Friday, September 29, 2023

Bonus Offers!

Should you sign on for a bonus offer?  That depends on whether it is something you'd do anyway.

I noted before about coupons and discounts that, of course, you should take advantage of, if you planned on buying the item in question, anyway.  For example, they are offering a BOGO on cantaloupes and you planned on buying two cantaloupes.  So you take the deal - it makes no sense to pay twice as much for something you actually wanted.

On the other hand, it makes no sense at all to use a coupon to buy adult diapers unless you or someone you know is incontinent.  "But it's such a great deal!  You can't afford not to buy!" cries the hoarder.  And I know folks like this - who buy things because they are a "bargain" even if they have no use for the item in question.  Their homes are overflowing with bargains.

A reader writes, asking me what I think of promotional bonus offers from banks and financial institutions.  I am always suspicious about reader suggestions, as I wonder whether I am being trolled or unwittingly promoting someone else's agenda.  The reader provides links to websites, but most appear to be aggregation sites with funny names ("Debt Donkey" - really?) that merely have links to other financial sites (and no doubt collect commissions from those who click).  For example, if you clicked on this link to open a Capital One credit card, I would get $100.  Think about that - put up a website with links like that, and you could really cash in.

By the way, don't click on that link.  I don't need the $100 and you need another credit card like you need a hole in your head.  But it illustrates what some companies will pay for "leads" and how lucrative being an "influencer" can be.  I am in the wrong business!

All that being said, I have latched onto some "bonuses" in the past.  I was planning on moving some money from Fidelity to Merril Edge, as if you have a certain balance with them, you become a "platinum" customer of Bank of America and they waive all sorts of fees for you.  So when they offered me $1000 to transfer $100,000 to their trading account, I thought, "why not?" Free trades was icing on the cake - compared to Fidelity's fees at the time.

Similarly, Capital one had a deal where you would get $200 if you put $10,000 into a Capital One savings account.  Since the interest was far more than I was earning at Bank of America, I thought "why not?" and did it - twice.

But those were things that I wanted to do anyway, that ended up saving me money and didn't involve taking on debt.  Other offers are just bait on a bear trap.  For example, credit card offers of 0% financing can be a lifeline (at the cost of a 4% balance transfer fee) or a lead weight carrying you down to Davy Jones' locker.  I've seen offers for credit cards where if you take out the card and charge X dollars within three months, you get Y dollars (like $200) back right away.  Sounds tempting and indeed, I "scored" with one of these once.  But what they are counting on is you being sloppy with your finances and running up your credit limit and paying far more than that, in interest, within months.

Tempting, but then again, most traps are. When you walk through the woods and see a nicely baited trap, you have to always ask yourself, what's the catch?  Because there's always a catch.  In my case, I make sure to read all the fine print and make sure I follow all the rules to the letter - and then carefully monitor the account to make sure they followed through with their promises.

It is like 90-days "same as cash" deals, which I have bitten on three times in my life, but have yet to get bitten by. Yet.  The first time was for a waterbed (a real necessity, right?) which I paid off on the 90th day, much to the distress of Household Finance Corporation (HFC).  The lady at the office (yes, I drove there on the 90th day to pay it off!) pleaded with me to "let the balance roll over" as I would "have all this cash to spend!" and of course, pay HFC 15% interest for three years.  No Thanks.

The next time was when we were remodeling the lake house.  I had about $3000 in supplies to buy and they offered 10% off ($300) if I would open a Home Depot credit card and get 0% interest for six months.  I did it, and made $500 payments every month for six months and paid no interest.

The last time was when we put replacement windows in the Jekyll house.  Same deal, although Homo Depot was offering 0% interest for a year as well as 10% off.  We paid it off in three months.   The "benefit" of "playing the float" is de minimus if not illusory.

Why would they offer these deals?  After all, in each case, I was prepared to pay cash for the purchase!  The answer is, of course, that it was a carefully baited trap.  They hoped my personal finances were a nightmare and that I wouldn't pay off the balance in time and that retroactive interest would kick in the day after the 0% offer expired.  The $300 off they gave me would be wiped out by over $300 in interest charges.  And if I took months or even years, to pay off the balance (and charged even more on the card) they would rake in hundreds, if not thousands, more.

By the way, that is one of the "tricks" with these deals - and you have to read that fine print in four-point type to realize it.  Say you get the $3000 on 0% interest for six months, and they mail you a shiny new Home Depot card.  You go back there to get a box of nails and figure, "why not use the new card?"  The problem is, you've added to the debt load, and unless all the debt is paid off by the deadline, you end up paying interest on the whole thing, from day zero.

It is just a trap, and like a loaded handgun, it should be handled carefully, lest it go off and blow off a limb, or blow your brains out.  Yes, you can handle a handgun safely, with proper training.  But then again, you never have to worry about it if you don't have one.  And less financial stress is better than more, even if they offer you bonus miles or bonus bucks or 0% interest.

Just bear in mind that bonus offers are not part of "customer appreciation day" or a "free gift" from benevolent banks.  They are a trap for the unwary, and if you think you can outsmart a multinational banking juggernaut, well, be my guest.  Myself, it is more like juggling grenades - with the pins out!