We are the type of cc users that the industry derisively labels "deadbeats" - we use a card for convenience and pay in full each month (twice a month, usually).
Yet for some reason we keep getting offers even though I don't see how they are going to make money on us.
I have no desire to switch my cc per se, but when a credit card offers me a $300 cash bonus for signing up, it's hard to ignore the offer. So in fact we recently took just this offer in December, and we actually got the $300 cash, no strings, no problem. Additionally the card offers 1% cash back on every purchase, plus 5% back for certain categories of purchases (and they are things like gas, groceries - in no way is it tempting us to buy more than we already do, it's just rewarding us for our usual behavior).
Now I have a new offer from yet another bank, not quite as good but I get $100 in cold cash plus a similar 1% back/5% for certain purchases structure.
The last thing I need is yet another credit card, but I just don't see the harm. The only way we are behaving differently is that we are strategizing which card to use for a given purchase that we would have already put on a cc and paid in full anyway.
So, is there something I'm missing? Is there a harm in my particular case given our particular behavior? Would I be stupid to pass up a free $100 - and I will tell you, $100 goes a long way in this house, it's not chump change here. Or would I be stupid to sign up for yet another credit card?
FWIW my credit score is probably in the 800s and I don't really care about it. So if it goes down to 700 but I get free money, I'm not certain that I care - unless you can explain to me why I should.
Homeschooling mama to 6 year old DD.
Not really sure- but we do the same thing. Everything goes on the card and once a year I cash in our points for a couple hundred bucks. We never pay interest and never pay late fees. We aren't planning on borrowing money- so we don't really care much if it hurts our scores- we just like the free money and I like only balancing my checkbook once a month :)
Iowaorganic- mama to DD (1/5/06), DS1 (4/9/07), DS2 (1/22/09), DS3 (12/10/10), DD2 (7/6/12) and a new kid due in early 2014
We are similar in that we put everything on our credit card and pay it off every month (we actually have what my husband thinks is a very complex system in which we use certain cards at certain places to maximize the rewards...one card where you get 5% back on gas, another for restaurants where the reward is 3% back, etc. Its not that complex ) . We also sign up for cards if there's a huge incentive to do so (just got $300 back with our first purchase...yes please!).
Marketplace Money on NPR just did a segment on this and credit card companies get a small percentage from the retailer for every purchase made, so even if you don't carry a balance and earn them huge interest income, they are still making a lot of money with relatively little risk because they know its unlikely that you'll default. Additionally, they're trying to get you involved in their other products as well (checking/savings accounts, mortgages). The link to the show is below.
We haven't worried how signing up for new cards affects our credit score because we're not in the market for a mortgage or other loan, and it didn't seem to have a huge negative impact two years ago when we were.
Mama to F (3/09) and S (3/11); and never forgetting my babe gone too soon (4/10).
I would just watch out for a) annual fees which may arrise once your initial year or time period is up b) that you don't end up spending more because you're not spending cash and c) that there are no penalties for cancelling your card. ...and get everything in writing!! Don't take anyone's word for "no charge to cancel"...ask where the in the fine print it explicitly says that.
We just switched cards (with the same bank) because we got a bunch of points which amount to $250 and the card free for a year. There is a yearly fee, which I fessed up that I was not interested in paying and they said if you see it go through in a year's time, just call and it will be removed/you can cancel and change back to your regular cc.
Laurie, wife to DH (Aug/04), mom toDS1 (Nov/05) and DS2 (June/12).
They can make money because you are more likely to pull out your card for payment, and they get a percentage of every transaction. So, whether or not you pay in full every month, they still make money off your purchases.
We do have an REI rewards card, and we can get cash back instead but we end up spending a good chunk of it right at REI. The store offers better dividends if you use the card, so it's good for them, too. The drawback? Variable rates that aren't as good as our previous card with no rewards. But for those of us that pay the entire balance, this is not a problem. Just mind those fees!
As for applying for a new card, this might affect your credit score as the available credit you have vs. what you use figures into this. If you are not anticipating needing a loan, then maybe this is not a problem. We just keep the one card though. You have to stop at some point. Every extra card is one more to keep track of, to pay the bills on, to get penalties on. Not worth the extra $100 in my book.
Give me a few minutes while I caffeinate.