Can You Really Save Money With Your Credit Card?
If there is one truism that endures year after year in the world of finance, it is that credit card companies are a creative bunch. It use to be, you simply had once credit card. That was it. Then came gold cards, and even platinum cards with higher credit limits and lower interest rates. When that wasn’t enough, the reward card was born. Spend more money and earn free airlines miles or credit points you can spend on the credit card companies website. Well, the geniuses at the various credit card companies have now set their sights on your debit card and your long range investing plans. Sounds crazy? It just might be. Let’s take a look at the new promotions the credit card companies are using to reel you in.
The sales pitch says you can save money by spending money. It sounds like classic DoubleSpeak from George Orwell’s classic novel 1984. But the new debit cards that are hitting the market plan on making you rich, as long as you make them rich, too. The new cards work like this. Every time you complete a transaction with your debit card, the amount you spend will be rounded up. The difference will then be deposited in your savings account. The more you spend, the more transactions you’ll have that are rounded up and deposited in your savings. Before you know it, you’ll have a savings account overflowing with .36 cent transactions here and .87 transactions there. To make the offer even more attractive the bank that is offering this “deal†promises to match every deposit you make for the first three months, and then it will match five percent for the rest of year with a cap of $250 for the whole year. But is this a program you actually want to enroll in or is it nothing but bad horse sense?
Well, it depends on how organized you are. Even though most people stopped writing checks nearly a decade ago, most people do continue to keep an accurate ledger. We’ve been trained from day one to save every debit receipt and make sure that our ledger is kept correctly. If it should happen to slip your mind that all of your transactions are being rounded up, you are suddenly in a situation where you could easily overdraw your account. In addition, if you need this much help to save, you might have a serious financial problem to begin with. Entering into a proper and sensible savings routine shouldn’t be something that we’re tricked into, it should be something we do happily since we know that by saving, we’re protecting ourselves for the future.
The other new kid on the block is an American Express card that takes one percent of your yearly purchases and invests it in a money market account. It sounds like a great deal, until you realize that after the first year, there is a steep annual fee that will only be waived if you spend more than $3,500 per year on the card to get rid of. For some folks, $3,500 is a good month of transactions, but if that is a whole years worth for you, you should probably continue to shop for the right card for you.