How often would you recommend applying for one of the best credit cards on the market?
While industry analysts recommend waiting at least 6 months before applying for the best credit cards again, I suggest that it depends on personal situations and circumstances, which are different for everyone. For example, if you are just building your credit history and getting started, you need to keep in mind that a hard inquiry is going to really impact your score for a certain time period. You are also sending the wrong signals if you apply too soon again and that could lead to denial. Thus, it is wise to wait at least 1 year. If you are rebuilding credit, then it is really prudent to wait at least 1 year before applying again, so that the stability factor is reinforced. Likewise, if you plan on taking out a major loan, like an auto loan or home loan, please wait so that your score is not impacted by the hard inquiries. On the other hand, if you have a stellar credit score upward of 730, and you really need that travel card, then one hard inquiry is unlikely to impact your score substantially, as it would do for someone who is just getting started. Likewise, if you have an acute and compelling financial need, then of course it makes sense to apply for a card with 0% APR on balance transfers.
What, if anything, do the terms offered by the market’s best credit cards say about the economy?
It is important to keep in mind that in the current situation, banks are averse to risk and are thus more inclined to offer credit cards to those consumers that possess high credit scores, demonstrate stability, are low-risk, and more likely to be loyal. In this day of AI and customer relationship management software, banks are determining who are their most loyal patrons and customers and thus are more likely to reward such consumers. It is important for younger consumers just starting their careers (notably Gen Z) and those that are from low-income households/single-income households to keep this in mind and thus practice minimalism- buy only what is necessary and avoid spending money by accumulating credit card debt on unnecessary items or products that you do not need.
Is it sustainable for the best rewards credit cards to offer initial bonuses worth $400+?
Credit card companies make money through several avenues such as interchange fees, revolving balances, co-branded partnerships (with hotel chains like Marriott, Radisson, Hilton, or airlines like United, American, Delta etc.)., and significant annual fees charged to customers. These revenue avenues mitigate the cost of offering attractive $400 + initial bonuses to high-value patrons that are more likely to do continued and sustained business with the bank.
Given that merchants don’t charge more for credit card payments, would you say that people who pay in cash subsidize credit card rewards programs? And does that, in turn, mean people with the best rewards credit cards receive the biggest subsidy?
Yes, it is true that consumers who pay in cash are paying the same price for a product or item, but are not receiving the rewards that credit card users do (such as a 2% cashback on purchases, all of which ultimately add up and contribute to substantial savings). It would be correct to say that such consumers actually do subsidize the rewards earned by credit card users.
Yes, the customers with best rewards credit cards that are also high spenders receive the maximum benefits, because rewards are linked to interchange fees- the more attractive the rewards, the higher the amount that the merchant paid to the bank. In addition, higher-income credit card users tend to spend big money and qualify for reward points and miles, but such consumers are also prone to paying off their credit card balances on time each month. On the other hand, customers with lower credit scores may accumulate high-interest debt, which in turn actually subsidizes and contributes to the rewards system mechanism.
Source: WalletHub