When we bag our groceries, we are encouraged to choose paper over plastic, in the effort to protect our environment. We suggest you do the same when protecting your credit card health: choose paper, not plastic.
Banks make their money from plastic. Every time you as a consumer use your credit card instead of cash, a percentage of your purchase goes into the coffers of the bank. Subsequently, banks want you to use plastic as much as possible. They will bribe you to use your credit cards even when you don’t need to – or when you shouldn’t – use plastic instead of cash.
Points are often awarded to frequent credit card users. As travelers are awarded points for flying with a particular airline regularly or frequenting a specific hotel, credit card users are awarded points for regularly using a particular credit card and often for a particular purchase.
Seasoned credit card users realize that a different interest rate is assigned to cash advances; this rate is higher, and fees are often added to this higher rate. In contrast, lower interest rates are assigned to balances transferred from a competitor’s credit card, as the lender offering the lower rate wants your business. In their efforts to remain competitive, however, banks are now awarding points, double points, and triple points.
One lender may give you double points if you use their credit card for gas. Perhaps the lender may give you double points if you use their credit card for groceries. Another lender may offer triple points if you use their credit card to pay utility bills. Beware!
Banks will try a multitude of tactics to get you to use their credit cards and to continue using them on a regular basis. You will find that you are developing habits that will cost you more in the long run, and unless you are a credit card user that pays off your full balance every month, you are building interest that increases the cost of the service or item for which you are paying. Develop habits that will protect your credit health.
Do not pay interest for gas. Do not pay interest for groceries. Both gas and food prices have increased enough over the past couple of years; do not make the situation worse. If you must use your credit card, use the purchasing power of the card for larger ticket items, saving your cash for basic energy and grocery essentials. Also, realize your spending habits. If you are one to buy impulsively, train yourself to walk away from a prospective purchase. Give yourself 24 hours; you may find that you do not want a particular item as much as you originally thought you did. If you don’t need the item and you don’t have the cash, don’t buy it.
Credit card rewards are a bonus for those consumers who can afford to pay their balances and avoid hefty interest rates. These same rewards, however, are bait used to lure the user into a dangerous cycle of revolving debt that siphons additional money from the consumer that the user does not have.