| Hi Taylor
- I got a credit card offer in the mail that seems really good.
Low spending limit but the interest rate is good and I get cash back.
So… what's the catch? Should I be suspicious? - Tommy
Hi Tommy - I think a dose of suspicion is always healthy when
it comes to credit card companies. Their one big goal is to have you
pay too much in interest. With that in mind, as long as you check
your blindspots, there is such a thing as a credit card worth having.
the plan? You mention cash back, which is great. Who doesn't
want to get cash back simply for spending cash? The trouble is,
you have to spend a lot to get much back in return. Are you spending
enough to make the cash back worth it? More to the point, should
you be spending enough to get handsomely rewarded? You have to
get your priorities straight before that credit card can enter
your wallet, and priority number one is only spending money that
you already have. If you're good with a budget and won't use the
plastic to drive up debt, then you're allowed to get excited about
cash back. Otherwise, it's a trap.
2. Fine print. You probably won't get full-on scammed by
a credit card company because they don't want the lawsuit, but
that doesn't mean you're entirely safe from trickery. That good
interest rate is most likely poised to shoot through the roof
if you're late on a payment. In fact, it might be a promotional
rate that will spike as soon as your first six months or year
as a cardholder are up. The good features are always in big, bold
letters right on the envelope, but it's the asterisks and small
font stuff that you need to read so you don't find yourself paying
an unexpected annual fee or seeking out a balance transfer because
the rate got absurd.
3. Everything else. Looking past this one credit card,
it's good to consider the credit conundrum as a whole. Frankly,
you need credit cards or some other lending option to build your
credit score. You also need to avoid bad credit cards, because
closing an account you don't use can hurt your credit score. Cash
back is great, as are airline miles and points toward specific
companies where you're already spending money. Bottom line, you
don't want to jump at the first card offered to you. Ten minutes
of research goes a long way toward making sure you have something
that fits your lifestyle. Check out Investopedia or Nerdwallet
or any other site that breaks down and reviews financial matters
and you'll feel much more informed.
| If you know
how credit cards work, there is no catch. Pay in full, pay on time,
and take advantage of the rewards. Hope it all works in your favor,
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.