Every Rose Has its Thorn: Downsides

I've tried to lay out the positives of the Credit Card Game. However, as Poison knows, every rose has its thorn. There are a few things to remember before diving in:

1. You have to pay them off every month. If you are late even one day on the payment, you're looking at 15-25% annual interest. 

So: PAY. THEM. OFF.  If there's any possibility you won't be able to pay the bill off monthly, don't get them.

2. Frequent credit checks and new accounts will slightly reduce your credit score. The credit bureaus use an opaque formula so it's not exact, but if you start out with a 700+ credit score, you'll be fine. By the way, every year you can get a credit report for free from each of the three main credit bureaus, by law, at www.annualcreditreport.com. Many credit card companies also offer free credit scores and reports.

3. Chase's "5/24 rule": if you've opened five new credit cards (from any issuer, not just Chase) in the past 24 months, Chase won't approve you for a new card. Some Chase cards don't count toward 5/24; details here: Implied task: get your Chase cards first.

4. It is a bit of work. As I've written before, I treat it as a side job: I spend a few minutes daily checking my balances and ensuring I schedule payments on 5-8 cards at any given time (the rest are in a drawer). In exchange, I get tangibly valuable things like hotel rooms, free flights, and cash back. I read about people using spreadsheets and online services to track all their card, and I don't understand this because you should only have 3-4 cards in regular use (more on this in the future). All that said, for some people it might be a hassle, or even a source of stress. So if it seems that way to you, don't bother with it! Life is short. But if you're smart, you'll earn enough cash back to buy enough Aquanet to keep the entire Poison lineup's hair voluminous through every glorious night of the Monsters of Rock Arena Tour.

Although we both lie close together, we feel thousands of frequent flyer miles apart inside.

5. The Dave Ramsey philosophy ("I H8 DEBT"). I understand and respect that some people (including people I know and admire) want to pay cash for everything, pay off their house as quickly as possible, and cut up their credit cards . They get great peace of mind, perhaps because they've struggled with debt in the past or just want a stress-free life. We all have friends and family with debts that are kicking their butts. I look at debt as a tool, something you use to make life easier. I use my credit cards to make money (and the "work" part feels more like a game to me: I am, after all, a wannabe clever fox). I also recognize that I am blessed with better job security than most people in the modern economy.

6. If you plan to get the card, spend the minimum, get the points/miles, and then close the account, it will also slightly hurt your credit. A better option is a "product change": asking the issuer (e.g. Amex) to switch that account (and its credit history) to another one of their cards. The downside of that? No sign-up bonus.

Like a knife that cuts you, the credit score heals. But the scar, that scar will remain (it actually doesn't, now take it away with a guitar solo, C.C. DeVille!)

7. Every good card has an annual fee, ergo each card has a break-even point below which it isn't worth keeping. Don't fly often? Might not be worth the $95 annual fee on that airline credit card--after, of course, the first year when you get XX,000 miles for that $95.

I know I could've saved some cash that night if I'd've known what to say/ Instead of makin' love/ me and this credit card both made our separate ways. 

8. Devaluations. As everyone who blogs about this will tell you, miles and points are a bad long-term investment. Think Zimbabwe-style inflation. There's a big frenzy among credit card issuers to get people using their cards, and a virtual arms race to award more points and more miles. Airlines and hotels love it, because the credit card companies pay them for ephemeral points that they constantly devalue by raising award redemption rates and adding restrictions. And you though Bitcoin was built on sand! For example, until February 2017, I could get rooms at nice Hilton properties for $40+8,000 points. When Hilton "improved" their program, the same room was about $60+15,000 points. So overnight, Hilton points were worth about half what they were before. This is known as a "stealth devaluation." Hilton makes Ben Bernanke look like a piker with his quantitative easing. Lesson learned: if your loyalty program emails you to tell you about "exciting new improvements," run like hell, spend the points, and make love to the first person you see because the world's ending!

So what does this mean to me, Fox? 

Get each card with a specific goal in mind, such as: "I am going to fly myself and my three older children to Europe this summer." This is actually my goal. I'll use my United miles, transfer Chase Ultimate Rewards into more United miles, and only pay the taxes on each flight.

Bottom line: know what you're getting into, and don't be like every cowboy who sings a sad, sad song. To hear that would tear me up inside. Can you think of any other downsides? Got questions? Feel free to email me or comment below. Rock on!

My actual tattoo. If you haven't seen it, you don't know me well enough.

Fun digression: this was the first song I learned to play on guitar, not to mention a middle school dance staple.