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Most personal finance-types out there have a real vendetta against those people that carry balances on their credit cards. They preach fire and brimstone to anyone that pays “low” credit card interest rates of 9-12% a month, and true eternal torment for those souls who get hit with the classic 19.99% rates. Not me, I love these people. THANK YOU credit card users who keep balances. If you have two or more of these cards, then you have a special place in my heart. The select part of the population (although growing daily according to most reports) that uses one credit card to pay off another, or takes out a loan (see our Borrowell review for online lending options) to pay down balances, only to charge even more to the plastic while now carrying at HELOC at the same time – you are my salvation.

You Pay For My Free Lunch Trip

You see it is the sacrifice of people like these unselfish individuals that make my credit card benefits possible. I have to admit, I am not unselfish, I pay off my credit card balance monthly. I think there was one time in college (man, I need to get better college stories) when I mistakenly carried a balance for like a month, and that $7.58 in interest still bugs me. Visa doesn’t make money off me, in fact, I’m kind of greedy in that regard – I cost Visa a fair amount of money. If it weren’t for the saints that so graciously make minimum payments, and painstakingly ignore their balances month after month, those Visa boys would probably get wise to greedy jerks like myself who just sit there and soak up rewards.

The Not So Few, Not So Proud

I know there are plenty of you out there because I get some crazy good stuff in exchange for paying with plastic wherever I go. I mean 2-3% cashback on everything I buy in a year, that adds up to some pretty nice coin. I know people that take holidays every year withtheir favourite rewards cards, and that simply wouldn’t be possible if there weren’t lots of you giving-is-better-than-receiving types. In order for Visa to keep posting profits while giving me such cool stuff just for carrying their card with me, someone must be absolutely paying through the nose. The credit card companies must make insane amounts of profit off of your accounts and pretty much give you nothing in return, otherwise the business model just wouldn’t work. Your business is so valuable, and the consequent profit margins so high, that companies have to promise me more and more stuff in order to try and attract your debt, so I just can’t say enough about how happy you make me!

The Definition Of Altruistic

Just don’t expect to me to bail you out when you declare bankruptcy though. That would totally ruin my impression of you. I would have to cancel that whole canonization thing, and give up lighting a candle for you at night. Remember, it is out the goodness of your heart that you are doing this. I mean, it has to be right? No rational thinking person would be crazy enough to give a bank more for the privilege of spending money that they don’t have than they could ever hope to make by investing it in the stock market. I know you aren’t like those rude people over on Wall Street that are leveraged to levels that even dedicated spenders like yourself could never match. Those guys are real rascals. See, like you, they are fine with all that debt, but then they want me to pay it off for them! Even worse, they recruit all these suit-and-tie types to help them take it from me in the form of taxes and subsequent bailouts (even if they come up with cool names for it like “operation twist”). I know you’re not dishonest and crazy like those guys.

This One’s For You

You’re just a buddy that I’d like to have drinks with (after all, I know you like to buy). Just one of the guys/gals. Joe/Jane Average if you will. Interest payment-lovers, we salute you as true North American heroes! You singlehandedly live life as a testament to the values of materialism, lifestyle inflation, addiction to credit, and giving much more than you have, and for that I am thankful!

Article comments

Matt says:

While your article has a point about how credit card rewards work, your sarcastic tone is quite insulting to those Canadians who carry large amounts of cedit card debt for TRULY selfless reasons (such as ensuring their children are fed and clothed and have shelter, or participating in extracurricular social activities with their friends), or because of circumstances beyond their control, such as sudden job loss, medical problems or death in the family.

Be lucky you don’t HAVE to carry a credit card balance. Many smart, hard working, and “rational thinking” people, through no fault of their own, are not that lucky and don’t deserve your sarcastic tone.

You may as well be saying “thank you, hard working unfortunate individual who cannot afford a vacation or afford to pay off your credit card debt due to circumstances beyond your control. Thank you for allowing ME to be able to take a vacation.” Nasty.

Yes, there are options out there other than credit cards for these unfortunate individuals, but credit cards are immediate and sometimes the only way to temporarily mend a problem.

And sometimes credit card debt is taken on for an important personal reason that holds more than just monetary value, such as a dream wedding, family reunion or family vacation, with the full intention of paying the debt off in a timely manner, and something unfortunate happens, such as an accident, that doesn’t allow the debt to be paid off as fast anymore. Sometimes this reason is important AND urgent, such as paying for a flight home for a grandson to visit his grandmother on her deathbed.

Everyone has a different story, and not everyone who carries credit card debt is a “non-rational thinking person,” and they certainly don’t deserve to be put down by those fortunate enough (not “smart enough”) to be able to pay off their plastic card right away.

Paul says:

I totally agree with you on this, but your post has a slight yet significant oversight. VISA, MC, AMEX, etc. all make insane profits not from people who carry balances, but from 1-4% fees charged to merchants which eventually gets added onto the sales price of anything you buy with your plastic. It actually makes more sense to these creditors to get you to default on your account so that they can write off your balance as a loss (I.e. tax break) and pocket the $1,000s in fees you’ve generated them.

I totally take advantage of rewards cards because I pay my balance every month, but don’t think for one second that people who carry balances are subsidizing our spending habits. Those rewards are generated from our spending habits. Cheers, Paul.

Cathryn says:

This ends up being a very inclusive commentary.

1. We get cash back or rewards based on our own consumer spending/consumption/purchases. The more we buy the
faster we get a very small amount back out of the credit
card company’s revenue. In order to stimulate some people
to buy more.
2. The credit card company makes money from our credit
car purchases at the point of sale
3. The credit card company makes money by financing
consumer purchases at high interest rates.

So with all this input, I have a really clear picture of
what is actually going on.

I use my own credit card for convenience and on-line purchases,but I always have my priorities clearly in place,
and how things fit into my chosen life-style.

harmless says:

Um, it’s not just the people carrying balances that are subsidising your card benefits. The merchants pay a percentage up front. Usually at least 2-3%. So, effectively, you’re taking from the store and giving to Visa. And they’re giving you a cut.

That’s all well and good if it’s a big chain which is likely as not owned by many of the same people but in my opinion it’s quite bad for our society if you use your card at small merchants.

They’re in a hard place. 2-3% doesn’t seem like much but that’s a percentage of the total. As a percentage of the profit it is quite a lot more given that margins are slim. And smaller players pay more for merchant accounts. Overall, it makes it harder to start a business which reinforces the boring chain thing and concentrates wealth.

Retail is sort of pointless, but I really appreciate small restaurants and local bars with better than usual food and drink. In Canada we’re lucky to have INTERAC so I use that or cash whenever I care even slightly about who I’m paying. INTERAC being like a flat 25c fee.

Worst place to use a credit card is in a taxi. Those comapnies rent the car and equipment to the drivers so they’re technically not employees and instead “customers” themselves. They also bill the drivers 6-8% on all card transactions, even INTERAC.

Teacher Man says:

I should probably have given some “ink” to this part of the industry as well harmless, your definitely spot on as far as numbers from what I have read. I do hear that the government is giving small businesses the option of charging people that pay with credit cards a little more. But as you say, this might just semi-unfairly drive people away. In the specific example of food and drink that you use, is it fair to say you would pay 2-3% more to eat there? I definitely did not know that about taxi cabs. Then again, I’ve actually never tried to use a Visa/Mastercard in a cab, so I guess I haven’t done wrong by anyone on that front.

$-Saavy Wife says:

Interesting that the Canadian government allows small businesses to charge more when they use credit cards…This practice (surcharges) is actually illegal in 10 states in the US, including the four most populous states. I wonder which lobbyists were behind these laws…

Teacher Man says:

I definitely agree that lobbyists were behind it one way or another!

I also thank people for my free trips to Europe and New Zealand with my credit card rewards (keep in mind I spent thousands on my credit card).

In this case I don’t feel bad about free-riding a bit.

Great post. Hopefully some people wake up and get their debt under control. The others that don’t want to can continue paying us our rewards 🙂

Poor Student says:

Just got accepted for the MBNA Smartcash card, can’t wait for the first six months of 5% off gas and groceries. I will be stocking up. I have never paid a cent of interest and pay for everything I can with my current cash back Visa and soon my new, better cash back card. It just makes sense when you can get some of the money you spend back.

Teacher Man says:

Atta boy! It’s too good to be true right? An automatic 5% back is pretty sweet!

Very tongue in cheek! I like it! And until we meet our goals (we’re getting closer…) YOU’RE WELCOME! 🙂

Teacher Man says:

Haha sorry if my sarcasm is a bit much sometimes!

Tracey H says:

I once said to my credit card company (when disputing a charge) that they must hate me since I pay off my card in full each month (and have done so for over 30 years). They said the same thing SavingMentor said–I’m making them money by buying things from merchants who get charged when I use my credit card. After that, I haven’t felt at all guilty about getting rewards, not paying an annual fee, etc.

Teacher Man says:

I still feel guilty a little bit, especially when I buy from small businesses. I sometimes wonder just how much into their profit margins I am cutting. But then I see all the different ways money gets taken out of my pocket on a daily basis and I just resolve to try to keep money there by any means at my disposal.

$-Saavy Wife says:

I love racking up credit card points, but I try to skip it at small businesses when I have cash on hand. Yeah, I lose a small % cash back, but at least they aren’t paying 1.5-3% to the big banks.

$-Saavy Wife says:

My mechanic used to offer a 5% discount if paying with cash. I started doing it for the discount, but now that he doesn’t advertise it anymore, I do it because he doesn’t rip people off and I respect his livelihood.

Teacher Man says:

I think it makes sense to offer a positive incentive for cash. As long as everything else stays equal it’s just business for me to use a credit card.

RichUncle EL says:

I enjoyed this hilarious post, it is sarcastic to say the least. Since you opened up the discusion about cash back rewards: what is your favorite cash back or miles card? Also Saving mentor how much did you have to charge or aka spend to get all those supposedly free trips? Everything in this life has a fee attached to it and if spending 10K more in annual expenses to get a free trip is worth it than count me out.

Teacher Man says:

I’m a huge fan of the Capital One rewards card. Their initial miles and anniversary miles are a pretty great deal.

RichUncle EL says:

Thanks for the tip I’ll check them out. I currently have an Amex with an annual fee, its a rewards card with no minimum. ITs a green charge card basically, but I am considering closing it out, cant stand the fee.

SavingMentor says:

I don’t spend any more money than I would normally RichUncle. I just put every and all possible expenses I can on my credit card. Many of the rewards points also came from switching credit cards fairly frequently and taking advantage of sign up bonuses. Any time a particularly attractive sign up bonus comes along I will typically sign up for that card especially if the first year of annual fee is waived. Then, I will use the card for the year (if the rewards are better than my everyday no annual fee card) and cancel it before the 1st year is up and they try to charge me the annual fee.

There were a few annual fees paid in the mix but most of the time they were waived. For the flights, there were some taxes paid here and there but very little.

Of course, the entire trip wasn’t free either – just the flights and accommodations most times. But, if you take care of flight and hotels, then the rest is pretty manageable and you can spend as much or as little as you want on that stuff.

Teacher Man says:

I know a lot of people that play this game SM. How much would you say you make per year, or what is the equivalent value of the rewards you receive off of these credit card switches?

RichUncle EL says:

OK got it. I just hear of all these great sign on bonus cards that you have to spend 3,ooo in the first 6 months and that just turns me off. IF I could put my rent on a credit card then I would do it. LOL.

Teacher Man says:

Yah 3,000 is a lot… The vast majority for me is food and gas, so to my way of thinking it is money I would be spending anyway.

Rachelle says:

Does it affect your credit rating to apply for new cards?

Teacher Man says:

It depends Rachelle. If you only have one or two cards and they are in good standing I don’t think it would matter. If you are constantly being declined card ownership, this probably won’t look good.

$-Saavy Wife says:

Yes- new credit is 10% of your score. Any time someone screens your credit, it will stay on your report for two years. It will affect your score negatively- more at the beginning and less over time. http://www.myfico.com/CreditEducation/New-Credit.aspx This is most relevant if you have others check your credit many times (for new credit cards, car loan, new job, utility company, etc).

New credit has the benefit of increasing your credit limit, decreasing % owed. http://www.myfico.com/CreditEducation/Amounts-Owed.aspx BUT, if you cancel your new card each year, this isn’t so helpful.

My suggestion, avoid doing this if you anticipate any important credit screens in the next two years.

Great post – I often wonder how people can sleep at night racking up all that interest on their credit cards. And I always imagine credit card companies scheming up new ways to get more money out of me – like how they constantly send me convenience cheques in the hopes I”ll spend thousands of dollars. Nice try, guys!

Teacher Man says:

Isn’t that crazy how they keep sending you crap? I guess it must work enough for them to keep doing it eh?

BeachBoy says:

The problem, is that when someone declares bankruptcy, because they were foolish enough to pay discretionary expenses using their HELOC, the persons who foots the bill is ALL OF US.

Most mortgages are insured by the CMHC, well in fact, all the low loan to value mortgage (higher risk) are insured by CMHC, and it’s these people that tend to get bankrupt.

CMHC insures the loan (and that includes all that credit card debt paid through HELOC), and pays back the bank.

CMHC is government money. Yes they receive some of the money in the form of interest/charges on the mortgage, but still.

Teacher Man says:

This is true Beach Boy, but on the flip side those people have to pay their whole lives for that bankruptcy so it’s not like they are getting a great deal either.

SavingMentor says:

I’m definitely with you there, I’m also thankful for those people. But don’t kid yourself, you’re partially paying for those rewards because of the merchant fees that Visa/Mastercard are charging the merchants who use their payment service. I’m sure a huge portion of their bottom line is made up from that.

You also need to thank those people out there who pay with CASH & DEBIT because those people are making sure that prices don’t go up by the full merchant fee at your local merchant. They only have to raise their prices enough to cover their cost for those people who use credit not the entire ~2-3% that the merchant fee would cost them if everyone paid with credit.

So THANK YOU to all of you. My family enjoyed our free trips to Paris, Toronto, Vancouver, Niagara Falls, Chicago, and Los Angeles!

Teacher Man says:

Great point Saving Mentor. There are so many savings available out there if people just open their eyes eh?

krantcents says:

Interesting viewpoint! Someone has to pay the expenses and it might as well be the ones who use it. This concept seems to be lost in politics. The haves pay the majority of taxes to support the people who do not earn enough to pay taxes.

Teacher Man says:

HAHA no kidding. In Canada right now we are having a huge debate over the requirements of EI. People refuse to realize what it is – a tax that transfers wealth from the working class to the non-working class in a systemic way.