Grab every last point, but don't become a victim...

[quokka77]

So, here's an article which fleshes out something that has been well-known for a while: spending on cards lessens a consumer's perceived purchase pain.

The psychology of making purchases with cash and credit - Talking Shop - ABC Radio National (Australian Broadcasting Corporation)

What can one do to stop it? Maybe just accumulate all of your points through direct points purchasing (USDM, Avianca etc), sign-up offers, and flying, rather than relying on credit card spend, and revert to banknotes? I'm not quite there yet, but I will be taking a critical look through the family budget to see what I can flense.

 

[zainman]

I never pay any interest on my cards anyway so for me using a card is the better option.

 

[Princess Fiona]

I never pay any interest on my cards anyway so for me using a card is the better option.

Same, never have and never will. The only outlay I have is the annual fee for the respective cards I have.

 

[Buzzard]

I always look forward to receiving my credit card statement.
Pay it off in full and start again using a free loan from the bank :mrgreen:

If it costs me a couple of hundred to earn a gazillion points I'm fine with that.

 

[casanovawa]

I never pay any interest either, but I imagine spending on a card can also mean your more likely to spend because of delayed pain than having to hand over the hard earned cash then and there....

But i try to pretty much have discipline whenever i shop and have gotten into some pretty stable routines, I have no problem waiting a month or two till the next sale on some shoes if i need them, usually reserving clothes buying to half yearly sales or buying groceries when on special and so several of them at a time etc rather than at full price...

But QF and the associated businesses really do like to trick people into the lure of the points etc and many fall for it...

 

[lovetravellingoz]

but I imagine spending on a card can also mean your more likely to spend because of delayed pain than having to hand over the hard earned cash then and there....

...

Yes that is the nub of it...that people spend more...irrespective of whether they also pay any CC interest or not.

 

[zig]

All my cards are paid in full every month, so no interest is paid. I really don't believe that I spend more by using credit cards over cash, and I get lots of points

 

[JohnK]

I pay interest on credit cards. Big deal. I also pay interest on home loans. And I pay interest on personal loans.

I have 2 credit cards where I hardly pay any interest. Amex and 28 Degrees. By using these cards I am not spending more than I would with cash but I am earning some points. e.g Virgin mobile direct debit. Why would I setup direct debit out of a savings account when I would just as easily pay with Amex today, earn some points and pay Amex back end of next month?

 

[quokka77]

JohnK, for essential services this is a no-brainer. You would have spent the money anyway so may as well get some points for it. Where it is less obvious is with discretionary spend, where the payment method appears to influence volume and pattern of purchases (according to the quoted studies which I have not looked up / read). Anyway just something to think about as you next go shopping, either online or in store.

 

[Flying Fox]

What happened to if you don't need it don't buy it (that's even before working out how to pay for it).

It's just silly to buy cough just for points.

 

[SeatBackForward]

I pay interest on credit cards. Big deal. I also pay interest on home loans. And I pay interest on personal loans.

I have 2 credit cards where I hardly pay any interest. Amex and 28 Degrees. By using these cards I am not spending more than I would with cash but I am earning some points. e.g Virgin mobile direct debit. Why would I setup direct debit out of a savings account when I would just as easily pay with Amex today, earn some points and pay Amex back end of next month?

But if you can manage your finances accordingly, why pay any interest against a credit card at all? pay off the balance as required so its effectively like a debit card.

 

[JohnK]

But if you can manage your finances accordingly, why pay any interest against a credit card at all? pay off the balance as required so its effectively like a debit card.

Long story.

 

[smit0847]

This is an interesting discussion. I usually have 2 or 3 credit cards at once, each has a very specific purpose (1 being a high earning Amex, another being either a high earning/decent Visa or a Visa with a decent sweetener i.e. 2-4-1 flights, and the 3[SUP]rd[/SUP] being a fee-free foreign currency card) and I pay off my balance in full each month.

If these cards did not offer big sign-on bonuses and/or good points earn I wouldn’t have any credit cards at all. For any card with an annual fee, I review the card towards the end of each year and decide if it is worth paying another annual fee for the next year or if there is a better alternative, like trying to have the fee waved or cancelling the card to take up a better offer. The only time the CC companies are making any money from me is with the first years annual fee which is usually more than compensated by the big sign-on bonus, and any subsequent years annual fees, which I would only be willing to pay once I’ve reviewed the card as discussed and believe its worth keeping.

I have some very stupid friends/acquaintances who have (fully maxed out) points-earning credit cards with the full 23% interest rate that they keep purely because ‘those cards earn FF points’, despite the fact they hardly make any purchases on them as they’re always so close to their limits. They would rather earn a few thousand points over the course of a year than save several thousand dollars by transferring the balance over to a low interest or no-interest-for-12-months card. As a result they have neither the points to redeem for flights, nor the money to pay for flights either. Others I know purposely have cards with very high annual fees, purely because they earn slightly higher points than low-fee cards (we’re talking 1.25 pp $1 vs 1.00 pp $1 spent). They end up spending all of about $3k on the card over the course of the year – I’ve done the maths and they’re paying far more in annual fees than their gaining from the slightly higher points earn vs a low-rate, lower-earn card.

Funnelling everything through a CC purely for points but avoiding wasting money on interest, annual fees etc requires a high-level of organisation, time, clear travel goals and an interest in the constantly changing deals, offers, sweet spots etc. I’ve managed to get my partner to sign up for the same CCs as I have and follow the same cycles – he doesn’t have the organisation or interest in this game that I do but recognises the benefits (‘how the other half live’ as he calls it) so is happy to just do what I suggest.

Very few people outside of this site have that sort of commitment to travel, yet are the first to complain about how unfair life is when they hear I’m yet again travelling J while they haven’t been overseas in years.

 

[casanovawa]

Unfortunately many, many people are clueless when it comes to managing their money, which businesses love and has the person themselves often complaining about everything (the banks, the government, centrelink etc, etc) rather than accepting the real blame themselves and realising they are in the main the only one who can put themselves on the path of getting some control over their life....

You can even tell them, drop hints, all sorts of stuff and you may catch their interest momentarily, but it fades within about half an hour of you mentioning it...

Habits are very powerful things...

 

[burmans]

Unfortunately many, many people are clueless when it comes to managing their money, which businesses love and has the person themselves often complaining about everything (the banks, the government, centrelink etc, etc) rather than accepting the real blame themselves and realising they are in the main the only one who can put themselves on the path of getting some control over their life....

You can even tell them, drop hints, all sorts of stuff and you may catch their interest momentarily, but it fades within about half an hour of you mentioning it...

Habits are very powerful things...

Adverse selection! Or as some describe it, a stupidity tax.

 

[amaroo]

I live a cashless life. CC for everything - helps to make the kids school fees bearable.

 

[knightman7]

I hate credit cards. If my wife was restricted to a 1k daily eftpos limit my life would be so much better lol

 

[zinkle]

But if you can manage your finances accordingly, why pay any interest against a credit card at all? pay off the balance as required so its effectively like a debit card.

Although very low balance transfers often have an even better interest rate than home loans!

 

[JohnK]

Habits are very powerful things...

If only it was that simple. People get themselves into various levels of financial trouble for any number of valid reasons.

Shopping junkies are one group.

Those wishing to live a higher lifestyle than their income allows are another group.

Those faced with necessary bills take out credit cards (just as easy as a personal loan) to get themselves out of trouble but then lose their job and max out their credit card and then have no ability to pay it back.

Credit is being given away too easily. The internet has made that much easier.

This little credit card debt clock is very interesting. Currently ~$34 billion but I have seen numbers as high as $49 billion reported a few years ago.

I would hazard a wild guess and say if you pay your credit cards off in full every month then you are in the minority. Just a wild guess though....

 

[SeatBackForward]

That old addage remains true:

In order to get credit from a bank, you must first prove that you don't need it.