Do your due diligence on credit cards

Do your due diligence on credit cards
                        

The last time I applied for a credit card was about 10 years ago when I was just starting in college.

I wanted to build credit straight out of the gate, and I used it very sparingly. Back then I thought it was an arduous process because I didn’t know what I was doing, but recently, it seemed much easier. I am going out of the country, and it was recommended to me that I get a Visa credit card because apparently it works better internationally than a Discover card, and I figured it was about time to open another card.

I signed up for the card, and I clicked “submit,” and I could not believe how easy it was to get $5,000 in credit. I had heard how easy it was to get one, but until I finally experienced it myself, it was unreal. Then the question came into my mind: “Why is it so easy?” I asked because it seems like nothing comes this easy these days, especially dealings that have to do with money. The answer is obvious, and that’s so you can be wrangled in with the credit card.

When I say “wrangling,” I am being nice. I always pay my credit card payments because I see the variable APR at 27% and that scares me to death. When seeing that, I can fully understand it can be so easy to get behind on payments and then have them grow time after time. Someone told me to never use a credit card unless you have the money to pay for it. That’s the sagest advice I have ever received on credit cards.

This article is not anti-credit card, but we need to do our due diligence when it comes to getting a new one. Do your research on every card you open. Look at the APR, the annual fee, the late charges and everything else. Do not just look at the rewards and think you’ll be making hundreds of dollars from the rewards back. I found $200 back on the first $500 and then 1.5% on all back. When you think about how small 1.5% is, it really shouldn’t be a decision maker. To “make” $200 on rewards, you would have to spend over $13,000. That is an astronomical amount with an incredibly low return. If rewards are your goal with a credit card, you will be sorely disappointed.

Now I know the argument is valid: “I’m going to spend that money anyway on a debit card. Why not get rewards on the credit card by using it then?”

It’s valid, but if you know you can or will get yourself into trouble with a credit card, why risk it? Avoid the temptation at all costs, even if you lose out on a hundred dollars — getting deep into credit card debt is not worth it.

Credit cards are so tricky because if you open a new line of credit, it hurts your credit score, and if you close one down, then it hurts your credit score. It seems like there’s no winning, especially if you get behind on payments. I also have heard closing a credit card is a task in itself.

So remember that when you are looking for a new credit card, be wise in choosing and staying on top of it. You won’t regret not having credit card debt three or 30 years down the road because that interest and stress that comes with it outweighs the freedom of using the card.

Holmes County native BJ Yoder is an insurance agent by day and a finance enthusiast by night. This column is for informational purposes only. He can be emailed at benjamin.john.yoder@gmail.com.


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