Wednesday, October 24, 2012

Credit Card Roulette

I'm pretty sure most of you know about the dangers of credit card debit and signing up for a new card only to use it to pay off another.  This sort of "bad credit card Roulette" is not what today's topic is about.  Instead, I've discovered (or at least been made aware of) a "Good Credit Card Roulette" that can be accomplished through some savvy personal finance.

Just to set the story right, I in no way recommend what I'm about to describe, but I just wanted to make you aware of this tactic.  I tend to think of myself as risk neutral when it comes to personal finance and investing, so this type of strategy will definitely not fly with me.  So what am I talking about?

The inspiration for this post came from this blog.  The author found a way to make a couple extra grand each year by opening up credit card accounts (max of about 10), snapping up their bonus offers whether it be free cash or rewards, and closing them out once the reward was met.  I was a little skeptical about this when I first heard about it, but then I asked a friend of mine who is a credit card product manager.  He said that he does the same thing and rakes in at least $1,000/year.  My next question pertained to how this might effect a person's credit (FICO) score.  He confirmed that his only dipped about 10 points with all the applications and closures.

This sounds like a fun idea, but bare in mind the risks.  You have to make sure you know what you are doing.  When you find a card to take advantage of, make sure you read the fine print in the contract section. Next, make a list of the benefits and terms to meet in order to acquire said benefits.  Maybe a simple Excel grid would do.  Record the date you sign up, and the date you plan to leave (this is important!).  Start spending like normal (do not spend more just to meet some petty reward), and make sure to record or keep track of how much you are spending.  Once you've met your reward, look at your contract conditions again and exit.  Some people say they can reap an extra $1-3 thousand dollars a year.  To them I say God Bless You, because this arrangement is simply too much work and too risky for my tastes.  Spending too much, getting charged some hidden fee, or somehow messing up my hard earned credit score are just too much to trade off.

But, if you feel like you are dying for some financial adventure, then credit card roulette might be the right thing for you.

Wonderful Moment of the Day: Looking with comfort at my measly single credit card...with cash back!

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