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on cash-back credit cards

the journal of Michael Werneburg

twenty-eight years and a million words

I was given the advice that a cash-back credit card can save hundreds of dollars on routine purchases. So I looked into it, and found a 2% cash-back card that indeed could save us more than our "tax-free savings account" is currently earning, because with four mouths to feed we spend more than we save (by a long way).

But looking under the hood, it occurred to me that there's only one way that such a card makes sense to the banks that issue them. They're charging the vendors 2-3x what they're "paying" me to use it. In other words, these cards:

1. Damage the vendor's bottom line

or

2. Cause price inflation

while

3. Taking transactions away from the much more efficient debit card network, which we'd otherwise be using.

In other words, the banks and their card-holders are skimming without adding value whatsoever.

Sadly, I need the money, so now I'll be participating. The card I've found will save us $120 in yearly fees that was going to maintaining the old-fashion gold card. It will save us perhaps $400-$500 in "cash back". Sorry economy, I need this.