by Claire
As some of you know, we used a signature loan from our credit union to pay off the Discover card. I called Discover prior to calling our credit union to see if they’d do anything to reduce the obscene 18.2% interest. They would not budge. So, of course, it felt great to pay off the $7300 balance and have the power back in our hands. Since paying it off about 2 months ago the offers have not stopped—not surprising since I know they’d love to have me back to take my money.
We’ve ignored the offers because they include lots of fees and would negate any interest savings we may get…until the offer we just opened. We want your thoughts on this one. Here’s the deal: If for the next 5 months (July 2012 through November 2012) we spend $3,000 each month on the Discover card, we get $500 cash back in December. We’d use the card like we should use the card–for regular monthly expenses paying off the balance when the bill arrives (if not earlier!) We’ve read and re-read and will do so again and call to ask any questions before we commit, but right now we are wondering if you’ve seen this and what your thoughts are.
I like the timing of this in the sense that it would be a great challenge with a $500 pay off at the end. On the other hand, I think that’s a lot of record keeping and potential for fees/interest if we slip and pay it off late or just make a misstep of some kind. It would take discipline though and that is very appealing at this point. I also love the idea of getting free money from them…but also realize it is like playing against a dealer in Vegas. Ultimately they know more than I do and hold more cards. As I type this I am more excited about actually accomplishing this than I am about the $500…..hmmmmmm……
So, what do you think?
Born and raised in Texas. I’ve at least driven through every state in the US courtesy of a roadtrip loving Dad.
I’m single with two children and a good parenting relationship with their father.
I am a “life is just half full of funny” kinda gal. Humor is my saving grace and I am thankful for it every single day. I have a strong Catholic faith and am thankful for that foundation.
I read a lot for a living but still enjoy a good book. I love biographies but in recent years have found the need for fun fictional books–sadly, for a long time I just didn’t enjoy fiction!
I love live theatre of any kind–from local productions to Broadway.
I love to scrapbook and pride myself in my kids’ albums.
I love being a mom but also love my career. I’m blessed to have found a balance allowing me to be at everything my kids need and want me to be at–while also having a career.
Favorite Quotes: Well behaved women rarely make history.
Behold the turtle. He makes progress only when he sticks his neck out. -James Bryant Conant
Uh… is this a joke?
This sounds like a really bad idea Claire. Even if you played by the rules exactly and ended up making that $500 in Dec., look at how much more complicated your monthly finances will be and the potential to slip up is huge on this one.
We’ve paid off our credit cards and just use one for recurring charges every month like gym membership, ADT service, etc and pay the balance off every month. This earns us cash back and we have about a $500 rewards balance right now that I still haven’t cashed in. Just waiting for the right time or trying to see how high I can build it.
I would not recommend this for someone who still has large amounts of credit card debt. You haven’t been at this long enough nor have you actually paid off all of your credit card debt to use cards like this in a responsible manner to where they will pay you instead.
Simplifying should be your goal right now, not adding to the chaos.
Thank you Cathy C! This is the kind of feedback I need. You’re right–it is only going to add to the chaos. That’s why I know to post this stuff for thoughts from readers and I will continue to do so…in spite of comments like kate’s! 🙂
No problem and I’m glad I could be of some help! I can totally understand where you would want to capitalize on “free” cash from these offers and your post today was a valid one. I hope I didn’t sound like you aren’t capable of making something like this work in your favor-I think you’re definitely smart enough to juggle funds around and make it work, but I would concentrate instead on streamlining your debts and getting them down to an easily manageable level first. I think in the end that $500 you would earn would not be worth the extra work and stress it could cause.
Not to be a total braggart today, but I just paid off one of our vehicles this morning!! We now have one more vehicle left to pay off and then it’s on to the mortgage. It was an awesome feeling and having one less payment to have to budget for was HUGE. Just removing one debt from the monthly finances simplified things dramatically.
And get this–not one hour after I paid it off,Honda Financial was calling us to see if we wanted to buy a new car! Bastards!!!
My point is, creditors WANT and NEED you to make poor choices. It’s up to you to stand firm, be strong, and say NO MORE.
I told them to be looking for my second vehicle to be paid off in January 2013!! oh, and release my title thank you very much…
This is not a good idea, actually it’s a terrible idea, but it’s great that you posted it instead of acting on it! That’s really what the blog is about, to act as a breaking system for ideas like these.
However, those credit card offers are always very attractive, if also always too good to be true.
Think of it like this, who other than your grandma would give you $500 with no strings attached? Then don’t accept $500 from anyone other than your grandma.
Agreed with Cathy C., 100%.
I actually take advantage of credit card deals like this all the time and earned a substantial sum in credit card rewards in 2011. BUT, it takes serious financial discipline to turn the tables on the credit card companies in this way.
In general, I Would never recommend this path to anyone already deep in debt. & once the debt is paid off, I would probably still not recommend it. It works for me because “hell would freeze over” before I would pay a cent to a credit card company.
You might have that mindset once your debt is paid off, fair enough. 😉 For now, I think it’s just not what you need to be doing. The credit card company is likely to “win” in this scenario. I think this would distract you from more important goals, and could put you in a position to get further in debt.
P.S. And just to add – since my “hell freezing over” feelings, I would not charge anything I could not immediately pay in full in cash. I don’t get the feeling you are in that cash position with the debt (only $1100 in emergency fund). Just one more reason to not go there!
Claire
It really isn’t that great of a deal by Discover. I just signed up for one of their bonuses and all I had to do was to spend a *total* of $1500 over the course of 4 months in order to get a $250 bonus. You are being asked to spend $3K a month for several months each month to get double the bonus I’m getting for spending about $400 a month for 4 months?
Its a bad deal. Don’t get tempted…do you even easily spend $3K a month in expenses that can be charged? We don’t.
Wait, wait – I think the posts by everyone else kind of prove my reply. – I wasn’t being mean – I am just really surprised you would post this kind of question, when the answer seems so clear.
No new debt. No more credit cards. It’s not about games, deals and tricks, it’s about living below your income and not paying fees and interest. Isn’t it?
No one who has interest in seeing you become successful is going to thumbs-up a credit card that has required spending.
Warning bells go off in my head as well.
First and foremost, why are you charging that much to any credit card each month? That’s an unbelievable amount to be charging for a regular family, even one as large as yours.
The only way I’d counsel accepting an offer like this is
1) you agree to pay $3500 towards the card the day you activate it. At the end of the first month you would also pay the full amount you had charged. Thus at the end of each billing period, you’d still have a $3500 credit. That would guarantee you’d get the $500 bonus.
2) you agree to charge the closest amount of $3000 per month and not one charge extra.
3) you prove to us that every single one of the charges you plan to make with that card were ones that you had no choice but to make. Thus, you can’t stock up on more food in order to get the charges up, or start paying more for gas (giving up the cash discount price.)
I honestly can’t think of $3K of expenses each month that you should be paying with the credit card (obviously, things like utilities or insurance might help but then you are falling into the trap Discover wants you to fall into – then they get the transaction fees on your monthly charges because it is too much trouble to change those monthly charges back.)
Stick with cash – I can’t stress that enough (and that reminds me, I emptied my wallet today so need to go put more in it – but the empty wallet stopped me from pulling into a garage sale on the way home from the store ‘just in case’ there was anything I needed.)
I have no doubt that Claire has at least a $3,000 operating cost per month for her household (including rent) because we do.
Factor in 2 car payments at $1,000, a mortgage or rent payment at $1,500, gas at $200, groceries at $400, etc, etc and it’s easy to see how she could feasibly charge $3,000 a month on normal budgeted expenses to a credit card.
I have to admit, it’s an attractive option and one I’ve considered myself, but I can’t stand putting anything on a credit card. I have about $110 of recurring charges that I put on mine and pay off every month but I don’t like it. It’s just easier and safer to pay these particular expenses with a credit card vs. having an automatic draft from our checking account and I hate writing checks and sending them through the mail even more.
Kudos to all of you who only use cash. I’m not a cash person. If I have cash, I spend it. All of it. I try to set everything up on automatic draft or bill pay online. The act of physically removing that debit card from my wallet and swiping it has become repulsive to me and keeps me in check with the spending. If I had greenbacks in my wallet it would be party on.
I know, I know, how very un-DR like of me… Not everyone agrees with him and yet can still be successful at this game.
I know I’ve been posting way too much on here today, but I just wanted to share for those who can’t believe Claire would have $3,000 in expenses to charge every month–
our monthly expenditures exceed $5,000 for a family of 3. This includes one car payment, a mortgage and all our regular expenses and blow money. We have no cc debt. We are, however, heavily insured and love our entertainment packages:)
Yep. I’m thinking with the size of Claire’s family $3,000 doesn’t even come close to her monthly expenses.
Sure, her monthly expenses are over $3000 but in Canada you can’t charge your car payment, your rent, or a large number of other expenses (i.e. income tax payments.)
So to come up with $3K of chargeable expenses per month would be hard here.
Yes, you can pay those sort of things with the ‘checks’ the credit card company sends to you but here those count as cash advances are not eligible for the cash back or other incentives that come with credit cards. Plus you pay interest on those from the moment the check is cashed, there is no grace period.
We actually did this with a Costco Am-ex card and it was NOT a good idea! The money we intended to pay our amex bill (gas/food) suddenly disappeared (eating out/dumb spending) and we were left with a balance that only seemed to increase monthly.
We were too early in our journey to attempt this…we convinced ourself that it made sense…when it fact, we set ourselves up for failure.
Just my .02…but, really think about it….:)
Why risk it. Certainly there’s an easier way you could make $500 in 6 months that doesn’t put your family’s finances at risk.
That huge rushing sound is the collective sigh of your readership that you’d even suggest it. Hard to be nice in this one. Imagine working on your teenagers for 6 months to hang up their towels only to come home and find all the towels dirty. That’s the emotion we all went through reading this. Hope you don’t pull the trigger.
Using credit cards at all is a bad idea but putting living expenses on a credit card is a terrible idea.
Thanks Claire! I’ll keep an eye out for grandma…
Thank you for the candid share here Cathy. A good reminder that what works for one does not work for all. And yes…you hit the nail on the head…our monthly expenses, including rent, exceed $3,000.
Actually CanadianKate…we did discuss that we would advance pay the bills in order to do this…but then upon further discussion we realized that this would put the overall debt reduction plan at risk. Hey so we’re a little slow…the key is we aren’t acting and then coming here to seek forgiveness! 🙂
GREAT analogy Adam. It helps all of us (readers and blogger) realize I really am but a financial teenager learning how to handle finances. Sorry to disappoint but that’s the reality…what you get here is real time, on the fly blogging! We aren’t going to do it so you can go back to being proud of my no paper towel, no cable television, no salon visit blog. That’s not to say that I won’t have some other disappointing post tomorrow or even later today! Sometimes this process does feel very minute to minute for me! Thanks for the help. I cannot say thank you enough.
Hi Claire. Basically, do you spend over £3k per month, every month, after all of your commitments? If the answer is no then DON’T DO IT! It’s a con. After really beginning to tackle my debts, today I received a letter from some pathetic bank offering me MORE credit! Sod them, they are just ruthless, and you don’t want to take the risk.
I agree with everyones thoughts… But my question to you, Claire is this: Why are you taking valuable time out of your busy day to read cc offers? It’s junk mail. Shred it and dont give them any more thought.
You’re working hard to simplify life… Keep it that way.
Great point. One of the unexpected side effects of not buying anything new is I now put sale flyers straight in the recycle without stopping to read them first and the same goes for all those offers that come in the mail.
That frees up 5 – 10 minutes a day. Now I just do a quick sort to weed out the grocery flyers and recycle the rest.
I will admit to wasting that freed-up time reading financial blogs but that’s another story!
I am late to the show but I seem to agree with everyone else haha.
Personally, I don’t “believe” in using credit card “offers” because there is so much trouble to get the rewards or cash back or whatever. I prefer to find other ways to make or save money. However, if your financial situation was different – no more credit card or car debt, I would not necessarily see anything wrong with utilizing this particular card. But as we know from all the information you have shared with us, your finances are already a little tricky so why add something that will probably be more of a distraction than a relief?
It sounds like you have made your decision already, and I applaud you for posting this. Some readers have said it seems so obvious that there should have been no reason to post it – I disagree. Sometimes, when you are always trying to find ways to save money that when someone tells you they will give you $500 if you do a bunch of crap you might be desperate enough to do it. Just say no Clair 🙂
I agree with the others, I don’t think this would be the greatest idea. The chance of maybe something going wrong seems high.
So you would have to spend $15,000 to get $500 back? That would only be 3.33% cash back. To me, that is not worth the high risk. I agree with the other readers on this one!
I recommend ripping and recycling those offers as soon as you get them. Don’t even waste your time reading them.
I can’t wait to pay off my Discover card. The interest is bonkers.
Yeah, sorry if I was harsh. Believe it or not I want you to succeed in your journey.. Keep up the good work and avoid credit cards like the plague!
And seriously think about how you could come up with $500 apart from the cc offer and you can use the risk- free $ to pay down some debt. You’re doing great and keep going!
There’s a recurring theme that hasn’t been explicitly stated – stop reading junk mail! We rip up and toss every credit card, insurance offer, and merchandise catalogs without even opening them. Once in awhile something makes us curious about how the “deal” could possibly exist, and we make a game of finding the “gotcha” part. Good deals rarely fall in one’s lap, instead, good deals are sought out. Methinks Discover has Murphy on its payroll.
Some of the readers here give great advice. I agree, don’t do it. I understand the urge here, but I say keep things simple and enjoy your progress.
hi from Sydney (Australia) Claire, I think Chicky’s point about how much you get back for spending $15,000 is a telling and excellent one. If you save $100 a month you will have the $500 anyway. I don’t trust credit card companies and I think it is too risky. I am paying off a credit card debt myself (total of about a month or less salary but taking a long time because I am on a low income but I pay more than the monthly miniumum balance and I am getting there so I talk from experience)
We are doing an offer for Chase right now. Spend $3000 in three months and get $400 back. I don’t think I would ever commit to an offer that required $3000 per month for three months. That would make me too nervous. If it were just $3000 one time over a period of months, that would be easier.
Seriously? A company treated you poorly, and you’re considering doing business with them again?? Bad idea.
And you think you can outsmart a credit card company?? Not so. They’ve done their research. They know you’ll spend extra to hit that $3000 goal. And they know they’ll likely mess you over in some other way. (And why on earth are you spending that much on a credit card each month when you’re getting out of debt?!)
Simplify your life and finances. Focus on paying off debt and getting debt out of your life, not on playing games with debt to maybe get some small payoff. And if you want extra money, get legitimate side jobs.
I hope you know that I was kind of kidding when I said that bit about grandma, anyway, posting before acting is so great! Keep up the good work!
Oh yes Claire–I knew you were kidding. I was too!
There is no such thing as a free lunch.
They will get that $500 back from you somehow.
Stick to your guns. NO MORE CREDIT CARDS.
Coming in a bit late on this one…
I wouldn’t take up any offers like this until you’ve paid off your debt AND established good habits, like paying off the credit card charges in full each month. I’m sure Discover, Mastercard, and Visa will still be offering you deals like this for years to come 😉
Btw, I saw an article this morning that said that while Discover’s revenues are up, its net income is down because they have fewer customers who are carrying a balance or paying late! Due to tighter underwriting people with lower credit scores aren’t as likely to get credit cards, and the customers are using cash more. So, that leaves Discover with more “deadbeats” like me – people who pay their cards off in full each month 😀
If this trend continues, then I’m guessing that the credit card companies will be coming up with more and more deals like this to pump up the revenue from transaction fees… and to lure more people back into debt.
Thanks for this Jen! We aren’t going to do the Discover “deal.” And WOW…I need to cut and paste what you wrote here about the credit card companies getting more and more creative in their rip off schemes! And put it on my bathroom mirror so I can remember it as I get distracted with “deals.”
I forgot to add – in the real world I am not a deadbeat, but in the credit card industry world I am a deadbeat, because they don’t make much money off of me.
I think that says a lot about the credit card companies……..