Despite the credit crunch, your mailbox is stuffed with credit card offers. Maybe you should just take what you can get, right?
Wrong. Credit card offers are based on information that marketing agencies have purchased about you. They buy this info from credit reporting bureaus, with the goal of sending you the offers that you are most likely to accept, not the best offers for you. That means that you’ll receive offers for cards that fit someone with your credit profile—not necessarily that these are actually good offers.
Credit Cards Are Not Evil by Nature
In fact, if you’re a responsible spender, we encourage you to do all of your spending on one credit card so that you can keep track of it in one bill. Credit cards are better for making purchases than debit cards because (1) they provide insurance in case you buy something that’s a dud; (2) they allow you to dispute charges; (3) they offer perks like cash back.
But You Should Be Wary
The fact that we just told you about the good attributes of credit cards does not mean that you should jump on every card offer that lands in your mailbox.
The perks advertised in unsolicited offers like cash back, awards points, and free flights often obscure the hazards, tricking you into accepting credit that could seriously threaten your financial health.
One of the things you must bear in mind is that rewards and cash-back cards are great for responsible spenders who pay their bills in full every month. If you find that you have trouble controlling your spending or paying on time, then you must be aware that cards with good perks often have steeper late fees, grace periods, and higher APRs.
So … Should You Sign Up for That Card From the Mail?
Get out a magnifying glass and read the fine print detailing the card’s terms. When you see anything you don’t understand, contact the company and ask for an explanation. Make sure to do this before signing or verbally agreeing to anything. Scrutinize late fees and APR schedules. If you don’t like the card’s terms, move on.
Identity thieves can use the information in credit card offers to steal your identity and open fraudulent accounts. Always destroy and dispose of unwanted offers. To reduce the number of offers you receive, register at OptOutPrescreen.
An Option We Love
There is a whole credit card marketplace out there. Contact credit card companies, your bank, credit union, or other financial institutions to find a card with an APR and fee schedule that allows you to comfortably manage your debt and live within (rather than beyond) your means. Check out Bankrate for credit card comparisons.