Being a credit card deadbeat isn’t actually a bad thing In fact, it can be a smart financial move that saves you money and improves your credit score.
So, what exactly is a credit card deadbeat? It’s simply someone who pays off their entire credit card balance each month, avoiding interest charges and late fees. This might seem like a no-brainer, but many people carry a balance from month to month, racking up high-interest charges.
The term “deadbeat” was actually coined by credit card companies themselves. They use it to describe customers who don’t generate them any profit through interest charges Instead, these customers pay off their balances in full, maximizing the benefits of their cards without contributing to the company’s bottom line.
Here’s why being a credit card deadbeat can be a good thing:
- You save money on interest charges: Credit card interest rates can be incredibly high, sometimes reaching 30% or more. By paying off your balance in full each month, you avoid these charges and save yourself a significant amount of money.
- You improve your credit score: Paying your bills on time is one of the most important factors in your credit score. By consistently paying off your credit card balance in full, you demonstrate responsible credit behavior and improve your credit score over time.
- You avoid late fees: Late fees can add up quickly, especially if you forget to make a payment or your payment is even a day late. By paying off your balance in full each month, you avoid these unnecessary fees.
- You gain more control over your finances: When you carry a balance on your credit card, you’re essentially borrowing money from the credit card company. This can lead to a cycle of debt that can be difficult to break. By paying off your balance in full each month, you regain control over your finances and avoid falling into debt.
How to become a credit card deadbeat:
- Choose a credit card with no annual fee: There are many credit cards available that don’t charge an annual fee. This can save you money, especially if you don’t use your card very often.
- Pay your balance in full each month: This is the most important step in becoming a credit card deadbeat. Make sure you pay your entire balance by the due date each month to avoid interest charges and late fees.
- Set up automatic payments: Setting up automatic payments can help you avoid forgetting to make a payment and incurring late fees.
- Track your spending: It’s important to track your spending so you know how much you’re charging to your credit card each month. This can help you stay within your budget and avoid overspending.
Being a credit card deadbeat isn’t just about avoiding debt; it’s about taking control of your finances and making smart financial decisions. By following the tips above, you can save money, improve your credit score, and gain more control over your finances.
Remember, being a credit card deadbeat is a good thing! Don’t let the term fool you. It simply means you’re using your credit card responsibly and maximizing the benefits it offers.
What is a Credit Card Deadbeat?
According to a book called Maxed Out, written in 2007 by James Scurlock, the term ‘deadbeat’ was adopted by credit card companies. It refers to a credit card user who pays their balance in full instead of carrying a balance from month to month. This practice prevents the card user from incurring any interest charges. That prevents the credit card company from making money from that card user, except for the fee to the vendor for processing the charge. In essence, the consumer limited the profit they intended to make from the service provided.
One story in the book exemplifies the tone of the whole book. It’s a story recounted by Elizabeth Warren.
Elizabeth “was once invited by (a major financial institution) to help the company reduce its credit card losses. Warren showed a room full of executives, using graphs and charts, how they could drastically cut down on charge-offs by considering their clients’ ability to pay before extending credit. The meeting was adjourned when an executive in the room pointed out that they would never turn a profit if they only extended credit to those who could repay it (Miller, 2011).
Strive to be a Deadbeat
The good news is – I’m telling you it is okay to be a deadbeat. The best way to get the most out of a credit card and minimize any negative effects is to use credit wisely, just like the proverbial deadbeat does. Simply said, deadbeats can beat the credit card system. That’s why they are not the preferred customer of the credit card company. Customers who are prepared to make the bare minimum payments for the longest possible terms at the highest interest rate they can afford are given preference. These are their best clients, and they will be happy to give them more credit so they can increase their profits.
Your best bet to earning deadbeat status? Follow these simple rules:
- Look for a credit card without an annual fee. They do exist.
- Use that card only for purchases you are certain you can afford to make in full when the monthly statement comes in.
- Pay that monthly statement in full before the due date. As a matter of fact, some electronic bankers treat their credit cards like debit cards. Instead of waiting for the monthly statement, they accomplish this by paying for each transaction as it is incurred. They make monthly payments, which are deducted immediately and electronically from their funding account.
Doing these three things can help maximize the perks offered on the card. It can also help you better manage your monthly expenses and live within your means. Best of all, a good payment history will help build a solid credit score.
What the Credit Card Companies Don’t Want You To Know
FAQ
What does it mean to be a deadbeat in the credit card world?
What is a deadbeat debtor?
What does it mean to be a deadbeat in reference to credit cards group of answer choices?
What is deadbeats?
What is a ‘deadbeat’ credit card?
Credit card companies have a term for these zero-balance users: “deadbeats.” These so-called “deadbeat” users open rewards and cash-back credit cards to accrue points, miles, and other perks, but, because they pay their balances in full and on time every month, pay nothing in interest back to the companies.
Can a deadbeat make money using a credit card?
And because deadbeats do not carry a balance and do not pay any interest, a rewards card that offers 1% to 5% back on purchases means a deadbeat can make money from using a credit card. Credit card companies may refer to cardholders as deadbeats if they regularly pay off their entire balance each month.
How do Deadbeats make money?
Deadbeats often reap the rewards from credit card programs without having to pay high fees or interest due to regular and full payments on their cards. Credit card companies make money from deadbeats (3% fees) that merchants pay on purchases. Deadbeats with credit cards do not generate significant losses for credit card companies.
Why do you want to be a credit card deadbeat?
The reason you want to be a credit card deadbeat is simple: because not being a deadbeat is costly. Being a deadbeat allows you to escape potentially expensive finance charges on your credit card balance. Suppose you have a credit card balance of $5,000 with an interest rate of 15%.