Comments on: Why Credit Cards Offer Rewards

By: Lazy Man and Money

Lazy Man and Money — Wed, 29 Aug 2007 05:43:27 +0000

In either event, I’ll be happy to take the 1-5% reward. If a store wants to offer a 3-5% discount for not using a credit card (as some do), then I will consider using debit or even, *gasp* cash.

By: Tommy

Tommy — Tue, 28 Aug 2007 23:53:26 +0000

I actually wrote little notes to myself on my credit cards. This way I’m not confused about which to use for what. My Amex small biz card is good for 5% back on gas, cell phone, and office supplies so I wrote “5% back gas, office, cell” and also “0% until 02/08″ on a little post it, cut it down to a tiny rectangle, and taped it to the front of my card so I know exactly what to use that card for. I’ve done this for all of my rebate cards to maximize my rewards.

On that same, note, the Amex Simply Open card is nice because there are no points, no accrual limits, or any of that nonsense. They pay out the rebate every month without you having to do anything. I get about one or two free tanks of gas each month from Amex (about $30-50!). Not bad for doing nothing but swiping this card instead of using my other cards.

By: jim

jim — Tue, 28 Aug 2007 04:22:48 +0000

Whoops, see points are confusing!

By: buttercrud

buttercrud — Tue, 28 Aug 2007 03:42:08 +0000

A penny is 1% of a $100? News to me.

By: FIRE Finance

FIRE Finance — Mon, 27 Aug 2007 18:25:29 +0000

We also agree with FMF and Trent about the fact that the credit card companies profit primarliy from the money charged as interests on balances carried. But Triston points out a new fee which we did not know of i.e. interchange fee. We shall investigate that this week. Thanks Triston.
Kudos for the great post.
Cheers,
FIRE Finance

By: Triston

Triston — Mon, 27 Aug 2007 17:16:44 +0000

It would be fine if the interchange fee was just enough to cover the cost but that isn't the case. Thanks to new technologies, the actual cost to process the transaction has declined while the interchange fee has skyrocketed. It's the biggest hidden credit card fee nobody has ever heard of. ($40 billion a year!) We're doing something about it at UnfairCreditCardFees.com

By: creditwithdrawal

creditwithdrawal — Mon, 27 Aug 2007 14:52:25 +0000

The ~3% they charge covers infrastructure and operating costs for having the CC network in place (phone lines, computer center, support, etc). They MIGHT get some profit, but nothing like the 12.99%-29.99% interest they charge cardholders to USE that network. Worst that can happen is they break even on the sale.

By: FMF

FMF — Mon, 27 Aug 2007 13:15:36 +0000

Uh, I don’t know. I think I agree more with Trent.

When I worked with MBNA on a credit card program for a previous employer, they told me the merchant fees were simply enough to cover their costs. The REAL money was in people carrying balances over time.