Sneaky Ways Credit Cards Get You To Spend More Money

Sneaky Ways Credit Cards Get You To Spend More Money


Credit card debt in the US hit $870 billion at the end of 2018. That’s a record high. In fact, over half of
Americans who own credit cards have debt on them. And part of what gets
us into these debt holes are the tempting offers
from credit card companies. Hidden fees and reward
programs can trick customers into spending more than
they otherwise might. Clip: Wow, look at all the signs. Narrator: And if that balance
isn’t paid off in full, those rewards points aren’t
going to be worth it in the end. Let’s start with the reward programs. They offer a variety of benefits,
including airline miles, cash back, and points you
can put towards shopping. This can be great for customers. I mean, who doesn’t like free stuff? And credit card companies
can boost the rewards when you first sign up for the
cards as an extra incentive. For example, the American
Express Platinum card currently offers 60,000 reward points if you spend $5,000 in
the first three months. Now, if you’re about
to make a big purchase, those points are a nice bonus. But if you end up spending
more than you otherwise would just to hit that $5,000
mark, consider this. One point is typically worth
only between $0.01 and $0.02, making those 60,000 points worth somewhere between $600 and $1,200. So, let’s do the math. Say you usually spend $500 on
your credit card per month, and you increase that to
$1,666 for three months to get those 60,000 points. You’ve now spent $3,500 more
than you otherwise would. And, yes, you may get
$1,200 back in points. But that leaves a difference of $2,300. That’s $2,300 more that you spent overall and that you’re never getting back. But $1,200 back is the
max you’ll likely get. It might be less. And figuring out exactly
how much you’re getting for every dollar spent can be tricky. In the AmEx Platinum’s
rates and fees section, it says, “The value of
Membership Rewards points varies according to how
you choose to use them.” So it’s hard to be sure how much value you’re actually getting. And the eagerness to spend for points can get you into trouble. Sarah Silbert: Obviously,
it’s very attractive to get points or miles
from your credit card, but if you’re not paying
off your balance in full, the points or miles that you’re
earning are not worth it. Narrator: Because you’re going to get hit with that interest charge. A credit card’s interest rate is also called the APR,
or annual percentage rate. The APR determines how
much you’ll be charged if you don’t pay your balance
in full by the due date. On average, the APR for new
credit card offers is about 19%. But store credit cards from places like Banana Republic, The
Home Depot, and Target have some of the highest
rates in the business. And if you’re not paying attention, those charges can add up. The average household
with credit card debt pays $1,292 in interest each year. Now, some credit cards
will waive interest fees for the first few months to a year. And you might think, well, this is only a problem
for people with bad spending habits who don’t pay off
their card in full each time. Clip: But there’s a lot
more to it than that. Narrator: Even if you’re
responsible with your payments, there’s still other ways
credit cards can cost you. Silbert: There are lots
of credit card hidden fees that you could be surprised by
if you’re not aware of them. These fees are hidden in the sense that they’re buried in the fine print. They’re definitely documented, and you can find them
if you look for them. But they’re not super
apparent if you’re just glancing at the credit
card application online. Narrator: Some cards
have fees you can’t avoid by diligently paying your card on time. Like a foreign transaction fee. These are fees placed on
purchases you make abroad. But they can also be charged on any transaction processed abroad, even if you yourself are not traveling. So, if you’re making a
hotel reservation in Bali or buying a cool pair of
pants from a Japanese website, you might want to make
sure the card provider isn’t charging you a fee
to make that purchase. Foreign transaction fees
typically run around 3%, so for a hotel room
that costs $150 a night, you’re paying an additional $4.50. Just think, you could have bought yourself an iced coffee with that money. Other fees to look out for
are balance transfer fees, authorized user fees, late
payment fees, and an annual fee. You could get charged an
annual fee once a year just for having the card. On some cards, it can be quite high, like the Chase Sapphire Reserve card, which has an annual fee of $450. Ouch. But the Sapphire Reserve also
offers a $300 travel credit and a hefty sign-up bonus, so if you’re using it for travel and are a big spender
anyway, it might be worth it. So, with all these sneaky
fees and incentives, how do you avoid a credit card
bill at the end of the month that’s higher than you expected? Silbert: The best way to use credit cards is to treat them like debit cards. So that means don’t spend
anything more than you can afford, you need to pay your balance off in full, and that way, any rewards
that you’re earning are really rewards in something extra.

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About the Author: Oren Garnes

100 Comments

  1. For the majority, don’t play with fire
    For ppl like us, we fly business class for free
    Gotta love these “sneaky traps” when they are all public info and common sense

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  3. I had to stop the video at the 2 min mark because yes there are these incentives to make you buy more. But at the same time, it's up to you to discipline your own spending. You're not forced to spend from $500 a month to $1666. The point that always gets lost is that there are different credit cards for different needs. If you're already spending $1666 per month, then that card is right for you. Financial literacy is so important and this whole victimhood mentality is so dangerous.

  4. All big business enterprises are using the same tactic to lure people into spending more with the help of their AI and reward programs.

  5. Takeaway from this is,
    – Pay off your bill every month.
    – Don't spend more just to meet the minimum spend.

    Follow these rules and enjoy the perks of credit cards!

  6. I don't know, I'm kind of seeing it backfire for them in some ways too. Like, how about people who go for those 5% cashback cards and always pay their debt in time, but I guess as long as they catch enough people that don't then those high APR rates will more than make up for it.

  7. Moral story: Don’t get a credit card unless it’s an absolute emergency. Just control your budget and learn to live within your means.

  8. Hence why I stick my ass to debit if I don’t have it I don’t have it save up and purchase … just use what’s in my account … all this costs and hidden costs on credit is not worth it

  9. I don’t use a credit card anymore, and my credit score is 714. I got into credit card debt when I was younger. But I’m paying it off every month and I’m down from $5,000 to $3,200 in a couple years. Will never use a credit card again. Not worth it.

  10. I pulled money from an ATM outside the country, the fee was deducted but the amount was increased 4 points!
    For example: $100 in my hands, but the bank's website shows $104 + FEE!!!!!!!

  11. Bro if you have credit card debt you really should re-evaluate your spending lol

    It’s very easy of course there are emergencies

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  15. Student using one credit card and just got approved for a second one. Never missed payments, earned around 300 in rewards so far and only paid a couple dollars in foreign transaction fees.

  16. The only thing I have is a debit card, i don’t have a credit card yet or any kind of credit. But my family to start off with one of those pre paid credit cards (i can’t think of the proper name for it right now. But put $200 on it and that ends up being my credit limit. Once the company sees i make my payments on time they up my limit to $500) But don’t use the credit card for anything other than my phone bill every month using automatic payment. Make payments on my credit card every month and just work on building my credit. But continue using my debit card or cash for my purchases. But i don’t have $200 to put down on a credit card yet but I’ll get there eventually.

  17. Credit card can be good and bad at the same time. I think for traveling they will charge you a rate but you definitely win on comveniences as its not wise to travel with loads of cash, just ensure to minimize spending on things you can get locally or thay if the product is generally 10-20% cheaper than locally.

    I use it for alot of business entertainment, bills and travel. Those points do get me a free flight ticket annually. So aint all that bad, being a cashless society.

  18. It still perplexes me how people actually don't pay before the due date and rack up those interest fees, like if you really can't pay off what you buy just buy less…

  19. Wow… who is this video targetted for? Children with credit cards? Annual fees and foreign transaction fees aren't "hidden fees." They're just fees.

  20. My tip and recommendation for using Credit card is to treat credit card as Debit card . If you want to purchase a apple computer that cost $1500 USD . Always first before you buy it without credit card always have a at lease 50 % money $750 USD that way it helps you to mange your credit card payment that you are not getting your self in to debt.

  21. It’s also best practice to use the autopay feature. This way you can either pay the Minimum, or pay in full.

  22. Never use a credit card to buy things you can't afford.

    It's a tool to take advantage of cash back & travel perks, and to build credit score!

  23. Like my Asian parents once said: “Only spend with what you have and what you need” and y’all know how Asian parents tend to spend their money.

  24. People who call out credit cards as evil are ridiculous, credit cards are the strongest form of consumer protection in America.

  25. Never carry a balance pay it within the 21 day grace period and you won't be charged interest. At that point you're getting rewarded for fungible purchases (purchases you make regardless of the situation like getting rewarded for food or groceries). the problem is when people use credit to spend beyond what they can pay back in a month. Thats were credit cards companies make money.

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  27. Most of those point is a trap. We were once going to use miles to buy plane tickets and when we tried to use them, the tax/fee went through the roof and was more than twice as much as if we bought the tickets normally.

  28. This is where I play the 'Let Me Pay For You' card. Whenever my parents and friends start paying something with cash or debit cards I take that money and pay with my credit card. I accumulate credit, reward points and have the money to repay my bill on time.

  29. AMEX Platinum is a travel card, not a rewards card. People don't spend the $550/yr for rewards, it's just an added benefit over the travel perks. People who can afford the annual fee likely have no problem making that $1,666/month. Not the best example of a rewards card as it's one of the worst on the market.

  30. If you do not know how to readterms and conditions or exercise patience with persistence. Credit cards are not for you. I have over 20 credit cards in my credit score is 806. Please don’t spread false information. It’s up to you to pay your cards on time credit cards are like fire you can either get burned by it or you can use it to cook your food and keep you warm

  31. I have 2 credit cards I just spend 2 $ or 1$ (0% ) utilization them a piece a month & pay the balance in full on the due date they not getting me with them interest and fees And if you travel abroad make sure you have a credit card that has no foreign transaction fees

  32. I just paid off all but one card and it felt great. When I was younger I racked up too much debt. Took me 7 years to pay it off and I did. I don’t mess with credit anymore. I don’t want to owe anyone anything and I agree, use your credit card as if it’s your debit card.

  33. Its simple just get the lowest credit limit u can get but do your research online and never spend more than your earning your LOANING it its not your money

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