DIY Counseling: Credit Card Offers

Credit cards seem like such an easy way to pay for everything – online, over the phone, and in person. You don’t have to fiddle for cash; all you have to do is swipe or insert the card so the machine can read the chip. In most cases, you don’t even have to sign for your purchases. Some credit cards are simply tap and go.
All of this is amazingly convenient, but it is also very easy to lose track of what you are spending, and end up maxed out on one or more of your cards.

Rewards for Shopping

In addition to the convenience of a credit card, companies often offer special rewards and incentives for using their card. Things like air miles, cash back, or points in their gift mall may seem like a good deal, until you consider that studies have shown that people who use reward cards tend to spend an average of 4% more than those using regular cards. Unless you travel a lot, your best deal is cash back, and monitoring your spending.

Another good deal might be a Upromise card linked to a 529 educational savings account if you have children and are planning to send them to college. The card will give you money back, and also register extra money back when you buy Upromise-approved products, such as in the supermarket. You can also invite friends and family to link their cards, for instant rewards.

Note: any money saved in the 529 account will be taken into consideration when it comes time to determine your child’s financial aid, but only if the account is in your name. See if you can get an aunt, uncle or other relative to open the account and then you can all contribute without it affecting your child’s financial aid package.

Attitudes to Money

Some people are very casual about cash. If they have it, they spend it. If not, they live on Ramen noodles for the rest of the month.

One of the main driving factors for spending is emotional. It might be to keep up with what others have. It could also be that you work so hard, you feel you deserve a little treat. Look at all of the credit card ads with smiling, happy people going on vacation, dining out, or buying their dream item. It’s easy to get tempted, and that is exactly what the credit card companies are banking on.

The Offer That Is Too Good to Be True

The 0% APR offer for X months is a common lure credit card companies use to get new customers. It can be bad for a number of reasons. The credit limit and fixed term often tempt a person to use the full amount offered, treating it like “free money” because they don’t have to pay it back at the end of the month. They estimate they have, for example, a year to pay the bill. But what happens as the year draws to a close, and all the accumulated interest will fall due unless the full amount is paid in time?
A second reason these offers are too good to be true is that every time you sign up for one, it shows up as an inquiry on your credit report. Too many will lower your credit score.

A third reason is that having more than one card makes it easy to lose track of your spending and the amount of time you spend paying bills and juggling payments. The simpler, the better when it comes to finances.

Credit counseling can open your eyes to all the tricks of the trade. Then it is up to you to avoid temptation.