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A reader is suspicious of all these "reward programs." How can they possibly be legit?

2 minute read

Question: Last month, I asked my girlfriend to marry me, and we started talking about our finances. She couldn’t believe I’ve never had a credit card in my life  — she has, like, nine of them. She says she’s earned all sorts of rewards.

Me? I’ve only ever used debit cards. I can’t help but think these reward programs must have some hidden fees. I mean, who gives away airline flights, gift cards, and even cash? Companies don’t stay in business not making money, right?

My fiancee says I’m paranoid and she’s earned plenty. I say she’s naive and is missing something. Who’s right, Howard? Please answer this question, because seriously, it’s our first-ever fight.

— Ethan in Missouri

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fastFirst, I’m pleased you two are discussing your finances before your wedding day. I can’t tell you how many married couples I’ve counseled who later got divorced because of money problems they never talked out beforehand.

Second, I’ll warn you against debit cards. As I’ve written before, a debit card combines the worst of both credit cards and cash.

Third, you’re not alone thinking those credit card reward programs are rigged.

In fact, right before the presidential elections last month, a company called Colloquy polled 1,500 U.S. consumers and found, “41 percent say that points, miles and cash back programs are rigged.”

Of course, that means 59 percent thought otherwise, but it probably won’t surprise anyone that, given the acrimonious presidential campaign, “Republicans are 60 percent more likely than Democrats to say programs are rigged.”

Ethan, I can tell you and your wife without doubt or hesitation: Reward programs from major credit card companies are definitely not rigged.

Then again, you make an excellent point: How can these companies stay in business if they’re doling out rewards? Simple, Ethan. Those credit card companies don’t have to rig anything to make much more than they’re giving away.

The reason: They know many Americans will run up huge balances on their cards, which means they’ll extract much more in high interest rates and other fees than they’ll pay out in points.

You didn’t provide details, Ethan, but if your fiancee has nine credit cards and even one is carrying a balance from month to month, she’s probably breaking even at best. At worst, she’s actually losing money.

However, if she’s paying off those balances every month, I recommend you elope today. That means she’s one savvy woman!

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Have a debt question?

Email your question to editor@debt.com and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC