Saturday, June 2, 2007

What's in your wallet?

Several months ago, I explored high-interest savings accounts in a post titled, Is your bank robbing you?"

Perhaps today's post could be alternatively titled, "Is your credit card company robbing you?" As we all know, many credit card companies charge exorbitant interest rates. But if you don't carry a balance from month-to-month, those interest rates won't hurt you.

Credit card companies also charge merchants fees every time you use your credit card to buy something. The credit card company, therefore, has a financial interest in getting you to use their card instead of the one offered by their competitor.

Rather than thinking in terms of what we must pay to have a certain credit card, we should be thinking in terms of what the credit card will pay us to use it. Many credit cards offer cash-back, airlines miles, or other rewards just for using that credit card to make your purchases. Therefore, if you're not getting one of these benefits when you use your credit card, you are probably getting robbed.

There are many other options available too. Excellent resources for comparing available credit card are available at and Nerd Wallet.

NOTE: If you already have a credit card that is not giving you cash-back or rewards, you may be able to call the 1-800 customer service number and simply have the card switched over to one that does give cash-back or other rewards.

Revised 11/30/14


Anonymous said...

is there any impact on your credit score for opening and closing credit card accounts? If so, that might play a factor in using this excellent post.

David Wolfe said...

Sharon--If you've had a card for a long time and paid it off, your credit score could be seriously damaged. After all, a big portion of your credit history would disappear. Not sure about the hit from switching cards within the same company. If you want to do this very good idea and have multiple cards, I'd try doing it on the card you've had the shortest amount of time, like a year or less.

David said...

sharon, there isn't a simple answer to your question. opening a new account might temporarily lower your score, but having more accounts open over time may actually raise your score (assuming you pay your bills on time, etc.) even if you decide to stop using some of your older credit cards, it may be wise to leave those accounts open rather than closing them, since closing them might lower your score.