Are banks giving away free money? Sometimes - but with a catch!
I wrote before how Capital One offered us a deal if we opened a money market account and deposited $10,000 into it. If we left the money there for a few months, they would give us $200. Since we have to take money from our 401(k) every year to live on, it was an easy matter to deposit $10,000 each into these money market accounts and score $200 in free cheese.
Recently, Capital One was at it again - offering me $250 if I would set up a checking account with them and direct deposit at least $1000 within 75 days. Again, since I have to transfer money from my IRA to my spending accounts anyway, it was a simple matter to set up the checking account and make two $500 transfers. At the end of 75 days, well, I had $125 plus some change (interest) in the account. Free money samples at the bank!
Well, I thought that was pretty swell. After all, what has Bank of America done for me lately, other than funneling about $75 a month back to me in "rewards" for using the credit card. Oh, right, Capital One has the same deal. Competition in the marketplace - to score the better customers, that is.
So I was a little surprised at Capital One's latest gag. They offered me $250 $350 (upgraded!) if I would get a Capitol One Quicksilver card and charge at least $500 on it in 60 days. A few trips to the gas station and our health insurance premiums should about cover $500 in 60 days, so, why not?
It was a bit of a PITA to unlock my credit score with the three agencies (I wish lenders would just tell you which one they use!). If you don't log in regularly, well, your password may have expired and the reset mechanisms are clunky. Nevertheless, within a half-hour or so, I was approved for the card.
Why is Capital One doing this? Well, in a way it is like encouraging a compulsive gambler to gamble. The credit card has a trap associated with it - 25% interest or more! And no interest until 2025 on new purchases! For a gambler, this is pure uncut cocaine. For me, it is a chance to score $350 if I am careful.
Like I said, I plan on spending the money anyway - but not carrying a balance, of course. So the deadly trap of compound interest should be avoided. Nevertheless, it is a trap and it can bite almost anyone. For the salary slave, it is temping to run up charges and pay them off later. Zero interest? Play the float, right? Then they get laid off and that 25% interest (as high as 29.8% depending on your credit score!) kicks in and you can never pay it back - well, you can, but it may take years.
They count on you being weak - the cater to your weaknesses. They market to your weaknesses. I mentioned before - more than once - that they are not giving out free money samples at the bank, now or ever. What they are doing here is baiting me to spend. And while "stealing the cheese" is tempting to do, one has to be very, very astute about such things, or you could end up like a rat in a trap.
Of course, many of these better offers are only offered to better customers. With a credit score of over 800, I don't need or want credit - so they offer me these deals. The working single Mom who is behind on her bills and paying bounce fees to the bank really needs a deal like the ones they offer me but rarely get them. Or, if they do, it is just a shovel with which to bury themselves.
I read all the time online, pleas from young people who distrust and hate banks. And I understand that sentiment from when I was young as well, and banks were always trying to fuck me over - or so it seemed. They had all the money - they had all the cards. I was a mere supplicant, begging for scraps and crumbs. And many young people (as well as immigrants) have an unnatural fear of banks which causes them to make even worse financial decisions, such as being un-banked or using payday loan outlets.
When you don't need or want the good deals, that is when they offer them to you - they know that you need to be enticed financially to engage. The poor and middle-class have no choice - so why offer them anything? The system rewards the rewarded and punishes the punished.
Yea, it sucks. But from the bank's point of view, the poorer the borrower, the more likely they are to default, so rates and charges are figured accordingly. On the other hand, someone like Trump can walk away from paying anything to anybody and for some reason the banks accept this and do a workout.
Again, the system is unfair - the richest should be held accountable more than the poorest. But it works the opposite way, and since bankruptcy reform was enacted, well, it is darn hard to weasel out of debts anymore - if you are poor.
But of course, I will snag the free money if I can. It is a simple matter of using this new card for our trip this summer and then paying it off with the money I put in their checking account - and then closing all of the accounts!
That, of course, is not what they were hoping I would do!
UPDATE: Or maybe they don't care - but were hoping I would write about it in my blog!
