Credit Card Expert Blog

Getting Cash Back For Using Your Credit Card

I don’t care what anyone says, the notion of getting a few percentage points worth of the cash you spend on your credit card back every month is a great idea and something I think is one of the more customer friendly things that credit card companies have developed in a long time.  I know that it does my heart good to see that 3% or 4% come back to me at the end of every month and it also makes paying my bill just a little bit easier.  To some people the idea of getting $800 back if you used your credit card for $20,000 in purchases in a month may not seem like a lot, and in reality it probably is not a whole lot of money compared to what you spent, but it is the idea of getting cash back from your credit card company that sits so well with me.  I am certain that is what the credit card companies were thinking when they developed the plan in the first place.

I used to do a lot of business with credit card companies so I know that, as rich as credit card companies can seem, not all credit card companies work in gold plated buildings with pure silver door handles.  Being a credit card company is tough work and sometimes the profit margins can be in the low single digits.  So when a company decides to give you back a little of what you spent that can be a big deal for them, especially if you are the kind of customer who pays their bill in full every month.  Credit card companies count on you paying in monthly installments and having to pay their interest and service charges.  If you ever wanted to know the secret to upsetting the credit card companies that secret is to pay your bill in full each month.  Man they hate that!

Student Credit Cards Are A Necessary Evil

It is a lot to expect a college student to understand the pitfalls of abusing credit cards without them having any direct experience with it themselves.  When a child enters college they are still usually naive in the financial ways of the world because, as parents, we make sure that they get what they need.  Sure many children, by the time they reach college, have already had a job because they needed to keep their cars on the road.  That is the best way to teach a young person responsibility, make them pay for something they really want.  But credit cards are a whole different animal.  Here is a plan that can make sure that your children have a credit card for college, they learn that abusing it can cause problems, and they are not financially scarred when they leave college for the real world.

Get your child a credit card for college and make sure the limit does not exceed a few hundred dollars.  You need to do this because you are going to be the one paying the bill and you want to make sure it does not get out of hand.  I know that many of you are thinking that “there is no way I am getting that kid a credit card!”  Making your child get a job to keep their car on the road is one thing, car loans and car insurance are not two things that your child can spend on foolishly nor do they want to.  A credit card is something a child will need to have experience in before they get into the real world and if you leave them to try and deal with their first credit card on their own they will more than likely turn it into a several thousand dollar cloud over their heads for many years after college.  Unless you enjoy seeing your child struggle with something that could have been avoided then you should be the one monitoring the credit card usage and paying the bill.  Consider it part of what they learn at college.  If they maximize the limit the first day and they do not have the card to use until you decide to pay it down then they have learned.  Sometimes being a parent means knowing your child’s potential pitfalls and helping them avoid those pitfalls if at all possible.

Credit Card Profits And Losses

Let me give you a little insight into how credit card companies make money and how credit card companies lose money.  Credit card companies make money in two ways and only one of those ways involves the bill you pay each month.  Aside from the other financial shenanigans that credit card companies get involved in such as investing and all of that other stuff the credit card companies make money by charging the store you bought that vase from a small percentage of the cost of that sale as a service charge.  Credit card fees to companies accepting credit cards these days can get as low as 2% or 3%.  It used to be a lot more than that and that is why places like fast food restaurants would never take credit cards.  Their profit margins are too low and the credit card usage fees were too high.  Now that the credit card companies have lowered their usage fees more places can take credit cards.  Credit card companies also make money from you not paying your bill in full each month because when you pay in installments you are charged interest and service charges each month and that is big money for the credit card companies.

Credit card companies lose money when you don’t pay your bill on time or when you default on your credit card.  A credit card company is a bank and they operate like a bank so when you do not pay your bill on time then they have to carry your payment over into the next month and that costs them money to hold your money that much longer.  That is why they charge late fees.  When you default they are not only stuck with the cost of what you charged on your card, and the cost of carrying that money for you without you paying, but now they have to hire a lawyer to write you nasty letters and file all the forms necessary to sue you to get their money.  Credit card companies hate hiring lawyers so if you find yourself in a situation where you cannot pay your bill I suggest you try and work with your credit card company before you decide to default.  If you are willing to pay something then they will be willing to at least listen to what you have to say.

Prepaid Debit Cards And Aliens

I have never understood, nor will I ever understand, the logic of prepaid debit cards and I am further convinced that prepaid debit cards were placed on this planet by aliens as an attempt to inject pure confusion into our society prior to their massive invasion.  Prepaid debit cards are not credit cards regardless what company issues them or what they say on them.  They also do not cling to any thread of logic like a debit card attached to your checking account would cling to.  I can at least understand a debit card that is attached to your checking account because writing checks can be a pain so the debit card attached to your checking account helps you buy stuff without writing a check.  That makes sense.  Buying a debit card with cash, or writing a check to buy one, so that you can spend the money you just put on it using cash or a check will never make any sense to me at all.  Ever.

To me a prepaid debit card is the equivalent of taking an accordion duck hunting.  It makes no sense and it is useless.  Using a prepaid debit card does nothing to improve your credit rating with anyone and if you had the cash in the first place why not just use cash?  If someone steals your prepaid debit card they can use it without much problem and it is difficult to track a prepaid debit card so it doesn’t protect your money at all.  Plus, from what I have seen, you have to pay a fee to put money on your prepaid debit card.  When you use the cash there is no fee so what is the point?  I think aliens are using our country’s fascination with plastic cards to set us up for invasion.  I don’t know about you but I am investing in a tin foil hat instead of a prepaid debit card.

The Mastercard Commercials Are Priceless

        Sometimes an advertising campaign is so well conceived, and so well written, that you identify the product they are selling with it instantly and the advertising executive’s job is done.  The Mastercard company is permanently associated with the word “priceless” just as much as everyone expects taxi cabs to be yellow.  They will never be able to get rid of it, not that they would want to.  It is a powerful advertising campaign that has brought an increased brand name recognition to Mastercard that they never had before and a wider acceptance of their card as well.  Ever since the “priceless” commercials started taking off I have seen a definite increase in the number of places that take Mastercard.

        The “priceless” commercials, at their peak a few years ago, were very powerful pieces of advertising.  I live in Upstate New York and I am also a fan of the Buffalo Sabres professional ice hockey team.  The rise of the “priceless” commercials coincided with the rise of the fame of Buffalo Sabre goaltender Dominic Hasek and it was not long before Hasek had his own “priceless” commercial.  As soon as that ad was shown for the first time I started seeing not only signs at the hockey arena quoting catch phrases from the commercial but I also started seeing a lot of Mastercard acceptance in places that never took Mastercard in Buffalo before.  To me that is probably the most vivid example of effective advertising I have ever seen and Mastercard was the reason.