I'm becoming concerned about one of the theories that several of my fellow blogger's have regarding using credit cards for bonus points.  A lot of the suggestions that I read seem idealistic, spending the same amount of money as before, and also getting bonus points, as long as you always just pay off your credit card at the end of the month.  While this looks great on paper, rarely does this implement well in life.  There are several areas that people don't consider, were using credit cards for bonus points fail:

 

You spend more.  Anyone who always uses a credit card for their spending typically will spend more than anyone who uses debit cards or straight cash.  As sited by DebtGoal.com,

 

1.  A Dunn & Bradstreet study found that people spend 12%-18% more when using credit cards than when using cash.

 

2.  McDonalds found that the average transaction rose form $4.50 to $7.00 when customers use plastic instead of cash.

 

Using credit cards to many people psychologically doesn't really feel like spending money.  What makes it worse is that at the end of the month, a bad purchase will only cost a purchaser just a few dollars.  Of course, the credit card company earns interest, and will try to stretch the minimum payment out for years and cost you more in the end.

 

Cash back bonus' are really just a shell game.  The cash back bonus can really work out great, if you pay off your credit card every month, and don't use it at all every other month.  Most people however are not willing to put that much effort into making the cash back feature work for them.  Credit cards also will use different rates for different types of use.  You may have a credit card that has 12% interest on purchases, but 23% on cash advances.  Furthermore, you will typically find in the fine print that cash advances are NOT purchases, therefore they do not qualify for a cash back bonus.  The credit card companies pay statisticians to figure out how to maximize their profits with these schemes.  Betting against the credit card companies is comparable to gambling against the house.  Before you start you are  already statistically against the odds.

 

Balancing your checkbook becomes a nightmare.  You can't really figure out your budget if you are always charging and making payments on a credit card.  By the time you are ready to balance your checkbook, your credit card is already two weeks into the new cycle.  If you compound that problem with several more credit cards, all in which you use and "pay off" every month, your bank statement will never really tell you how good your finances are.

 

The simple solution.  The only way to really beat credit cards at the game is to pay off credit card debt.  Even if all you can do is stop creating debt, and make at least the minimum payments each month, you can start taking control of your finances.  You will start receiving your credit card statements that will have the final debt, and you will be able to finally budget a way to pay them off. 

 

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