Are You a Financial Deadbeat?
Closer Look at Beating the Debtor
Now, I know you saw the title and went, "Is the writer talking about when a parent chooses to not support their child?" Readers, I am not discussing that kind of deadbeat lol. Instead, I am talking about a term a creditor will use when someone pays off their credit card before interest can take effect. Why are they called deadbeats? Is it bad to be a deadbeat? Will being a deadbeat decrease my chances of being approved for another credit card?
Okay so let me give you the rundown of how deadbeats are impacting the credit industry:
Let us say for the month of January, you have a $1000 credit line on your Discover It card and you purchased $250 on that card. On January 15th, you get a credit statement saying it is due February 1st. Now, a week before the 1st of February hits, you pay it off (Yayyy let us celebrate!). For the next billing cycle, the balance is ZERO!!!... Now repeat this process for the next 9 months.
It is the new year, and you want to get approved for a Chase Freedom Unlimited credit card. You put in the application, 1 week later, you get rejected. You are puzzled and confused because you did everything right, your credit score is solid, no late payments, the utilization rate is low, what is up with them giving you a hard time?
Well, the credit bureaus and the company you do business with know that you are a responsible credit holder. They know that you are not going to make them an extra profit from the interest and other unkind, pointless fees. You are officially known as a 'deadbeat.'
As a deadbeat, paying your full balance each month before the due date, makes them lose out on money. You do not look like a positive customer because you take matters into your own hands before they call at your door looking to collect. You are not 'profitable' for them to take advantage of, but do not be alarmed, being a deadbeat, in this case, is good for a few reasons:
1. You save yourself money by avoiding interest and other fees. Everyone loves a good save. The more you save, the more you keep in your pocket.
2. Shows your responsibility for managing credit. This will always be a plus when it comes to credit management. Implementing good credit techniques will pay off in the long run if you are ever thinking about purchasing an asset like a house or car.
3. It still boosts credit score. You might not pay interest on your card, but that does not mean you cannot still build your credit. Utilizing your credit at 30% and lower and paying it off before the due date will increase the score.
4. Still able to reap the benefits of credit cards like cashback or cashback match. For me, I am a proud financial deadbeat. However, I love my 5% and 1% cash back rewards on my card. The money I earn from purchasing on credit can be used to help pay my credit card bill. That is a major power move!
Now, you may pose to creditors as a risk when trying to get approved for another credit card, however, the benefits of being a deadbeat far outweigh the setbacks. A true part of financial freedom is being able to have your spending manageable and under control, as well as paying off your bills on or before the due date. If you're just starting with your first card, use it responsibly and keep up with dates. If you've been a cardholder for a minute and are a proud deadbeat, keep at it. Always stay in control of your financial freedom.
About the Creator
Writing about life experiences, personal finance and, career insights that impact the millennials and Gen Z culture.
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