Originally Posted by
t325
Both of these points are related IMO.
Chase keeps their ads on these travel hacking blogs (even if they go through an agency, they can tell the agency not to advertise on them) and offers 5x because there are a lot of stupid people out there who will spend money they don't have to get 40,000 bonus points for spending $4,000, or or 5% cash back at Amazon, not realizing the interest and fees they'll pay far exceed what they're getting out of it.
Take one of my friends for example. He doesn't make a lot of money, and isn't good at managing what he does make, so he's always living at the edge of his credit limit. ,snip>
He's the kind of guy I could see spending $1,500 this quarter at Amazon even though he can't afford it, just because he gets 5% cash back, completely ignorant of the fact that he's going to pay back more than $75 in interest if all he makes are the minimum payments. "So wait, you mean to tell me you just bought an XBox One and new laptop on Amazon even though you can't afford it?" "Yeah man, but I got $75 in cash back! I'll pay it off eventually."
For every one of us, there's probably a dozen of my friends. I'll be sure to thank him next time I travel somewhere for free.
It's these folks that make amazing travel possible for the rest of us. I cringe when I read this... your pal is teetering on the brink. I've had a few converts to miles and points with the same type of poor money management strategies. New credit cards only sink them deeper. They don't stop to do the math on how much the "free" points have cost them in interest and fees. It's astonishing, but it's what makes the banks rich.
The behaviors that we mimic are of a sinking financial ship... we apply for a bunch of credit cards and run a bunch of spending through them. We call it MS. The banks and Fico say it looks like someone is in over their head and looking for a bail out. That's why they get cagey when we've got enormous credit lines and a fistful of new credit cards. So, they turn us down for new lines of credit, or, our credit scores nosedive until we've proven that we can handle the credit lines on scads of new credit.