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What’s The Catch? Is The Wrong Question

MoneyFwd [3] left this comment in my post about Matt’s experiences with the Invest with $100 post [4]: “I think people also still believe deep down that it’s hard to get this extra money since for so long we’ve lived with the idea that there’s always a catch.”

What’s The Catch? is the wrong question to be asking nowadays. In the past, businesses offered a great deal at the front door and managed to pilfer you out the back door; but this is no longer the case in most instances. With the speed of information and the ability of consumer to sniff out a bad deal (and then tell their friends), businesses no longer rely on these tricky tactics to earn money. Why do credit cards offer $100 gift cards [5] for you sign up for their cards? It’s because they can make so much more money off your use of that card that the $100 is a pittance. Every time you charge that card, they make 2% off the transaction. If you carry a balance, they make money. You forget a payment (and don’t call them), they make money. They don’t need to trick you. They make money hand over fist in their daily operations that they don’t need to trick you with a catch. In fact, if they were to trick you and you found out, think of the millions and millions they’d lose when you blogged about it and someone like the Consumerist [6] picks it up?

The question should be a little different: How Do They Make Money? If you can’t figure it out, that’s when you should worry about it being a scam. How can this company sell me windows for $50 a piece? Why is this guy from Nigeria sending me a check for $5000, asking me to deposit it, and then send them the difference on a $50 bicycle on Craigslist? Understand the motivations on the other side of the “table” and you’ll find out why they’re there and whether you’re getting taken for a ride.