If you’re anything like me, you probably get at least one credit card offer in the mail every single day. Some days, it’s more like three or four offers. Some offers have been disguised to look like important mail, until you open the envelope to reveal yet another plastic card just waiting to suck you in.
One day, one of these offers actually made me stop and think. 50,000 bonus points, and I could earn over $600 in travel rewards? I may actually need to look into this one.
A few days later I couldn’t resist any longer. I went to the website, typed all my personal information in, and was approved in seconds. They liked my credit so much that they gave me a $5,000 credit line! It had been a while since I applied for a new credit card, so I was shocked at such a high limit.
But the credit line didn’t really matter to me. After all, I was only opening this card to pay my mortgage with for three months to get my bonus points and get a free ticket to some tropical destination.
Then I discovered I couldn’t pay my mortgage with a credit card. (You would think I would have researched this before, but no, those shiny reward points were calling my name, couldn’t nothing stop them then.)
My plan was ruined. Since I couldn’t pay my mortgage with my new credit card, I had no idea how I would rack up enough charges to earn my bonus points in such a short amount of time. I started calculating how much my other bills would add up to, and it came nowhere close to the amount I needed. So I decided that we should put all our purchases on our card, and just send in a payment once a week to keep up with it.
I’ll let you in on a secret now: this didn’t work. At first I was able to handle it. I didn’t like the feeling of playing catch-up on things I had already bought, but I was committed to earning those points. I didn’t want to waste an inquiry on my credit report for nothing, after all. But as the weeks went on, it became harder to match what we were spending on the card with what was actually in our bank account.
We knew we had some big purchases we wanted to make, so we decided to go ahead and make them now to help earn that bonus. This drained our savings account ten times faster than it took us to build it up.
Shortly after this, there were a few expenses we hadn’t planned on. The truck needed new tires, it was time for another visit to the eye doctor (and new contacts to go with it), and going-out-of-business sales that were too good to pass up. All these expenses went on the credit card. Without the funds to match in our bank account, the card quickly racked up a balance and is now added to the debt pile we need to pay off.
So did we spend enough to earn the bonus points? We sure did. Funny thing is, I decided to cash them out to replenish our savings account to have at least a small emergency fund in place. No plane tickets to Maui. No hotel stay at a fancy resort. I basically went in one giant circle.
Had I never opened this credit card, we probably would have held off on those big purchases, and kept the money in our savings account. We definitely wouldn’t have made so many impulse purchases and spent so much on entertainment. Our credit card rewards program allowed us to go out of control. We thought we could handle it, but we just couldn’t.
So do I think you should use a credit card for the reward points? My answer would be a big fat NO. On top of the ways we failed here, it has been said that you spend more when you use credit than when you use cash. Do not fall into that trap like we did–run far, far away! Your bank account, and your sanity, will thank you for it.
Do you have an experience with a rewards credit card? Share it with us in the comments below!