Credit cards points are a fools errand.

Right now in the FI (financial independence) community people are doing what is called travel hacking. This is where you get a new credit card, spend the minimum amount to qualify for the massive 50,000 to 100,000 point bonus and then cash in your travel bonus. If you are going to do this, maybe credit cards make sense. But I believe most people don’t have the temperament to just spend the min and they don’t have the temperament to spend and never use the card again. This is because cards are the cigarette of the financial sector.

Credit is the cigarette of the financial sector

These credit cards wouldn’t be giving you all this free money if  it wasn’t a win for them in the end.  If you have taken a look at the stock charts of visa, mastercard and amex, they are on a constant uptrend. Like Dave Ramsey says ‘credit cards are the cigarettes of the financial industry’.

What you are going against is a well funded machine that studies consumer behavior, they know your spending habits better than you know your spending habits.  They know your trends and tendencies better than you know your trends and tendencies.

Credit card companies design these pretty cards, pretty apps, great branding and they make it seem like you are cool if you swipe swipe swipe. Meanwhile, the average american has a credit cad balance of $6,375.  Total credit card debt has reached its highest point ever, surpassing $1 trillion in 2017.

In regard to minorities, a report showed that about 90% of African Americans that owned credit cards carry a balance.  This would mean that you might think you are going to hustle the credit card companies but 90% of people don’t.  Sometimes the best way to beat something is to avoid it altogether.  This has proven true with actual cigarettes and its my philosophy with the criminal justice system. I avoid them all like the plague and its seemed to have worked out for me.

-19% ROI

Back to the people that think they can beat the system and all their resources, lobbying dollars and marketing budgeted.  After you get over the big bonus points then you have the 1% points you earn by spending, wow “balling”.

When you get a cashback card or a points card you effectively get 1% for what you spend, while they charge you 20% for spending. What sense does that makes? If I offered you an investment opportunity with a -19% ROI you would laugh me out the building.  But since its attached to stuff you think its a win.

The fact is that its not a win, its a massive loss packaged as a win.  Too often we just go along with what is sold to us then lose and wonder why we lost. An example of this would be civil rights, which ended up being a loss.  Another is integration, another loss, another issss college debt, a loss.  Loss after loss after loss that was marketed to you as a win.  The only way to truly win is to educate yourself so you can analyze the facts for yourself.

Free doom

The point debate just doesn’t make sense.  You would have to spend $100,000 just to get to $1000 dollars in cash back.  This reminds me a lot of the 5 for 2 trade off mentioned in the Millionaire Fastlane.  This is the work week trade off where we give away five days out of our life for two days of freedom.

The thing is that it is positioned as FREEdom, just like people position points as FREE.  There are no free lunches though.  Always beware of things that are “free”.. there is always a catch.  The catch with the credit card points is that you get your bonus and then use the card on the trip, use it ongoing, use it to make big purchases, use it to live life.  They will get their money somehow.  They might drip it out of you in fees and lower balances but they are going to get their money.

Daily purchases become accumulated debt

The are going to get their money because most people who bank on their credit card points bank on it by using their card for daily purchases they would already be making.  They use it to buy gas, food, and other essentials. This works, but when you go this route you have to be extra careful.  One slip up could be a 20% charge and boom all that 1% you were accumulating is gone that quick.

It takes one month that your payment is late, it takes one month that a holiday delays your check and yeah you get the point. You have a balance that triggers the interest charge and all that free stuff gets wiped out.  Boo hoo.

Assets are still better than credit and throwing money in the club

Never forget that. Assets are better than credit. There is nobody on the Forbes list that got there from their credit card points.

Assets are a better play because assets give you credit. WHY?  Because all credit is is credibility. You can get that credibility by having a good payment history (making and spending) or you can get it by having savings, property, securities and other leveragealbe assets.  The problem is that your kids can’t inherit that 700 fico.  They have no use for it after you are gone.

Too many of us are banking on credit to save us of poor savings habits and I am worried that given all this credit people are only going to repeat what happened ten years ago in the last financial crisis.  We are banking on it because credit is easier than what it takes to build long term wealth.  The easy path always becomes hard and the hard path becomes easy. Wealth might not look pretty on the gram during the first five years but it  looks good in eternity.

Chill on the play play out of credit

I have talked to too many people who made massive income and spent massive sums.  Its not about how much  you make its about what you do with what you make. I advise you to avoid the credit card game and instead focus on delaying gratification temporarily while you stack and become your own credit source.  The world opens up to those who have cash and a  high fico not just a  high fico.  Get a high fico, it will help but don’t go high fico while neglecting your savings and own personal wealth building.  You wont win that battle.

If you are interested in joining any of our clubs we would love to have you.  Email info@capitaltodd.com if you haven’t yet done your taxes and haven’t created an LLC to organize your hustle, do so now! Email charles@capitaltodd.com today!

Be great and invest well!

Todd Millionaire

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