Credit Cards that Help? Not for me just yet

by Evan

I have discussed in the past that being that I am not out of debt, a rewards card is not a good decision…right now, but every so often I think about the rewards associated with credit cards. Regardless of my personal situation, I found an interesting article  in Wall Street Journal titled, “Credit Cards Help You Save, Cut Debt” by Jane Kim

Two Credit Card Rewards Program

Ms. Kim highlights two cards:

Wells Fargo & Co. is rolling out cash-back credit cards that automatically apply the rebates to pay down loan balances at the bank, while Fidelity Investments unveiled a new Retirement Rewards Card that will apply a 2% rebate earned on purchases to a Fidelity Individual Retirement Account.

I often think about reward cards, about why they exist? Credit cards literally exist for you, the average American, to carry a debt.

Credit Card Rewards are Not Worth it for the Average American

Found some really cool stats here….here are a few of the ones I found interesting.

  • 55 percent of credit card users keep a balance on their credit card, up 2 percent from 2007. (Source: ComScore, September 2008)
  • The average American with a credit file is responsible for $16,635 in debt, excluding mortgages, according to Experian. (Source: U.S. News and World Report, “The End of Credit Card Consumerism,” August 2008)
  • 76 percent of undergraduates have credit cards, and the average undergrad has $2,200 in credit card debt. Additionally, they will amass almost $20,000 in student debt. (Source: Nellie Mae, “Undergraduate Students and Credit Cards in 2004: An Analysis of Usage Rates and Trends.”)
    * Average credit card debt among indebted young adults increased by 55 percent between 1992 and 2001, to $4,088. (Source: “Generation Broke: Growth of Debt Among Young Americans”)
  • The average credit card indebted young adult household now spends nearly 24 percent of its income on debt payments, four percentage points more, on average, than young adults did in 1992. (Source: “Generation Broke: Growth of Debt Among Young Americans”)
  • Among the 35 percent of college students with credit cards that do not pay their balances in full every month, the average balance is $452. This is down 19 percent from 2007. Moreover, this balance is approximately one-third the size of the average balance for active non-student young adult accounts and one-fourth the size of active accounts for older adults. (Source: Student Monitor annual financial services study, 2008)
  • Approximately 74.9 percent of the U.S. families surveyed in 2004 had credit cards, and 58 percent of those families carried a balance. In 2001, 76.2 percent of families had credit cards, and 55 percent of those families carried a balance. (Source: Federal Reserve Bulletin, February 2006.)
  • Total U.S. consumer debt (which includes credit-card debt and non-credit-card debt but not mortgage debt) reached $2.55 trillion at the end of 2007, up from $2.42 trillion at the end of 2006. (Source: The Nilson Report)
  • Total U.S. consumer revolving debt reached $962 billion in May 2008, up from $879 billion at the end of 2006. About 98 percent of that debt was credit card debt. (Source: Federal Reserve)
  • The majority of U.S. households have no credit card debt. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • Of the households that do owe money on credit cards, the median balance was $2,200 — meaning half owe more, half less. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • Only 8.3 percent of households owe $9,000 or more on their cards. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • National average credit card debt per credit card borrower is $1,673. (Source: TransUnion, June 2008)
  • About 40 percent of credit cardholders carry a balance of less than $1,000. About 15 percent are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When you look at the total of all credit obligations combined (except mortgage loans), 48 percent of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit and loans — everything but mortgages. Nearly 37 percent carry more than $10,000 of nonmortgage debt as reported to the credit bureaus. (Source:
  • The typical consumer has access to approximately $19,000 on all credit cards combined. More than half of all people with credit cards are using less than 30 percent of their total credit card limit. Just over one in seven is using 80 percent or more of their credit card limit. (Source:
  • The average college graduate has nearly $20,000 in debt; average credit card debt has increased 47 percent between 1989 and 2004 for 25-to 34-year-olds and 11 percent for 18-to 24-year olds. Nearly one in five 18-to 24-year-olds is in “debt hardship,” up from 12 percent in 1989. (Source:, “The Economic State of Young America,” May 2008)
  • 28 percent of those surveyed say their ability to pay off their credit card balance has become more difficult. (Source: Javelin Strategy & Research, “Credit Card Issuer Profitability in a Difficult Economy,” July 2008)

Two words – Scary Sh!T.  With the above stats laid out there, what the hell is the 2% Fidelity or Wells fargo offering?  For most Americans, this is not free money being left on the table, this is simply a ploy to get you to spend money.  It is no different than a coupon for a product which you would not normaly purchase.

One day (in the near future), I hope to have zero consumer debt, and when I do so, the wife and I will talk about which rewards card is good for us when we prove to ourselves that we can pay the balance IN FULL.  My in-laws take advantage of programs from capital one, where, they pay the balance IN FULL EVERY MONTH, and have received multiple vacations from doing so, however, they don’t seem to be the norm.

What about my readers do you guys take advantage of reward points? If so, why? Are you carrying a balance?

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doctors S December 9, 2008 - 9:27 pm

I been gone for a while… but im back

I stumble on this article in the journal today myself and I found it to be very perplexing, especially on the part of Fidelity to provide a card that contributes to a retirement fund.

I look at it this way, Fidelity doesnt care if you rack up credit card debt (No where in the article do they promote paying it off quickly, nor should they but just saying) in order to save up for retirement? I know it is an extreme way of interpreting this product, but it still is an approach?

Another example of company’s trying to invent new ways to make a buck and take advantage of the credit card reliant consumer.

Millionaire Acts December 17, 2008 - 3:30 am

For me credit cards are friends because of the following reasons:

Cashless Transaction. You don’t have to bring much money when buying expensive things.

Float Advantage. This refers to the time it takes the credit card company to bill you for the purchases you made. You can practically purchase without money and you give yourself enough time to earn that money to pay off that purchase. So there’s no urgency to pay off quickly.

Reward Points. A lot of credit cards have these where you can accumulate points for every purchase you make and later on exchange them to freebies like appliances, gift checks, and even free vacation trips abroad!

Huge Discounts. Credit card companies offer huge discounts with their partner establishments. Some even entitles you to a free meal if you met the minimum purchase.

Oh, by the way we have almost the same tag line, mine is “Journey to Your Millions” 🙂

My Journey December 17, 2008 - 9:33 am

@Millionaire Acts

What I was saying in the post that the above rewards aren’t worth it to me YET. This is mainly because I am currently carrying a monthly balance.

The few bucks I might receive as a “reward” isn’t worth the interest I would probably have to pay on the card.

If you are currently rocking out a 0 balance, and can handle sending money every month – CCs are a great tool

Neil September 25, 2009 - 2:17 pm

“It is no different than a coupon for a product which you would not normaly purchase.”
Only if you buy things with it that you would not otherwise purchase. Otherwise it’s a coupon for something you would have bought anyway.

The problem with credit cards is and remains the users. Yes, reward cards exist to make money by getting people to use them and take on debt. As do all credit cards. The rewards are there to draw you to a certain bank. Getting out of debt is a matter of self control. Credit cards don’t trick you into debt, they just make it easy to get there.

If you’re one of the 55% that do not pay off your balance, you are paying for the rewards that the other 45% of us enjoy. Thank you for your generous contribution.

And finally, whether you are still paying off cards or not, reward cards can be worth it. Use a rewards card for your day to day spending and pay it off every single month. If you were otherwise going to put those purchases on a card where you are carrying a balance, you’ve just saved yourself an assload of interest. If you were going to pay cash, you get a 2% discount on everything you buy. As long as you continue to make the same purchases either way, it’s a winner.

If you’ll change your behaviour by having a new card then no, don’t get one. But that’s not a rule that applies anything close to universally.

Evan September 28, 2009 - 8:13 pm

“If you’re one of the 55% that do not pay off your balance, you are paying for the rewards that the other 45% of us enjoy. Thank you for your generous contribution.”

You are Welcome (well, Not anymore lol)

“The problem with credit cards is and remains the users.”

I agree with you 100% – credit cards are just a tool like anything else


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