It seems some days when I’m trying to make a quick run to buy groceries, sun block, socks for my kids and fill up the gas tank that I’m greeted everywhere by the same questions “Hi! Do you have our credit card? No?! Why not apply now and get free groceries/drugstore rewards points/10% off your purchase/two cents a litre discount.” It seems like everyone wants me to get a new credit card. Why?
Employees Often Have Quotas for Credit Card Applications
My first suspicion was that employees are getting judged based on whether they can sign up new customers for the store’s current credit card. They likely have a quota of new applications they must try to find. So if they get 5 people to sign up for the card this month, they look good to their boss, and maybe they even get a small reward.
So I asked a clerk at a major retail store. Yes, she agreed, they are supposed to get a certain number of applications per month. While at her store the employee would not get fired if they didn’t get the applications everyone knew that getting them was a good thing promotion-wise.
That wasn’t the significant reason, though. She was honest and admitted to a second incentive:
Kickbacks (Or Cash Bonuses) for New Credit Card Applications
The stronger incentive for some employees to push company credit cards is a specific financial reward. At some stores, the person who talks a customer into applying for the new credit card personally earns cash. The “sign up” bonus can be significant: from $25-150 per application!
(It’s important to know that not all employees get a cash reward if you sign up for a card. Sometimes they are pushing the card just to keep their job.)
Some sales people will even tell you that if you apply, they will get some cash, and ask you to help them out by applying. Sounds harmless, right. But should you?
So I Can Help the Cashier by Signing Up, Should I Go For It?
What can go wrong by applying for a bunch of cards you don’t want or need just to help someone out?
First, each time you apply for a credit card, there is the potential for a mark to be added to your credit rating that reduces your rating. It doesn’t have to be applied. It isn’t always applied. But there is a chance. Applying for one unnecessary card obviously isn’t going to be a big deal. But applying for a dozen unnecessary cards isn’t a great idea.
Second, each time you apply for credit you are increasing your chance of a financial identity theft. Again, it isn’t a large risk, but it is a risk. Watch what happens when you provide all that personal info for the card. Do they just stick the papers beside the cash register? Do they just slide them into the register? When will they get sealed up so no one can easily copy them? Where will they be sent and when and how many hands will they pass through on the way? The risk varies but if you don’t really want the card why take any risk?
Third, if you don’t cancel the card you have increased your overall borrowing limit. Say you are approved for 10 cards each with a $500 limit. That’s $5000 of new credit available to you. This can sometimes be a factor when you need a loan or a mortgage. Some lenders will look at all of the sources of credit you have available and assume that you are at the limit on each of them. They then use that liability as part of their calculations of how much you can afford to pay a month on a new loan or mortgage. This calculation is not always done but it was done to us in the past when we applied for a mortgage with a big bank. It was sobering to realize that just having a lot of credit, even if we weren’t using it, could cause problems with a big loan. Why add credit you don’t need or want to your file?
Fourth, the temptation to mis-use your credit increases. The more cards you have, the more likely it is that you will forget to make a payment one month or that you will spend a little more than you planned because the card is right there unused. Again, this is not a major problem for most people but judging by shows like Till Debt Do Us Part it is a significant problem for some people. Gail Vaz-Oxlade wouldn’t have to tell people to cut up all of their credit cards but one if they didn’t have many, many cards.
Just Say No to New Credit Cards
The fastest simplest way to handle these offers for new credit cards is to just say no. If you have trouble saying no, you can even lie and say you have one already but left it at home. No matter how many incentives they offer, no is still the best answer.
No Credit Card Rewards for Me, Alas
Some of you may have noticed I don’t run ads personally for credit cards on this site. Unfortunately, that means I’m not getting any of those lovely cheques for $125 for convincing someone to sign up for a new card. I’d love the cash but I wouldn’t encourage anyone in my family to apply for a new card, so I don’t feel comfortable recommending my readers apply either.
Sometimes my context-based advertisers (like Google AdSense) may run ads for credit cards. I don’t get paid anything from the credit card company if you apply after reading one of those ads. If I’m lucky, I might get a few cents if you click on the ad, though. I don’t control whether AdSense runs those ads or instead runs ads for debt consolidation businesses or penny stocks, nor do I know what ads AdSense is presenting on your screen. The ads vary for each reader.
- What Happens When Your Credit Card is Used Illegally and Fraudulently?
- Reduce Your Risk Online Shopping with a Low Limit Credit Card
Do you get tired of always getting asked to get another credit card? Do you bother having more than one credit card and one low-limit card to use online? Please share your preferences with a comment.