Credit Cards - And the Reward Goes To -

Last weekend I did something completely outside my character; I sought the advice of experts. Yes, instead of my mindless, imaginative drivel, I’d actually ask people who truly understood credit. My question to the universe was, “Do credit cards rewards actually work?” The next day, I opened my email to blinding, heavenly, white lights and orgasmic cries, ‘Yes! Yes! Yes!” that bellowed from my computer. I have to admit, my skepticism was called into question. I felt foolish for even doubting.

Jim, a financial blogger for www.bargaining.com used credit cards to pay for his wedding. He and his fiancé spent over $30,000 on credit cards and earned over $1500.00 in credit card rewards, which he called, “free money.” I wasn’t sure whether to congratulate him on his wedding or for the great deal he received from credit card rewards. Another wonderful woman, Dr. Sheilagh Weymouth of http://www.wholelifehealthcare.com/ accumulated her points on her Amex card which she rolled over into her Virgin Atlantic Flying Club. She flew to Africa first class for an economy price. Personally, I have always dreamed of visiting Africa. People are realizing their dreams, using credit cards. Wow, credit card companies do have the power to make dreams come true. Could I have been so wrong?

But as everything good in this world, there is always a hitch and I quickly realized one commonality in all those who responded. They all paid their balance in full with no incurred interest. So indeed, it was “free money.” For them, it is a dream come true, because they have no recurring fees or interest to pay off later. But using your credit card to get rewards when already in debt is like a thank you gift at a wedding reception; a mini bottle of Vodka, package of tissues, stale breath mints wrapped in gauze, package of aspirin and a small tin of antacid. It is a reward you receive, but is quickly lost in interest rates and potential fees.

There is no doubt credit card rewards are a marketing ploy to get consumers to spend more money using their credit cards. CFP, psychotherapist and author of "Complete Idiot's Guide to Getting Out of Debt" (a book I need to read), Ken Clark wrote, “Rewards create a false sense of progress or thriftiness in the midst of purchasing decisions that are generally unwise.” To get more rewards, means more spending on credit, money you do not have to spend otherwise, unless you are one who pays their balance off monthly without incurring interest, like Jim and Sheilagh, then it is indeed free money and a reward for good credit behavior. However the credit card companies are not in business to give away free money, they are in business to make money and they make the most money of the people who spend, already deep in debt. If Americans spend wisely on credit cards, creditors will not make as much money. It is just business.

Norm Bour of the Norm and Mike radio show, http://www.normandmike.com/ and who runs a Business Debt Eliminator, http://www.mortgageacceleratorplus.com/, program suggested these rewards work well for those responsible with credit, but many people abuse credit cards. It is a sentiment I happen to whole heartedly agree, but I feel the lines are not quite so black and white. There is no question, we need to bring fiscal responsibility back to America, but I believe it starts at the top. How can we expect consumers to be fiscally responsible when corporate CEO’s travel in luxury and attend meetings at exclusive resort spas and our government needs to continually borrow and go deeper in debt to foreign nations. What example are they sending to the consumer, it is okay to be exorbitant and spend money you don’t have? I believe the responsibility starts at the top, and all those who believe in trickledown economics should agree. I firmly believe it is the government and corporate CEO’s need to set the example, and American consumers will follow.

In the meantime, it is a lesson to learn from Jim and Sheilagh. Good things come to the fiscally responsible and wise. A lesson, I certainly need to learn.