You're the picture-perfect plastic user. You pay your bill in full each month.
You deserve a reward -- go ahead, skip next month's payment. In fact, take
this $1,000 "convenience" check to the mall and buy something pretty. Heck,
we'll even extend your credit so that you can get the stereo you really want.
That's what your card issuer would like you to do. In fact, most of the "perks"
offered by lenders encourage impulse purchases and spending beyond your means.
And impulse buys are how most folks get in credit card trouble in the first
place.
Fools know that they'll pay a king's ransom in interest if they skip a month's
payment. And they recognize that those "convenience" checks usually come
with a conveniently sizable fee, no grace period, and a higher interest rate.
Don't get us wrong. There are indeed reward cards that offer genuine perks
like airline miles and football-shaped clock radios. (Check out our
Credit
Cards message board to see which ones Fools find useful.) With most,
the rewards are based on the amount you charge, not your outstanding balance.
Some even require cardholders to carry a balance to cash in on the perks.
If you have the discipline, you can rack up some good points without going
into debt, just like one of our favorite Fools, Dogwind.
Before signing up for a charge card offering a reward, look at the annual
fee (most carry one) and interest rate. (Unlike unrewarding cards, these
issuers usually can't be talked out of waiving the fee or lowering the interest
rate.) Factor these into the reward you are trying to earn. It ain't much
of a perk if you pay for it then never use it.
Now, some of the naughty things lenders
do.
-- Dayana Yochim (TMF School)
Next: The Nerve! »
See Also