How would you take to being called a deadbeat? Would you wear it as a badge of honor or would you pick up stones to hurl at the person who just insulted you? I imagine that many, if not most, would be more inclined to do the latter as no one enjoys being ridiculed. However, when it comes to credit card companies, being considered a deadbeat by them is a good thing.
We all know how credit card companies make money â€“ from the interest we pay to carry balances with them. Yes, they do also make money from each transaction we enact with our card of choice, but the real moneymaker for credit card companies is the interest you and I hand over to them each month. If you think you might be a deadbeat when it comes to creditors, read a little further to see where you fit in the eyes of credit card companies.
What Kind of Credit Card User Are You?
Most credit card companies organize consumers into one of three categories. See which category you fit into:
Deadbeat â€“ a credit card deadbeat is the arch nemesis to most card issuers. A deadbeat pays off her balance in full each month. She might even pay in advance, all with the sole purpose of avoiding any and all interest charges. A deadbeat uses the benefit a credit card offers â€“ the float â€“ without having to truly pay for such a privilege. As such, credit card companies make very little off of these fiscally responsible individuals.
Revolver â€“ the revolver is the polar opposite of a deadbeat. Credit card companies view revolvers like ATMs â€“ convenient places they can regularly go to access cash. Revolvers may not necessarily be carrying significant credit card debt, but they donâ€™t go out of their way to pay off their credit card balances each month, at times paying only the minimum required. â€˜Revolversâ€™ arenâ€™t necessarily poor; they just may not manage their money effectively.
Rewards Hacker â€“ A rewards hacker is someone who beats credit card companies at their own game. They open multiple cards to reap nice sign-on bonuses to churn rewards. These individuals may transfer balances to zero percent cards to pay them off without ever paying a dime of interest.
We Love Debt
Cute monikers or categories aside, this sheds light on the fact that Americans love debt. We are professional debt mongers. Find that hard to believe? Check out these recent statistics:
The average credit card debt, for those carrying debt, is over $15,000 per household
We have over $3 trillion in consumer debt, as of January 2014
55 percent of males polled carry credit card debt, as of April 2012
60 percent of females polled carry credit card debt, as of April 2012
Simply put, debt is all around us. If you havenâ€™t had consumer debt, then itâ€™s likely you know someone who does. This is not meant to disparage those who currently have debt, as some debt (like mortgages or car loans) is often difficult to avoid.
Which Persona is Best?
Consumer debt does one thing â€“ it keeps you from growing wealth. That being said, if you choose to use credit cards, the deadbeat persona is the best to espouse. The rewards hacker, assuming youâ€™re fine with the inherent risk, is fine as long as you also do all you can to avoid being in debt and paying interest.
Consider this â€“ every dollar of interest you pay is one dollar thatâ€™s not working for you. Instead, itâ€™s going into the pockets of credit card companies who donâ€™t want you to pay off your debt. Why would they? Youâ€™re their sugar daddy.
Credit cards can be used to your advantage, assuming you use them wisely. In some instances, being a deadbeat isnâ€™t such a bad thing.
This post was published by John Schmoll, ReadyForZero Writer for Â»Â ReadyForZero.
ReadyForZero is a company that helps people get out of debt on their own with a simple and free online tool that can automate and track your debt paydown.Download