Charge It! But Watch The Rewards

When I was in the 6th grade, Mrs. Nygren (my teacher, may she rest in peace) used to admonish the class that no one should ever buy anything on credit except for a house. She was adamant. If we could not pay with cash, we should not buy what we wanted to buy. Cars, boats and other big ticket items were intended only for those of us who could deliver cash in full.

Even as a 12 year old 6th grade student, I could not agree with Mrs. Nygren. She was opinionated. I was more opinionated. I vividly recall arguments in class — they were not organized enough to be characterized as debates — about the value of building up good credit by taking on reasonable debt. My father had always told me that I would start building my credit rating by opening and maintaining a bank account, which I had done by the time I was 9 years old and that I would really improve it by taking out a car loan and making the payments when I was 16.

If I listened to Mrs. Nygren, I would have to accept that my father was wrong. That was not going to happen and, to this day, I still believe that a bit of debt is a good thing.

Since I am a believer in the value of building a good credit rating, I have several credit cards. All of them offer me incentives and my favorites are, by far, one card that pays 1% of my purchases into a college account and another card that pays me 3% on certain on-line purchases.

I almost never buy anything with cash, but I never carry a balance on my credit cards. Each month, I enjoy watching my benefits accrue and seeing my college account get fatter. My wife also shares my view and has religiously used a hotel incentive card for her purchases over the past decade. At this point, if we were to cash in our hotel rewards, we could stay in a luxury hotel in Hawaii for a month (which makes me feel that I really need to get an airline reward card soon).

But this is not actually about the value of affinity credit cards. It is about managing your use of those cards so that you do not lose out on the incentives that they offer.

In August, I received my credit card statement and noticed that the incentive payment that should have been deposited into my college account was a couple of dollars short. I should have called to find out why there was an underpayment, but I was lazy and let it go. In September, my wife paid my credit card bill and I completely forgot to check on the incentive payment.

Then the October bill came around and I quickly noted that I had not received any incentive payment at all. I checked my on-line account statement and soon realized that I had not been paid anything for September, either.

I called my credit card company and learned that my incentive payments had a cap that I had reached in August. For two months, I had been using my primary card for no reason. I felt like a fool because if I had moved to my secondary card (the on-line purchase card), I would have received about $75 in additional incentives.

My failure to track my credit card incentive programs had cost me $75 this year and I have to wonder how much it has cost me in the past. Now I know that there are limits to what credit cards will pay me as an incentive to use the cards. I have also done some additional research and learned that credit card companies are also able to change the incentives that they offer by giving notice to the card holders (at least when the card is a no-fee card, as are all of mine).

I will never again allow my cards to stop paying me an incentive payment because I will now always track how close I am to the incentive limits that the cards offer, and I shall pay a bit more attention to the mailings that I receive from my credit card companies.

Have you ever found that a credit card did not give you the incentive that you expected to receive? What do you think about using credit cards? Do you agree with Mrs. Nygren, my 6th grade teacher, who tried to instill in my class a disdain for credit? Or do you agree with my Dad, who feels that a little bit of debt, well managed, is a good thing?