Credit cards that offer bonuses for active use are an attractive banking product, but only for those who know how to monitor their finances and do not make unplanned purchases. I regularly use a classic credit card, so I know how the system of grace periods, bonuses and interest. But during one of the trips, I was offered to issue a credit card with accruing bonus miles for purchases. Based on my experience, I will share with what “pitfalls” of the attractive, at first glance, proposal I had to face.
Tempting offer
First, I will tell you how it turned out that I decided to issue another card with a bank limit. Paying with my "old" credit card at the airport ticket office, I learned from a company employee about a new promotion. Together with a well-known bank, the airline offered to issue a co-branded credit card: a special product offering non-cash accrual of miles for expenses.
I was attracted to the fact that they offer 50,000 miles as a gift for registration. To accumulate such an amount of bonuses in other banks, you need to spend at least 10 thousand dollars. Here miles were awarded immediately after activation. The only condition is that I had to complete any transaction within 24 hours.
Credit Card Terms
The card service suited me, as well as the fact that it was not necessary to spend a certain amount of money every month so that bonuses accumulated in the maximum amount, as in some banks.
In addition, I had the opportunity to choose the categories of products for which I received even more dearly from partners. For example, I often bought at Old Navy, Macy's, and Lands' End, so I selected them as the main categories. Alternative conditions included extra miles for dinners at the restaurant. But I am not a supporter of spending time every night outside the house, so I chose to choose these categories.
Under the terms of the credit card, in order to receive miles, I only had to pay using plastic, and not cash, in my favorite supermarkets or online stores. Bonuses were relied on for paying in special categories: miles were awarded up to 10 times more.
Joy of using
In the first 2 weeks after receiving a credit card, I could not get enough of how lucky I was with the card. To fly to hot countries without spending money on a ticket was my old dream. And I already imagined where I would go to rest next year.
Before issuing a credit card, I never considered myself an avid shopaholic. Using an old credit card, I always fit into the grace period so as not to pay interest to the bank. In addition, I analyzed my expenses for the period using the special Quicken application. It allows you to find out which category had the most spending in order to understand where you can save next month.
For the first time after the registration of a new banking product, I diligently applied everything that had already become a habit and became part of my “financial structure”. But after 2 weeks the situation has changed.
First problem
The terms of the co-branded card looked attractive, especially for me, since I clearly set myself the goal: to buy a ticket for “magic miles” next year without spending a cent of my own funds on it.
Lusting up on the idea, I began to implement my plan. And here the first problem lay in wait for me: wanting to accumulate miles as quickly as possible, I began to make more rash purchases.
At first it was the little things that are usually located near the cash register in supermarkets.Financial experts call them “cures for boredom,” since buyers buy chewing gums, sweets and candies, as well as famous chocolate bars, while they languish in line at the cashier.
The main disadvantage
But on small expenses, my desire to save up rather did not stop. Subsequently, I became more wasteful, which immediately affected my financial condition at the end of the month.
A credit card with bonus points forces you to spend more if the owner wants to accumulate on the target as quickly as possible. In my case, spontaneous purchases led to the fact that I could not meet the grace period.
This is the situation with me for the first time: earlier I made a payment even in a slightly larger amount, in order to be sure that the bank would not send a message about the need to pay interest. But with a new credit card, my vigilance faded, since all attention was directed to the accumulation of miles.
As a result, I did not notice how part of the limit remained outstanding. Therefore, I had to pay for the first time for the use of credit funds.
Bonus credit card trick
It’s nice to receive free miles or other bonuses for daily purchases if you do not have to pay interest to the bank. One of the features of credit cards with bonuses is a high interest rate. Thus, the issuer compensates for the costs of issuing free bonuses, points or cashback.
Having got into a situation when I had to pay interest to the bank due to my own stupidity, I made up mini-tips for using a credit card:
- Do not spend more than I can pay off.
- Do not buy unnecessary things for which they offer big bonuses (in my case it was miles).
- Analyze your spending regularly.
- Choose only those categories of purchases that I really use.
- Make payments on time so as not to pay interest and not spoil the credit history.
I admit, I managed to accumulate the required number of miles to buy a free ticket next year. But my experience with using credit cards with bonuses was not always successful, however, it allowed me to learn a good life lesson.