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Pumping and Dumping: Be Careful when using this Rewards Credit Card Tactic

Credit Card Rewards

There is a tactic used by many credit card customers called “pumping and dumping.”

This newest tactic is used when credit card customers open an account to take advantage of credit card rewards bonuses and points during a promotional time period, only to “dump” the credit card thereafter.

The Allure of Sign-Up Bonuses

Sign-up bonuses for rewards credit cards are quite common, as this is how many creditors lure customers into signing up for their credit card. However, many credit card customers are now signing up for these rewards bonuses and then quickly canceling the card once they have earned the bonus rewards and once the promotional rate has ended.

Earning air travel mileage is often a popular reason for “pumping and dumping,” as many customers are out for free or reduced air travel. Although this tactic has worked for many credit card customers, it can potentially backfire if used too often.

Tracking your FICO Score

The reason for this is because opening up and subsequently closing a large number of credit cards over a short period of time can lower your FICO score. So, although you think you are making out a like a bandit with rewards points, you may be actually hurting your credit score – and your ability to obtain low interest rates – in the process.

Another reason why “pumping and dumping” may be detrimental to your credit score is because a portion of your credit score is based upon the length of time you have had credit. In other words, a long relationship with a single creditor will likely give you a boost in your credit score, while short relationships with a number of creditors will likely put a ding in your credit score.

Many credit card analysts often recommend closing the newest credit card accounts before you close older accounts, as this will help protect your credit score.

Finally, “pumping and dumping” can prove to be quite confusing for many individuals, as opening and closing several accounts at any given time can result in forgotten accounts and forgotten payments. Often times, sticking to one or two credit cards, instead of becoming involved in a cycle of opening and closing various accounts, allows you to better track your spending and your credit cards.

Great Ways to use your Credit Card to Earn Frequent Flier Miles

Credit Card Rewards

Frequent flier miles are a great way to earn free air travel and, best of all, you need not fly to earn them!

When frequent flier miles were first introduced in the 1980s, consumers could only earn them by flying. Now, however, there are many credit cards that enable you to earn frequent flier miles by simply making the purchases you normally would.

• Check to see if your frequent flier program has an affiliate credit card (most of them do!).  You can then begin earning miles on everything from grocery purchases to airline ticket purchases. Plus, many credit cards that offer frequent flier miles will also offer an incentive to sign up for their card, in the form of frequent flier miles. In fact, many creditors will offer new customers 10 to 20 thousand frequent flier miles, just for signing up!
• You may also consider signing up for a credit card that offers membership rewards (both American Express and Diners Club have these programs). Many of these credit cards offer membership rewards points that can be converted into frequent flier miles, for your airline of choice!

However, many of these membership rewards credit cards require that you pay off your balance in full each month, so they are certainly not meant for consumers that typically carry balances on their credit cards.

• Consider applying for a credit card that offers you frequent flier miles for simply charging purchases at select retailers. For example, your creditor may offer you frequent flier miles by staying in a participating hotel or eating at a participating restaurant.
• Finally, consider enrolling your existing credit card into a rewards network, which is essentially a group of partnering retailers, like restaurants, bars, and associates of the major airlines. Then, each time you make purchases within that rewards network you automatically receive frequent flier miles.

Remember to explore all of your options regarding your credit card choice. And remember: there are many, different ways to begin racking up those frequent flier miles for your next trip!

How to Use Reward Credit Cards to your Advantage

Credit Card Rewards

There are loads of different types of credit cards available to consumers today, and many come with excellent reward programs.

If you are interested in a reward credit card, then you should start by considering your wants and needs. A frequent business traveler, for example, may find that a rewards credit card with hotel points may be the ideal card to have, as the rewards program could result in free hotel stays and other perks.

On the other hand, a credit card that offers a cash back program may appeal to an individual who uses his or her credit card on a frequent basis and will likely earn cash back points.

From airline and hotel points to cash back and gift reward programs, there are plenty of reward credit cards from which to choose.

Points to remember when using a reward credit card:

• Read the details of the consumer agreement carefully, and make sure you understand the terms of the reward program. If you have any questions, contact the credit card company to clarify the card’s terms and conditions before accepting the credit card offer.
• Check your points frequently to make sure there are no discrepancies between your records and the credit card’s records. Many credit card companies offer online accounts which allow you to easily check your credit card point information at any time.
• Use your credit card for everyday purchases to quickly rack up credit card points. Remember: the more you use your credit card, the quicker you will see your rewards points accumulate.

It is important, however, to always make sure you have the cash to back up your purchases, as you will want to be able to pay off your balance in full every month to avoid costly finance charges.

• Make it a priority to pay your account on time every month, as many credit card companies will take away any earned points (and will likely increase your interest rate) if you are tardy on payments.
• If you find that you are not using your credit card enough to earn significant reward points, you may want to consider switching to a no-frills credit card, as the interest rate will likely be more competitive.