Bait and switch: More rewards could mean less credit

I’m certain you’ve seen it at least once: the movie scene in which a jittery bank robber demands that “nobody move”.  Or he may say, “Don’t do anything funny!”  I’ve also heard, “No sudden movements!” 

That scene is what comes to mind every time I get an e-mail from one of my credit card companies encouraging me to buy this and that, to take advantage of this offer and of that offer.  I’ve noticed that the e-mails have become more frequent and more aggressive.  It’s almost as if there is an inverse relationship between a declining economy and how much creditors want you to spend. 

You may suggest, “Kevin, just opt-out of the e-mail!”  As much as I would like to do that, I realize that reading the e-mails gives me clues about how I should alter, if at all, my shopping habits.  The information may also indicate how well or poorly the company is doing. 

One of the e-mails I received promoted discounts for those who use their credit card to buy groceries and gas, two purchases that creditors are watching closely nowadays.  Some creditors assume that if you are buying necessities, you may be experiencing cash flow problems.  It is only a matter of time before your credit line is reduced or you see some type of negative impact. 

So, in short, don’t drastically change your credit card spending habits these days. Despite how good the promotions seem, this is definitely no time to begin charging necessities on your credit card. Your only strategy should be to pay off current debt.  As if a victim of a robbery –and there is no intentional parallel between the creditor and the robber--  just remain calm.  That way, you won’t get robbed and killed; that way, you don’t increase your debt and get your credit line slashed --or even canceled. 

Comments

[joseph roberts]

amex pulled the same thig with me and my business and cut our by over half. called me at home a t 5:45 am and tried to tell me i was late with a payment . i got her supervisors number and came in the office checked my balance (was current) and called and got a lot of hot air. we are looking for eliminating amex from doing business with them as we do about 5 k a month personally and 30 thousand a month for my business. we too are looking at visa or funding debit cards and using them.

[Doug Robertson]

Your "Bait and Switch" article was very interesting. It reminds me of the tactic police sometimes use to catch criminals, where they hold an event and invite people with warrants. Those people show up and they get arrested. This is just what the credit card companies seem to be doing. Why? Why chop off the hand that feeds you?

[Cindy]

I just watched the interview with GMA - scary.

Didn't believe "we" should have bailed out anyone. Even more convinced now.

I agree - they are getting more aggressive in their tactics. Luring people into more debt that they can't afford and then jacking up the interest rate when you're late or cannot pay the minimum due.

I have a Chase card and my due date is the 10th. So I've been trying to pay it down and make a couple of payments. However, anything I send in up to the 16th is applied but they treat it as a late payment and have been charging me a late fee. Crazy.

Another concern I've had for some time has to do with the timing of payments. If I go to my local Target and make a purchase with my debit card, it is sucked out of my account at that exact moment. I go home and log on to my account and see - the money is already subtracted from the total available.

However, if I elect to make a payment to my phone company or credit card company, that money doesn't come out for 2-3 days. Why? When I pay my cell bill at AT&T's site and not through my on-line banking, that money comes out right away.

Seems that banks and retail have some agreement that debit card transactions will come out right away, but other payment types will not...

Also, I remember a local story here in Denver where a woman had written a small check for something (less than $10). She ended up owing hundreds in bounced check fees because her bank cashed her checks in order to get the most NSF fees out of her. Her mortgage - obviously the largest payment was taken out first, and everything after that including the $10 check bounced. The local news did a story and the bank defended itself saying they could cash the checks in whatever order they chose.

Criminals. And now we've just given them more money...

My husband and I are paying things off. Yes, there are great deals out there, but after this recession is over, we plan to be in a better financial position. Our second car will be paid off tomorrow, I've paid off my Macys (which didn't have a big balance anyway), and earlier this month I paid off the discount tire card. So with that money we'll plunk it down on higher interest things and get them paid off sooner.

Thanks for bringing this out in the open!