Credit Card Survey Shows The Positive Side Of Plastic

A while back, Mr Credit Card invited me to provide some responses to a survey he was conducting about the credit card habits of financial bloggers. I gave him my replies and he has since published the results in his article entitled “Personal Finance Bloggers Credit Card Survey“.

Credit Card Survey With Personal Financial Bloggers

Here’s a summary of his findings:

#1 Most financial bloggers carry 2 credit cards. I own three: one for personal, one for business and one spare card (aka the just-in-case or backup card).

#2 Many respondents favor American Express and the Discover More card. Some even have an Amazon.com Visa card. None of my cards was considered a popular choice.

#3 Most financial bloggers surveyed do not carry any debt at all! 76% of respondents have no credit card debt. That’s amazing. Like most bloggers, I pay off my cards in full each month.

#4 The majority of survey participants have credit scores of 700 and above. At least 75% of bloggers are in this boat.

#5 About half the bloggers charge their utilities, cable and internet bills to their cards. I don’t and this tidbit gave me the idea that perhaps I should — to increase my rewards points of course!

#6 Respondents don’t have their credit card bills on autopay. I don’t. I’d still want to scrutinize my statements before I pay them.

Given the bad rap that credit cards have had, particularly in recent years, no thanks to consumer credit card debt piling up and contributing to the credit and subprime loan crisis, it’s refreshing to see that a good number of people still love their credit cards. I am one of them. However, I must emphasize that most people who see the positive side of plastic usually don’t have hangups with their finances. Credit cards are simply tools you can use in a myriad of ways. Some people end up doing well by them, while some don’t. They carry some risk when you use them, but if you use them right, you can benefit in a huge way. I liken credit cards to a knife: use it the wrong way and it’ll hurt. Use it properly and you can do quite a lot with it!

The credit card survey above shows that many financial bloggers are truly taking advantage of their cards and moving a lot of their regular expenses onto their cards. There’s a focus on popular high end rewards cards like American Express and Discover, and the reason of course, is because they have some of the best rewards out there. Recently though, I’ve seen how Chase and Citibank have been promoting various forms of their rewards cards with bigger and better bonuses, such as $150 to $200 cash back. It’s obvious that the card industry has shifted once more to trying to grow their customer base.

The Positive Side of Plastic

Let’s remind folks about what you can get from using a rewards card responsibly:

• Pro number one: Free stuff. Of course, as they say, nothing in this world is for free. You do have to pay for the items you buy, and if you don’t pay it off at the end of the month (just as most credit card companies are betting on), it’s going to cost you plenty in interest fees. But if you do play by the rules, then you have a chance here to weigh your reward options. Good customers with great credit always get the best offers.
• Pro number two: Membership pays. Most, but not all rewards cards are also known as affinity cards. These are credit cards that are affiliated with a specific business. In most cases, you earn rewards based on dollars spent, regardless of which merchant you utilize; however, the rewards increase exponentially if you patronize merchants that are specific to the affinity card you carry. For example, let’s say you are carrying a Harley Davidson Rewards MasterCard. You will earn 1% cash back, or one mile per dollar spent, or $1 Harley cash for every dollar you spend on that card. But, if you use that card inside a Harley Davidson franchise (or any other company Harley happens to own), your rewards double. Pretty cool, right?
• Pro number three: Pricing. Card issuers are pretty competitive and they sure want your business. Recently, they’ve been doing a good job with presenting consumers with favorable options such as better interest rates, lower fees, and good repayment terms. With the card industry recovering and adjusting to the new card regulations, companies are back on track and want to attract good customers. By good customers, I mean the ones that have near perfect credit and spend lots of money while proving they can pay it back.

A Few Warning Shots Before You Pick Up A New Rewards Card

While all of this sounds great, we of course, know all about the drawbacks. Misuse of cards can really bring down your financial house. Also, it’s difficult to overcome some of the credit criteria required to become eligible for a great rewards card. These cards are reserved for individuals with credit scores well above the norm, as well it should be! It’s not uncommon for rewards cards to require credit scores of 750 or higher in order to qualify. In addition, many rewards, especially those tied to affinity cards, can only be redeemed for merchandise with a particular merchant or through a catalog offered by the credit card company itself. Of course, this doesn’t apply to cash back cards, but for those that award airline miles, it is usually with a specific airline. The same applies to gift cards and other travel services.

In some cases, the rewards credit card interest rate may be slightly higher than a non-rewards card. A 1% savings on your monthly interest rate will trump a 1% cash back reward any day of the week, especially if you don’t pay your balance in full every month. And lastly, credit card companies that offer rewards cards are generally very intolerant of late or missed payments or being over the limit. Most will reserve the right to downgrade your account and stop rewarding you if you miss several payments, or are late more than 2 to 3 months within a calendar year.

And, there’s always the credit report to think about. By opening a new revolving account, your credit score will take a hit. Of course, this is a temporary setback, but if you are attempting to make a large purchase like a house or car, it might be wise to wait a little bit before you open that new account.

So, for those of you who have great credit and payment habits, by all means, get yourself a rewards credit card just like what many financial bloggers have done, and begin reaping the benefits. But for those of you who might be on the edge of qualifying, it may be best to hold back and opt for a prepaid card instead. Don’t rush into credit cards just because everyone else you know has one.

For more findings on bloggers and their credit cards, please check out Mr CC’s report. You can also find out who actually participated in this survey in Mr CC’s follow up post.

Created July 30, 2008. Updated July 8, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.