Credit card companies have three objectives in mind: Sign you up, don’t let you quit, and keep you spending. They make money whenever you spend and, in fact, they can make a ton of money if you never pay a fee, are never late, and never pay interest because they take a little cut off the top of each transaction. All the other fees and interest, that stuff is just gravy to them. So, when it comes to those three objectives, those credit card companies will employ all sorts of tactics to get you in, keep you in, and keep you spending (sounds like casinos doesn’t it!?) so keep on reading to see what I think is the best way to combat these tactics.
Get You In: Small Dollar Incentives for Signing Up
Back when I was in college, I used to sign up for credit cards all the time to get stupid t-shirts or Pittsburgh Pirates hats and blankets; all sorts of incentives that were less than $20 in value. When it costs a credit card company nearly $200 to acquire a new card holder, $20 seems like a steal! In fact, to prove that it costs that much to get a new card holder, check out the expired $250 promotion from the Chase Freedom card  and the currently active $250 promotion from American Express ; if it didn’t cost a lot to get cardholders, you wouldn’t see those types of promotions (or as many balance transfer offers)!
Solution: Only sign up to a card where you get a tangible benefit of at least $50-$100 dollars, whether it’s a balance transfer, a juicy cash back offer, or a free gift card with your first purchase; don’t sign up for a card that gives you nothing or some marginal gift. If you really want the hat, get the tangible benefit of $50-$100 and then buy the $12 hat.
Get You In: 0% Offers
There are two ways a company can mess with you when it comes to 0% offers:
- 4a. Balance Transfers with Fees – I have a page that lists a lot of 0% balance transfers  and it’s a great resource if you are trying to make a 0% balance transfer arbitrage play  or if you just want to get a little breathing room from your credit card debt. The problem is that all of that you take a big hit if you go for cards on that list that have a fee, some which are as high as 3% with no maximum fee cap. While it’s great if you’re dealing with a card with a 30% interest rate, it’s something you might miss if you’re trying to arbitrage or comparing offers.
- 4b. APR After Balance Transfer Expires – Why does a company want to give you a 0% balance transfer when they know full well they’re not making money off you for at least the promotional period (assuming you don’t miss a payment)? It’s because their interest rate APR could be really high after the promotion expires. If you’re doing the arbitrage thing, this won’t matter so much; if you’re looking for an interest breather, this is something you have to check before you pull the trigger.
Solution: Always check the fees on balance transfers and always check the APR after the promotion ends, even if you think you won’t be around (a percentage of you will be) that long.
Get You In and Keep You Spending: Pump Up Your Ego
You are what you swipe and those of you who carry a Gold/Platinum/Black/Plutonium credit card are the cream of the crop! In fact, if you don’t carry a Gold/Platinum/Black/Plutonium card, then you actually don’t matter at all because you simply aren’t cool enough or smart enough or rich enough or good looking enough. Everyone who carries the Plutonium card is a somebody and everyone who doesn’t… eh, who cares, they’re nobodies. Oh, and to carry the Plutonium card you have to spend $500,000 a year and pay a small foreign car as an annual fee – but if you’re big pimpin’ then that won’t be a big deal.
Solution: Ditch the hype, it’s ridiculous don’t you think? Seriously, a plutonium card!?
Keep You Spending: Spending Contests and Promotions
Discover ran a recent promotion where they would give you $20 for every $200 you spent at the Simon Malls, a promotion that probably spurred people to spend spend spend in order to get essentially 10% cash back (that was a smart way for consumers to take advantage, honestly); but think of how many promotions out there give you a “chance at a million dollars” each time you swipe their credit card? The Discover promotion = good promotion for everyone, The “Chance At A Million” = good promotion for credit cards.
Solution: Don’t buy the hype, get the tangible benefit when you can like in the case of the Discover promotion, skip the contest and the promotions where you might get something or you might get nothing. The credit card companies control those promotions and they know the probabilities, you are always on the losing end.
Get You In and Keep You Spending: Co-Branded Cards
Do you love the New York Jets? What about the Ohio State Buckeyes? How about the Penn State Nittany Lions? What if I told you that you could get a credit card with your school or team’s logo and name printed right on the card? When you use the card, you’re supporting your alma mater! When you use the card, you’ll also be giving up as much as 5% cash back since all of those cards usually come with no cash back offer whatsoever! Are you showing support for your favorite school or your favorite credit card company!
Solution: It’s just a credit card and it’s all about money, there are plenty of ways to show your support for a team or school outside of getting a credit card with a picture on it. Donate a bit of that cash back you’ll be getting and that’ll be more than what the school gets for pimping themselves out on a credit card.
Keeping You In: Phone Menus
Ever call up a company and wanted to stab yourself after entering phone menu tree hell? Yeah, me too. In the constant war of attrition, forcing you to deal with the ridiculous phone menu tree is just one way of breaking down your will to fight and one that works surprisingly well – unless you bypass the tree all together.
pound lightly tap 0 or just ignore all the messages and eventually you’ll get passed through to a human being. Whereas some companies will drop the call, credit card companies will almost never drop the call if they don’t know what’s going on.
Get and Keep You In and Keep You Spending: Reward Points
What if I told you that for every hundred dollars you spent, I’d give you one point? You’d probably say, sure, that sounds like 1%. Now what if I told you that for every hundred dollars you spent, I’d give you one million bazillion trillion points? Wow, that’s a lot more points right? Yeah, unless it takes a billion points to get a Diet Coke coffee mug. It’s easy to compare cash back offers because it’s straight cash, it’s much harder to compare the catalogs of different reward programs because they often don’t have the same things in them. The companies do this so that it’s harder to compare programs, they get to give a little less than 1% rewards, and they hope that you won’t notice.
Solution: Either always go for the cash or try to find something you’ll want and do the math yourself. Let’s say you get 1 point for each $100 you spend and you want something that is worth $100 and costs 200 points; you’re looking at 0.5% cash back. In reality, you could get a 1% cash back card and use the money you get back to buy the reward you want and come out ahead.
Do you know of any particularly insidious tactics used by credit cards that I may have missed?