Wednesday, 30 November 2016

Something for (almost) nothing

There are many loyalty programs out there.   So many that you may start to think that you shouldn't spend a penny without some future benefit accruing to you.   I used to have a 'free' credit card, two in fact.   They didn't cost me anything and one of them paid me (a little) cash back once a year and the other accumulated points that could be used to get merchandise or gift cards.   It was win-win as far as I was concerned because I never allowed myself to be put in the position of having to pay interest.  I liked to use cash for smaller day to day expenses and used the credit cards for larger purchases.   I remember once having to put a credit on my account to charge a $16,000 family vacation that was slightly over my credit limit at the time.   (See, you can arrange your life to have fun!)

One day I got thinking about my credit card benefits.   Half of one percent was awarded to me, so that meant I would have to charge $10,000 to my credit card to receive $50 back?   Why hadn't I realized this before?  $10,000 was a lot of money and the merchants were charged 3 - 5 % when a customer used their card.   This was on top of the 18 - 22% interest rate charged to those who carried a balance.   I was so amazed by my mathematical discovery, I had to telephone my second credit card company to confirm that they were equally (not) generous.   No point threatening to cancel one card to use the other exclusively.

Some supermarket point systems don't seem to be worth much.   Some enable you get get a cheaper price at the point of sale on something you were planning to buy anyway.   But the accumulated points, in my experience at least,  will get you something like a mug after six months of shopping.

Then there are credit cards that accumulate points for flights.   A family member extolled the virtues of a bank credit card, with an annual fee of $120, that enabled the family to have paid airline tickets at least once a year, whenever and wherever they wanted.   What had I been missing?   Enter the world of getting something extra for every cent you spend.   Now you need discipline for this and attention to detail.   It can get crazy with some brave individuals juggling a dozen different cards.  

It seems that everything, every pack of gum, must be charged to the credit card.   This can lead to a nasty surprise when the bill turns up, so keep track of your account on-line.   Check it regularly to ensure you will be able to pay it off before the due date.   Don't be one of those people who spends more or more often when paying by plastic as opposed to cash.  

This is an interesting topic to research on-line.   Lots of ideas and tricks.   Offer to put restaurant bills for large groups on your card and get everyone else to pay you (first) in cash.   Probably they hadn't all intended to pay cash.   People with small businesses who purchase goods and supplies on their credit card have a lot of potential to accumulate points.  

But be careful and make sure you are suited to something like this.   Credit card debt is no joke and can skewer any financial goals.

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