Comments on: Credit Card Companies Want Your Money – A Guest Post From Five Cent Nickel

By: Andrew

Andrew — Fri, 23 May 2008 15:22:04 +0000

I had never thought of getting a 0% credit card and then putting the money in a High Yield bank account. How do you go about doing that once you get the credit card though? Do banks allow you to transfer money from your credit card into the bank? If so, that’s a great way to earn some extra money! It’s better than credit card sign up deals that I already do.

By: Mike

Mike — Mon, 19 May 2008 22:34:27 +0000

I am all for the responsible use of credit cards. You’ve gotta be careful with them – but then, you’ve gotta be careful with everything! If you don’t have the time or inclination to be careful, then you probably shouldn’t use credit cards, but there are certainly ways to use them responsibly.

By: Emily @ Taking Charge

Emily @ Taking Charge — Mon, 19 May 2008 21:56:33 +0000

“Signup bonuses are relatively innocuous, in that you can simply cancel the card after getting your bonus. Moreover, a single application can net you $100 or more.”

I really don’t want you to encourage people signing up for cards and canceling them immediately. Every time you apply for a card, your credit report gets a hard inquiry, which dings your credit score. Applying to many cards in a short period of time is a red flag to other credtors because it makes you look desperate. Additionally, every time you close an account, you ding your credit score. So while this can be fine from time to time, this is not something that should be done with any sort of frequency. If you will be applying for car insurance, a loan, or mortgage any time soon, this is a bad idea. If you don’t need a great credit score, go ahead. Just be aware that signing up and dumping cards left and right will lower your score.

Also, arbitrage (or stoozing) — when you take the 0% money, put it in high yield accounts, and bank the difference — is something that should NOT be attempted by someone in debt. It is a great tactic if you are in the black, very on top of things and want to make a little extra money, but if you are already in debt, you do not want to risk getting behind even more. Additionally, utilizing that much of your credit limit will lower your credit score, which is not a good call if will be needing a loan or mortgage soon.

By: kitty

kitty — Sun, 18 May 2008 22:23:52 +0000

There may be some risks with 0% arbitrage game, but I see little risk in just using credit cards if you pay in full every month. As to the overspending studies: the average in the case of overspending with cards includes people who spend a whole lot more and run up huge debt. Combine one person who spends 100% more with credit cards with 9 people who spend about the same and you’ll get “people spend 10% more on average”.

Payments can be automatic. With automatic payment of the full balance the full balance is deducted from your bank account on the due date. You are guaranteed to never be late even if they change the date.

The trick to not overspending is to decouple the decisions to buy from the decision of how to pay. I’ve never seen why it can be any other way – you have to pay for it anyway, so what is the difference? Those who cannot do it should probably avoid cards. This requires thinking before making a purchase, but this is a necessity even if you spend cash. You cannot spend more than you have with cash, but spending all you have is often a bad idea.

Joshua – I’d thought so too, but I later found out that some of the financial bloggers and readers are indeed struggling with paying debt.

By: Pamela Grundy

Pamela Grundy — Sun, 18 May 2008 16:39:45 +0000

Great article, thanks! The intent these companies have is to hook you, for sure. What they want is for you to run up a balance and pay the minimum, preferably until you die. I do feel some regulation is in order, but doubt we’ll see much of that anytime soon. Until then it’s definitely Caveat Emptor!

By: Joshua

Joshua — Fri, 16 May 2008 21:58:02 +0000

I know myself as well. I know that if you reading a personal finance blog you usually can control your spending. Maybe I’m wrong.

By: DebtFreeDave

DebtFreeDave — Fri, 16 May 2008 21:40:03 +0000

I don’t care what the offer is I’m not getting any credit card except for a debit card. It’s just to tempting to go out and spend. I know myself to well. Just stick with a debit card.

By: Philip

Philip — Fri, 16 May 2008 12:54:24 +0000

Thanks you for the post Nickel, I have been tracking all my spending for over a year now, and have no CC debt, just mortgage and student loans. I am seriously considering starting to deal with some of these offers soon.

I agree that this is just another way of playing a game, and if you don’t enjoy dealing with all of it, then you would probably be best served to just leave them alone outside of the sign up offers.