Sunday, January 18, 2009

In praise of credit cards

The other day, I received a $100 voucher from Visa, to be spent at a local department store. As I held it in my hands, and calculated I could buy about five pairs of pants with it, I reflected on the benefits of the credit-card system — provided you use it in a cold-blooded, disciplined manner.

Shortly after I got my card in 1998, I found that if you shamelessly bought everything on credit, maximized your number of reward points, periodically converted your points into clothing vouchers, and always paid your accumulated debt as soon as it fell due, you could make a tidy profit on your operation of the system.

Of course, if everyone did that, Visa, MasterCard, et al., would have to charge a lot more in annual card fees. But they know that most people are weak and stupid, will buy more than they can afford, and will incur a growing debt that attracts interest at a rate of about 20 percent.

With everyone predicting a tough year ahead, it's time we all started thinking and acting smarter.

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