Credit Card Rewards

Growing up I was rather adverse to credit cards.  As numerous millennial’s can attest to they saw how horrible credit cards were for their parents.  After my parents had to declare bankruptcy because of credit cards I never really wanted them as an adult.  So this is a quandary how do you get someone to sign up for something that if used irresponsibly can cause amazing destruction to your finances leading to bankruptcy?  Now you can go with the argument everyone needs a credit card, which other than renting a car from a car rental agency I have never seen a place that would not take a debit card in place of a credit card.  So there is one time in an adult’s life that arguably having a credit card might come in handy, however, credit card companies I assume want the average American to have more than one credit card.  So how do you get someone to sign up for credit cards?  The current idea is that you create sign up bonuses, card rewards, and also give some sort of point or cash back reward.

Cash-Back Reward-
I personally use fidelity rewards card which gives 2% cash back as my default card.  Ok I’m adverse to the idea of credit card debt, however, the idea of getting back 2% whenever I buy anything is appealing.  This is a little bit more than you get with a money market which are typically around 1% and lets say inflation for sake of argument is 3% so the amount you get back is pretty decent.

Sign-Up Bonuses-
Most of these work in the idea of spend x in three months after opening the card and get y amount of bonus points.  So I guess the idea than comes to mind is how useful is a point?  Capital One for example with the Venture Cards had a 40,000 bonus points when spending 3,000 dollars in the first three months.  Looking up on their reward system it’s 50,000 points for a roundtrip flight from Atlanta, GA to SeaTac, WA. So if I’m planning to spend 3,000 dollars in three months (which is relatively easy to do and even if you have issues reaching minimum spend limits you can always spend money on gift cards) I can get enough points to fly home for the Holidays.  Now what about if I had to earn points normally without the help of a sign in bonus?  In the Venture example most money spent is equivalent to 2 points.  Now spending $25,000 in a year to get a free plane trip is a lot less appealing than spending $3,000.  I think this might lead to you opening up credit cards just for the sign-in bonuses, however, every time your credit is pulled it’s a ding on your credit score.  If your interested in how opening a credit card affects your credit I suggest reading the following: https://www.thebalance.com/how-opening-a-new-credit-card-affects-your-credit-score-960501

Card Rewards-
Other cards like the IHG card gives you a night free stay every year at an Intercontinental Hotel Group Resort, which has some inherit worth, most of these cards also come with an annual fee in this case $49 and can be worthwhile if you plan at staying at a Holiday Inn at least once a year.  I was looking at one card for a Disney Vacation that gave special privileges why you are at Disneyworld again with all these things you need to look at the fine print.

Also it’s never worth it to have a credit card that is not paid off.  As long as you pay the full balance due on the credit card every billing cycle you should never theoretically be charged.  Also some cards don’t really have substantive enough rewards, but might still be a good idea as a way to close another card that costs money and transfer off the points you have earned up on it.  For example, the Venture One card doesn’t give as much as a bonus as the Venture card, but has no yearly fee so is it’s a good card to have if you want to earn the points with the Venture Card and then close the card out and transfer the points to the Venture One card.

Growing up adverse to credit cards I do think that it’s worth using a credit card so that as you spend money you can acquire some sort of sign-in bonus or other flat reward like 2% cash back than just putting the money on a debit card.  It does make doing my monthly finances more of a pain.  In that along with my bank information I have to go into each of my credit cards and see how much I spent on them and what I spent that money on which can make categorizing your expenditures a bit more work, however, you do get something for the extra work you are putting in and for the risk of having a credit card.  Also opening a credit card can affect your credit so take that into consideration if your about to make a major credit purchase such as a new home loan.