Credit card companies are at war for your dollars. Well, they are at war for your debt, to be precise. Having debt of any form means you are indebted which means servitude. It means you are no longer “working a job for yourself everyday,” you are “working to pay the credit card company you owe.” It might feel like you have a choice on where to spend it when you receive your paycheck…but you won’t have a choice someday down the road. It’s like living in a big house that the bank owns…”we’ll let you live there and play pretend, but for that privilege we’re going to charge you more than twice the purchase price of the house by the time your 30-year mortgage is over.”
Debt is a huge business – making money off of peoples’ debt is very lucrative. A nicer way of referring to the business of trading unfortunate folks’ servitude is debt securities. One of my brothers is a debt collector and told me debt is sold, resold, then resold again, because companies can turn around and collect more and more money on that original debt…because it keeps growing. You can start your own debt collection business just by finding some debt to buy then trying to collect on that debt. The sad part is he said most of the severe debt is healthcare related….umm healthcare reform anyone?? I just saw a news report on a helicopter company that flies your newborn to the hospital when their heart stops but then bills you twice your annual salary for that favor.
Debt is all around us through, starting with the houses we live in…and no one can seem to “start small” with their house and instead they go out and buy a house for as much as the bank will write the loan. Your mantra should be “just because I can doesn’t mean I should.” I have this romantic notion that everyone would live in a home they built with their own two hands…like my grandfather did. Yes, maybe he used newspapers for insulation and maybe the structure wasn’t what it could have been, but imagine the pride he felt and how carefully the family took care of the house. So much of that pride is missing from homes these days, because no one puts the work in so the value is not there. I read that you go to “your bank” for a mortgage, and then almost immediately they turn around and sell that actual note or promise of payment to another company, although you continue to receive your statements from the original lender, your debt is being traded the entire time, to see who will pay the most for it on the odds you never pay it down. It changes the way you think about banks.
My Grandpa Karl Douglas (R) and younger brother Clark (L). Karl built a home out of a shack when he married my grandmother, then the original shack owner revoked the sale, forcing my grandpa to return ownership of the property after he had built the house. He never forgot that and never owed anything to anyone ever again.
Credit card companies offer up rewards for your debt dollars…hoping you either go spend-crazy with your credit card for the sake of rewards or hoping you roll over your current debt into their credit card program. The only way to take advantage of this debt shitshow is to pay off the entire balance every month and use a cash back rewards program….which I’m sure credit card companies hate! Don’t worry, there are plenty of indebted folks making sure credit card companies stay profitable. If you only charge what you can afford to pay off each month, you are actually making money #intheblack without actually incurring any debt or servitude. But it’s not easy to do.
- Credit cards (and technology) make it too easy to spend. You can save your credit card info on every site you buy from so it is already there next time you decide to buy something; you can PayPal that shit to death until you are over your monthly income all of a sudden.
- You have to swear to yourself you will never pay a dime in interest no matter what. Develop a plan of exactly what you will do if you accidentally overspend. Do not run to mommy or daddy…your parents will have hardships in the future guaranteed and you probably have more energy and are more able-bodied than they are. Plus the whole self-respect thing. Do you have a savings account you will pull from? Do you have an asset you can sell on Craigslist or eBay? Do you have a quick cash gig you can do on the side such as moving furniture or bar-tending?
It’s critical you pay off your balance every month. How critical? If you find yourself unable to pay off your balance, don’t even think about accepting the “loan” from the credit card company, you must get another job immediately…I don’t care if you are cleaning shitters or driving for Uber. You don’t want to owe anything to anyone…that shit doesn’t go away and only gets bigger. It’s like “…herpes…that shit will come back to you…”
With that in mind, I looked for a long time for a great cash back rewards personal credit card and found it in American Express Blue. A lot of rewards programs are only temporary (for the first year) or they charge an annual fee, which is ridiculous. Or the rewards are not very transparent…like points or miles…which don’t always add up the way you think they should. I made about $400 dollars in cash back last year, which I’m tremendously happy with…it’s free money from a CREDIT CARD COMPANY! #winning The only caveat is some retailers don’t take American Express, because their transaction fees are higher (the fee the store has to pay to the credit card company for the transaction, on the off chance they don’t make any money off of you on that purchase/you pay it off). Because of this, I also have a Visa (no rewards program) that I only use to pay the water bill each month and whatever else pops up that I can’t put on my Amex.
It is important to note length of ownership of the credit card is of foremost importantance on your credit report. I’m not obsessed with my credit report or score because that’s just dumb but I do understand and pay attention to factors that influence my credit score including:
- The longer you own a credit card (and pay off the balance), the better. People who shift money (debt) from credit card to credit card are literally killing their credit score. While I’ve only had my Amex for about 5-8 years I’ve used the same Visa since I turned 18. Never, ever add more cards for the sake of rewards…unless you plan on owning those 8-10-15 cards for the rest of your life. Also, I might discourage you to cancel a card for the same reason, unless you have an overabundance of credit cards.
- Each time you apply for credit or a loan or “see if you’ll be approved” it dings your credit score. If you do this more than once per year, I’d say it’s a pattern that is noticeable and will downgrade your credit score. It’s basically saying you’re seeking out financing often…which essentially means you’re financially unstable.
For our rental business, we knew we didn’t want to get stuck in a situation where we couldn’t use our card everywhere, like with American Express Blue, but we also wanted cash back rewards, not points or miles, without an annual fee. We eventually found the Bank of America Cash Rewards Business MasterCard and it has done pretty well for what we need it for. In the last year we’ve redeemed about $100 cash back so not as lucrative as the Amex Blue but we’re very happy with it.
There’s a lot more to be said about credit cards and their benefits and pitfalls, but I think this post is my longest ever so I’ll stfu. Yay for cash back!