazon, Chase Reserve pays 10pts/1$ for Spotify and Netflix... etc. These are all purchases I make anyway - why not let banks sweeten the deal? Obviously this is not about $10 savings - I was doing it to fly in business and first class for peanuts (I won't say "free" since premium travel cards have annual fees) and stay in expensive hotels that I normally consider overpriced.

Last year I flew in JAL first class from NY to Tokyo for $5.56 and 72k AA miles and came back in business via Europe on Thai airlines and Lufthansa (maybe 80k Chase UR points?). In 2018 I went to HKG and SE Asia in Finnair business. A year before that, I was in South America... I still have 500k Chase UR points, 300k Amex MR points and 400k AA miles in my accounts. And my credit score (not that I care) is 820. Will those perks be worth anything if travel comes back? Who knows but accumulating these points didn't cost me anything...

It's a harmless hobby that actually creates value - unlike other hobbies that cost money - and it certainly doesn't prevent anyone from investing or creating wealth in any ways.

I don't travel much and when I do, 90% is on company's dime. I guess everyone is different.

I also did't sign up CC with annual fee and I always paid the monthly balance off so I guess you were just stating common sense..

What I think you missed from my post is that using CC tends to get your spending up. It is a behavior modification because using CC is so easy and during the transaction, instead of exchanging your money with goods or services, you get your CC back. It completely skipped the process where you feel the money leaving you for good in real time. That to me is a deal breaker.

With reward points you have to spend in order to get rewards. The CC companies don't care the initial sign-ups bonus points they lose to you. Their solid intention is to get you use the card and develope an habit of using it until the day you die. The more people use CC, the more people get into debt, and the CC companies will enjoy their 18%-24% interest and overdue charges.

You can argue you take advantage of their offers and never fell into their traps. Good for you! But the number of your type is less than the number of those households that have $18k in recurring debt. So when you encourage people (most of them do not have sufficient knowledge or self spending control) to start collecting points, you become the accessory for screwing up their financial well-being. I am not sure why you would be the free advertisement for CC companies so they can prey on the less informed.

Whoever think their expense put on the CC is just essentials, you can do a lot better in saving without CCs. That is not just my experience. Too bad cash transaction it neither convenient or safe online especially during COVID.

 

[Scrapr]

What I think you missed from my post is that using CC tends to get your spending up. It is a behavior modification because using CC is so easy and during the transaction, instead of exchanging your money with goods or services, you get your CC back. It completely skipped the process where you feel the money leaving you for good in real time. That to me is a deal breaker.

I don't know the answer but I'll ask the question. As you say people tend to spend more on CC purchases than if it was cash purchase. Would the same mindset apply to debit cards vs cash? Does the act of pulling out a plastic card contribute to overspending? Surely somewhere there is a study

I ask only because some posters liking debit cards over CC. No judgement either way.

 

[Rustic23]

We use 2, and one debit card.

Credit card for bills that are on auto pay. Low limit. I set this up because I got tired of having to change things when the got cloned, Target, Home Depot, and other incursions.

Credit card for all other stuff. We use this for just about everything else except gas.

Debit card for gas. Linked to a bank account with a low balance. I use it as a gas card 99% of the time.

 

[tenant13]

What I think you missed from my post is that using CC tends to get your spending up.

I did not miss this point. Perhaps this is your experience. Possibly it is the experience of millions of CC holders (who in turn fund my sign up bonuses with their spending - we can agree on this point). But as a fiscally responsible adult I do not share it, nor do I think that a square piece of plastic in my wallet (or an image on my iPhone) is a license for increased spending.

 

[OldShooter]

... What I think you missed from my post is that using CC tends to get your spending up. ...

I don't know if that is true or not. It sounds plausible considering the balances that people carry. You state it as fact. Do you have a link or a reference?

For DW and me it is definitely not true. Method of payment has no effect on our spending decisions. I would guess that we have that in common with most of the posters here, admittedly a skewed population though.

 

[Aerides]

What I think you missed from my post is that using CC tends to get your spending up. It is a behavior modification because using CC is so easy and during the transaction, instead of exchanging your money with goods or services, you get your CC back. It completely skipped the process where you feel the money leaving you for good in real time. That to me is a deal breaker.

While it is true that credit card purchases are larger than cash ones, and some premium cards show average charges higher than lower ones, the link to behavior depends on the person.

And the overspend-because-i-can, might be true for a younger person, or one with isn't very secure with their own personal budget and finances, but not for the vast majority of those here on ER. I'm simply using the card for, A) rewards back/benefits, and, B) protection - in case of items not received, or that trip gone wrong, etc. I know I have not thought "oh I can spend more because credit card!" since my 20's.

 

[teetee]

I did not miss this point. Perhaps this is your experience. Possibly it is the experience of millions of CC holders (who in turn fund my sign up bonuses with their spending - we can agree on this point). But as a fiscally responsible adult I do not share it, nor do I think that a square piece of plastic in my wallet (or an image on my iPhone) is a license for increased spending.

Not a license. It is a human tendency to do more things that are easy (aka instant gratification from using the plastic). I thought this is a common knowledge:

https://www.forbes.com/sites/billhardekopf/2018/07/16/do-people-really-spend-more-with-credit-cards

https://www.npr.org/2020/02/13/8057...high-and-overdue-payments-rise-for-young-peop

My point was by using sample size of one (you being the responsible spender) to infer that whatever works for you should work for all is not a good thing because in reality it may benefit a small portion of the CC users but it helps to bring the rest of the population finance down.

If CC companies losed money and handled their business like charity (and we know they did't), then you wouldnt get new CC sign-ups offers in the mail all the time.

It all comes down to whether you are aware of how things are made. The US consumer debts are not all because of using CC. But I would not do free advertisment knowing my method could save me a few bucks but can ruin other less informed / less principled consumers.

 

[scottpush]

Today I closed my Delta AMEX card . No need to pay a $95 fee for something I do not need for the foreseeable future. Don't care about credit scores or any other BS.

+1 Well put

 

[PatrickA5]

According to my spreadsheet going back to 2004, between DW an I, we've had well over 150 credit cards racking up $6,615 in annual fees over the years. We've paid $0 in interest. On average, we save $8K - $10K per year in airlines and hotels paid by points. Unfortunately, nothing this year. Have 1,725,000 points/miles remaining valued at roughly $20K. DW thinks it's a pain, but perks up a little every time we fly or stay somewhere nice for free.

Having said that, we're down to 3 total credit cards between us. Have slowly stopped playing the game and eventually will just get a cash back card and call it a day.

 

[ShokWaveRider]

One (or Hubby and Wife) needs 2 cards minimum, just in case one gets compromised. It has happen to us, then the second card is a life saver. We had a card that was always compromised regularly at lease once every 3 months, even when the CC company completely changed the card number and we stopped using it at all. I think it was a Mastercard, we have since cancelled it and do not have any Mastercards anymore. I forget the bank.

 

[shafer9]

Pare diwn

You have too many cards, that will impact your credit score. I would say cut it down to three maximum, get rid of the rest. Keep the three that make you the most money or get you the most travel rewards or whatever it is you’re actually looking for.
Personally, I have one business visa that pays double miles on everything. I use it to pay for literally everything and pay the card off every month. My travel balance is usually over 100,000 miles. At the moment it’s higher than that because there’s nowhere to go. I’m hoping that will end by 2025

 

[Chuckanut]

One (or Hubby and Wife) needs 2 cards minimum, just in case one gets compromised. It has happen to us, then the second card is a life saver. We had a card that was always compromised regularly at lease once every 3 months, even when the CC company completely changed the card number and we stopped using it at all. I think it was a Mastercard, we have since cancelled it and do not have any Mastercards anymore. I forget the bank.

That is very wise.

A friend had one CC, a Mastercard from a big bank. On his second day of a three week trip to Hawaii, he sees an odd charge on the car. One call to the bank and they cancel his card (good!) and then tell him they will FEDEX a new card to him (Good!). But, he was in Hawaii (Bad!). It took him an entire day to work out the issues so they would FEDEX the card to his hotel room and not his home.

 

[old medic]

We have 5 major cards, Dont even carry one unless traveling, or planning on making a purchase. Have been playing the 0% interest transfer game over the last few years to pay off some leftover debt, and a few big purchases and leave our nest egg from our selling our house 3 years ago alone. 4 have 0 balance and the 5th will be paid off in the next 2 months.... YAA debt free baby.... Our banks VISA is set up for some auto billing and Paypal....and generally paid off every month...
We also have 5 store cards for materials to restore our retirement home...
Only use for 0% interest purchases...
and total balance on them.... $150... and that will be paid off next week...
The next big purchase coming up.... Windows and doors....

 

[ShokWaveRider]

Unfortunately because of vendors and banks preferences and their different benefits, we do have 2 cards on the back burner, and one form a different country.

Our main Cards are: AMEX cashback, and Visa Sapphire as a backup.

We also have a Costco Visa, as we purchased a TV this year and got a significant discount and 5 years warranty by using it. That will most likely be cancelled before the one year expiry as Costco is becoming less and less competitive and is 45 mins drive from us. Aldi is better for us for groceries, and On-line purchases for non food items, to save the sales taxes.

We have a Credit union Visa because there are no transaction fees for foreign purchases. And a Canadian Visa for Canadian purchases and using money from our Canadian Bank account.

 

[smoghat]

We live near the Newark United hub and, given that I used to travel a lot for work, around a decade ago I started using my Chase United Presidential Plus card for everything. I have never missed a payment. I charge around $20k a month and pay if all off. Everything goes on there. Naturally we have the ability to take vacations whenever that becomes possible again. I have a BofA credit card, a USAA credit card and my wife has a Williams Sonoma card. The thing is that this is still a high credit usage and we get dinged when we try to apply for loans. I was rejected for a $30,000 auto loan this year. Kind of nuts since we have over 150x that in stocks. The hitch is that we are also 53 and retired. Our credit score is stuck at 760/780. My main concern is that I be able to get a mortgage for a second house one day. Even if we move full time, I’d rather that we sell the house we live in (worth over $1 million) on our own time and not be forced to sell it to avoid paying massive capital gains by selling hundreds of thousands of dollars of equities all at once.

 

[Sunset]

We live near the Newark United hub and, given that I used to travel a lot for work, around a decade ago I started using my Chase United Presidential Plus card for everything. I have never missed a payment. I charge around $20k a month and pay if all off. Everything goes on there. Naturally we have the ability to take vacations whenever that becomes possible again. I have a BofA credit card, a USAA credit card and my wife has a Williams Sonoma card. The thing is that this is still a high credit usage and we get dinged when we try to apply for loans. I was rejected for a $30,000 auto loan this year. Kind of nuts since we have over 150x that in stocks. The hitch is that we are also 53 and retired. Our credit score is stuck at 760/780. My main concern is that I be able to get a mortgage for a second house one day. Even if we move full time, I’d rather that we sell the house we live in (worth over $1 million) on our own time and not be forced to sell it to avoid paying massive capital gains by selling hundreds of thousands of dollars of equities all at once.

So to reduce your credit usage, pay $5K on your CC debt every week online. You don't need to wait for the statement to pay your CC, which by then has 20K usage on it.

Also phone up the CC company and raise your limit on the card you use a lot, so it's usage will then be lower with the same amount of spending.

 

[smoghat]

Yeah, I think that makes sense. No need to wait until the end of the month.

 

[HI Bill]

Yeah, I think that makes sense. No need to wait until the end of the month.

Many cards make awards based on the closing balance of the statement. If you pay if off before the month closes, you may miss the rewards (cash back or miles). I know I have!

 

[Sunset]

Many cards make awards based on the closing balance of the statement. If you pay if off before the month closes, you may miss the rewards (cash back or miles). I know I have!

Really ?

I get my rewards immediately upon the purchase, at least for all 3 of my BOA cards.

I've never had it where I don't get a reward because I paid off the card or paid a portion early. Many cards might have a rule of needing to spend 3->5K to earn a bonus when new, but I've always gotten it even when spreading the payments many times all over and the spending over a few months.

Which card did this to you ?

 

[jazz4cash]

Really ?

I get my rewards immediately upon the purchase, at least for all 3 of my BOA cards.

Which card did this to you ?

That’s a good point and question. I think my reward points are calculated on each purchase and become available when the bill is paid. If you pay early or some other credit is posted (like an item is returned) how is it handled? I don’t think I’d get cheated but I’m going to look into it.

 

[HI Bill]

Which card did this to you ?

Sorry, I can't remember which one. It was a Visa card, and I had a large balance due to a trip...paid it off early, and didn't get the reward. I record every credit card transaction to my checking spreadsheet and pay attention to points/miles at the end of each period.

 

[Sunset]

That’s a good point and question. I think my reward points are calculated on each purchase and become available when the bill is paid. If you pay early or some other credit is posted (like an item is returned) how is it handled? I don’t think I’d get cheated but I’m going to look into it.

I know BOA gives me the points, even when I pay early, but but looking online I see they are pending points, so maybe it's at the end of the bill time when they make them permanent and usable.

As for credits (return of goods) I know how that works , when it posts they subtract the points. Since I had a cruise cancelled I currently have about -9,000 points.
The really good part is they didn't redeem the points on me and make me pay $450. So I'm slowly working off the (-) points as I earn points by using my card.

 

[Tiger8693]

You have too many cards, that will impact your credit score. I would say cut it down to three maximum, get rid of the rest. Keep the three that make you the most money or get you the most travel rewards or whatever it is you’re actually looking for.
Personally, I have one business visa that pays double miles on everything. I use it to pay for literally everything and pay the card off every month. My travel balance is usually over 100,000 miles. At the moment it’s higher than that because there’s nowhere to go. I’m hoping that will end by 2025

I have 10 total cards and over 800 credit score. I don't think having 8 is a detriment to his score.