Many of you have likely seen the Smallenfreuden campaign that Visa has been running for the past few weeks. The premise behind it is to entice Visa cardholders to use their credit card for even the small, every day purchases, that one would normally make. The advantages, as they say, are that you earn reward dollars on all your purchases while being able to track all your purchases on one, easy to read bill.
I don’t like it.
As a Mortgage Broker, I see people every day who have racked up their credit cards or lines of credit to point where they are barely able to make the minimum payments on them. Maybe they were smallenfreuden-ing at one point? The simple truth is that human nature kicks in for the great majority of our population and it’s way too easy to use that little plastic card to make every day purchases. Well when your bill comes a month later and you have forgotten about these little purchases which now total, say $800, that you had not budgeted for paying in a bill that month, maybe you are only able to pay half of it at the end of the month. And the cycle continues…. next month, since you have now collected interest on that extra $400 sitting on your card, with an additional $800 in #smallenfreuden purchases, your balance is now over $1,200. And the cycle continues…
I think you get my point on how dangerous a marketing campaign this really is. Visa loves it as they are collecting more interest off these people than ever! The “rewards points” that you will collect off these small purchases are slim to none and don’t even come close to evening out the amount of interest you might end up paying. Fact of the matter is, credit cards that have even a half decent rewards program are only eligible to certain customers who meet certain income and credit standards. These people are not the ones I am worried about. It is the larger majority of the population who might succumb to this harmless looking advertising campaign that Visa is running.
My only advice is: be responsible, and be careful what you smallenfreuden. And if you are going to smallenfreuden, take advantage of online banking and log on and pay that sucker off right away.
Cheers to good credit.