In the personal finance blogosphere, you’ll find many mixed views regarding the usage of credit cards. Some will say they’re evil and you shouldn’t ever use them, others will say go ahead and use them as long as you’re responsible. On top of those, you’ll find those who suggest only using them for emergencies and those who talk about how wonderful they are and how you can actually earn money by using them.
Personally, I’ve been talking about using them responsibly and earning rewards because I was using them for everything. Yep, that’s right—I was credit card happy. Things were going brilliantly and I loved it. I wasn’t paying any interest because I was paying it off right away and I was also earning tons of rewards. Was? Things don’t always go as smoothly as we expect them to. So, with a heavy heart, I’m going to share with you the downside of using credit cards responsibly.
About the Card
The credit card that stole my heart was the Best Buy Reward Zone MasterCard even though they didn’t seem interested in increasing my credit limit. I had a tiny limit of $600 on the Best Buy MasterCard, but that was okay.
I kept making payments so that we wouldn’t get too close to the meager limit since we had started using it for everything to increase our reward earnings. I’ve had the card for a while, so it was a large chunk of my credit history and I sucked up the $36 annual fee to keep my credit score going in the right direction. I figured if I could earn more than the annual fee in Best Buy reward certificates, then it wouldn’t suck too much.
We would use our credit card for everything from gas and groceries to paying bills, so at least once each week, I’d send off a payment for the amount we charged to the credit card. Sounds easy enough, right?
Nope, it appeared that every time I made a large payment and we were really close to our credit limit, they would decide to put a hold on that large payment. Pretty lame. Okay, so hold off on using the credit card until the payment goes through and it’s all good.
Unless you have automatic payments set-up on the card for some of your recurring bills, such as renter’s insurance, Netflix and GameFly.
3 small payments spread out over the month, but enough to stress me out when the balance is so close to the credit limit. I kept freaking out that one of those payments would make us go over our credit limit. It’s not just worrying about an over-the-limit charge, nope, there’s more to it.
If we go over the limit, we’ll get charged a fee (of course), they can raise our interest rate (not much to worry about since we don’t pay interest), it could show up on our credit report, and it can raise our interest rates on other credit cards and accounts that aren’t even attached to that account. That’s quite the punishment for going over the credit limit once.
When my honey and I were on vacation last October, we had another issue. I made a couple large payments to our MasterCard before we left so that we’d be covered for the whole vacation. I figured the payments would go through and cover the charges as they arose. We ended up with a large credit on our credit card and charges that were taking much, much longer to go through. It was awful, stressful, irritating and embarrassing. When we checked in to our hotel, they couldn’t even charge our entire stay on the credit card because of the low amount of available credit.
The hotel was awesome though, they worked with us and took out small amounts here and there until the total amount was paid. I called the credit card company to ask what was going on and they said that it can take up to 14 days for charges to go through and until then, they will be pending. It didn’t matter that we had a ginormous credit. They didn’t care that we were on vacation and kinda screwed, they said that we could apply for a credit limit increase. So I said fine, totally forgetting that it would show up on my credit. No credit increase for me, nope, we were denied an increase. I honestly have no idea why we were denied an increase, we don’t have horrific credit or anything. It was so frustrating.
I was glad that we had brought some cash and other cards with us in case of an emergency; otherwise we wouldn’t have been able to do anything on our vacation or even eat. It was a crappy situation, but we made the best of it; by planning ahead (just in case) we were still able to have a great vacation.
So in all, the second half of 2011, they held 3 or 4 payments when we were super-close to our credit limit. Each time I totally freaked because I didn’t want it to make us go over our limit. I shouldn’t have to stress out if I’m being responsible with my credit card usage, but they were out to get me.
In 2011, I earned a total of $345.00 in Best Buy reward certificates from using the Best Buy reward zone MasterCard, I didn’t pay a cent of interest, and I made all of my payments on time (well, actually way ahead of time). So it sound like I’m a good customer and responsible credit card user…but not in their eyes.
After the last time they did this, I finally sent an email to the credit card company asking them if they keep doing this each time I get close to my credit limit because they’re trying to make me go over the limit.
I didn’t expect them to even reply, but they did. Of course they didn’t answer my question at all, instead they danced around it and told me the same old shit they always told me when I called and asked them about it.
In the eyes of the credit card company, I was awful. They weren’t making any money from me (aside from the $36 annual fee) but they were dishing out tons of reward certificates each month. I wasn’t going over the limit, paying late or racking up interest charges.
Credit card companies aren’t out there to reward you for being responsible consumers; they’re out there to make money. They want you go incur interest charges, late fees and over the limit charges, that’s how they run their business.
So in December, I started backing off on being credit card happy and went back to primarily using our debit card again. I won’t be earning as many rewards as I was before, but the amount of stress I’m saving myself will be worth it.
I still have my 3 automatic payments on our Best Buy Reward Zone MasterCard and use it to pay our bills online, but that’s about all I’m using it for. It sucks that being responsible with my credit card ended up having a downside, but I had a pretty good run. Maybe one day I’ll get back into it…or not.
Has anybody else had this happen?