Two bloggers on BoardingArea wrote this week they know hundreds of people who benefit from credit card rewards, yet between the two of them, they only know one person who had financial trouble with credit card debt.
In general, I stay away from commentary about travel rewards credit cards since many bloggers in this points and miles space make a significant part of their income from working as credit card marketers for banks. I generally try not to piss off too many people. I leave that job to TravelBloggerBuzz.
Credit card marketing money is good income for a writer. The money is very good, earning $100 to $200 per approved credit card referral. Many travel writers work primarily as credit card marketers building the dream of travel for themselves and their readers.
Airheads in the rewards credit card bubble is my response to reading posts in which Mommy Points and The Miles Professor share their insights from within the bubble of financial marketing. Financial security among their circle of friends is apparently all wrapped up in great credit card bows and disposable income. I feel like somewhat of a guttersnipe with my circles of acquaintances and friends. Many people I know or did know had credit card indebtedness problems at one time or another.
I’d like to share my down to earth insight as someone who has lived in many places, made my living doing many kinds of jobs and aged through American economic cycles of boom and bust during four recessions since my adult working life began 35 years ago.
Airheads in the Credit Card Rewards Bubble
Let me preface to say this is not a misogynistic attack on two women bloggers. Mommy Points is one of my favorite blogs I read regularly. I simply feel compelled to respond to blog posts by Mommy Points and The Miles Professor. This post applies to many credit card marketer guys too. I rarely read articles about credit cards, but I happened to read both these posts this week.
The Miles Professor – He Handed $250 To The Bank and Got Nothing
“While I personally don’t know anyone who got themselves into financial trouble with reward credit cards, I do have a story of quite the opposite.”
Mommy Points – The Dangers of Rewards Credit Cards
“In my 3.5 years of writing about this type of stuff, I only personally know one person who has gotten a rewards credit card primarily for the travel rewards, and then maxed it out on unneeded items. I know hundreds, even thousands, who have used rewards cards successfully to maximize the purchases they were going to make anyway.”
I read this and think, “What bubble of acquaintances are you living in?”
The country just went through the greatest recession since the Great Depression of the 1930s. I know hundreds of people who lost their jobs without warning when their employer suddenly shut-down or downsized to cut expenses. The unemployment rate in the USA doubled from 5% to 10% between 2008 and 2009. Many people I know found themselves looking for a new job. Some moved to other places for work.
What do you live on when you are suddenly unemployed? Do you really have a big rainy day savings account? Do you cash in your 401K? Do you even have a 401K to access?
Or do you try to meet expenses with credit cards in your wallet and hope you secure a job quickly before the monthly bills start to hurt financially?
Moving to a new place is easy when you are single. One of the hardships many family’s face is when one spouse loses a job and there are few jobs available in your area. Picking up and moving is not an option when the other spouse has a career that is not transportable to another place.
What happens when you need $2,500 for urgent car repairs? When your income is reliant on your ability to drive your car to work each day, sitting around for a month or two waiting to save enough money to fix the car with cash is not an option. Selling your household possessions might be another way to raise cash or borrowing money from a more financially secure relative could be an option for low or no interest repayment.
Or do you demonstrate financial independence and simply reach for the rewards credit card? Not because you are thinking about the miles you will earn with $2,500 in spend, but the job income you will lose if you don’t have a working car.
In 2006 when I started Loyalty Traveler, there were people I knew who were in strong financial positions with multiple houses, playing in real estate speculation flipping houses, and holding 401K portfolios north of one million dollars. Then, over the course of 36 months that real estate and paper wealth collapsed between 2007 and 2009. The $750,000 house dropped in value to $450,000 or less, bad mortgage loans taken out for short-term gain became difficult to alter as bank liquidity dried up resulting in astronomical mortgage payments. Some people I know walked away from their homes, some people dipped into the kind of crazy credit card limit available when you are a paper millionaire, and some watched their retirement dream bubble pop as 401K account balances plummeted, home values plummeted and their job employment income ceased or was significantly reduced.
Some of my friends made remarkable financial recoveries from dire straits. Some others have limped along for years now trying to become financially stable again.
Upgraded to C
In the miles and points world, upgraded to C is a great moment when you learn your economy class flight has been upgraded to C, a business class seat.
Here is our story. In 2009, my wife got a call one day after having been to the doctor for a routine examination. She was diagnosed with rectal cancer. Her medical treatment required eight months. There was a shockwave through my brain when her oncologist told us she would be out of work for most of 2009. I had just been promoted two months earlier from Prior2Boarding to the BoardingArea bloggers page. That didn’t matter much since there was no advertising revenue stream from BoardingArea at the time. I was making all my income on other writing projects.
One day Kelley and I were both working, making the money for a decent living. Then, Kelley suddenly found herself unable to work for eight months. My time available for working on Loyalty Traveler projects diminished as I drove Kelley to the hospital 150 miles round trip several times a week for chemotherapy. For six weeks I drove her 180 miles round trip daily for radiation treatment. We charged the gas on our credit cards, we charged the hospital visit copayments on our credit cards. We paid for food and any bill we could on credit cards so we had money each month to allow us to remain in our home and not have to add a move to the already hectic travel schedule of hospital visits. We went from being able to handle our bills to being in debt.
Five years later, Kelley is a cancer survivor. We travel and we still have credit cards, although credit cards are really a small part of our travel strategy. Bankruptcy would have been the easy out. We stayed in debt and paid off debt.
One of the most irksome phrases I used to read in the miles and points world was Frugal Travel Guy’s “Your credit is your most important asset.”
Bullshit. Your health is your most important asset. Not much else matters when your health is shit.
Up in the Air
Travel bloggers who operate their business as credit card marketers write about the world accessible to you with the right credit cards. They continually tell you to use credit cards responsibly as they earn thousands of dollars a month or even tens of thousands of dollars a year through credit card affiliate marketing. Airheads in the rewards credit cards bubble sell you a travel dream of endless luxurious travel, flying from place to place in the front of the plane, sipping champagne and sleeping in bed as you fly around the world.
Are they lying to you? No.
I have been planning my travels in the points and miles world for more than 15 years and I know credit cards are an easy way to quickly make that travel dream a reality. And even a quicker way to make a decent income writing as a credit card marketer and selling readers the dream of rewards travel.
As a reader of this article, someday you might find yourself without a job, without a car, without a house, or even without a spouse.
One thing is for sure though, if you live long enough, if not you, other people around you will suddenly fall when their financial bubble pops.
I pray your bubble never pops. May you be blessed with good fortune.
NerdWallet Credit Card Facts September 2014
- The average US indebted household credit card debt stands at $15,607, counting only those households carrying debt.
- 2,681,038 more U.S. households held credit cards in December 2012 than March 2010. A rise from 116,716,992 to 119,397,330 U.S. households.
- While average credit card debt dropped from $7,768 in March 2010 to $7,117 in December 2012, the percentage of households carrying credit card debt went up from 43.2% to 46.7%. That is an 8% increase in the number of U.S. households carrying credit card debt in 30 months.
As the economy limps forward, credit card companies increasingly loosen their lending standards. Confident that consumers will be able to pay off their debts, the issuers allow more people to borrow more money. NerdWallet expects household indebtedness to resume an upward trend in the coming years as creditors become more lenient.
NerdWallet – American Household Credit Card Debt Statistics: 2014
U.S. household consumer debt profile:
- Average credit card debt: $15,607
- Average mortgage debt: $153,500
- Average student loan debt: $32,656
In total, American consumers owe:
- $11.63 trillion in debt
- An increase of 3.8% from last year
- $880.5 billion in credit card debt
- $8.07 trillion in mortgages
- $1,120.3 billion in student loans
- An increase of 11.5% from last year