Free Money!

In a prior post I mentioned my recent addiction to Reddit. I have enjoyed reading and making comments on posts (mainly in the personal finance subreddit). I have been impressed with the quality of many (but not all) of the responses that people provide to folks that are truly searching for needed information.

The personal finance subreddit is always filled with questions about debt, credit cards, and car loans. There are many questions regarding which credit card provides the most benefits (X% back on purchases, X points free if you spend $X,XXX amount in the first 3 months). People post how they use these cards to pay for everything and get $1,000 or $2,000, or more in credits or used the mileage they earned to get a free airline ticket for their vacation. They say it is “free money”. I also see some posts about 0% financing for vehicles. It is “free money” folks say!

But is it really “free”?  Yes, you can get something in return for an activity that you would normally do anyway (buy groceries, take a flight, etc.). But would you do it anyway?  Do these so-called perks drive people to spend more than they should?  Maybe?  Miss a payment and boom, here come the fees!  And don’t forget the $95 annual fee that was waived for only the first year.  It can take a lot of time to understand all the rules and requirements.

Now don’t get me wrong, I use some of these cards. I don’t keep a balance, so no finance charge is paid, and I get points and make “free” trips.  It takes time and discipline to not over spend, keep up with the changing rules, and make payments on time.  Of course, the credit card companies, banks, etc. are betting that most people will screw up.  Many people do, not because they are not smart, but because life has a habit of getting in the way.

I have commented on Reddit that people would would be better off spending time on learning about investments, than researching the best credit card deals.  There are many sites that compare and recommend cards, but many of these sites also make money from these card companies, so their recommendations can be biased.

I’ve noticed so far that my responses don’t receive a lot of comments.  Maybe starting with a title like “Free Money” will make them more popular!

As always, I welcome your comments!