It's Your Money, Honey! by Melissa Kirsch

Author:Melissa Kirsch
Language: eng
Format: epub
Publisher: Workman Publishing Company
Published: 2011-01-15T00:00:00+00:00

THE CARD GAME: Everyone Wants Your Money

There is an infinite number of organizations out there that team up with credit card companies to try to get you to apply for their cards. From charitable causes like the World Wildlife Fund to your neighborhood grocery store, they all want a piece of your action. Let’s take a look at some of the options available, and the rewards and secret pitfalls of each.

Reward Cards

Many credit cards these days will offer you points to redeem for prizes, like shopping rewards, frequent-flyer miles or even cold, hard cash. These cards often have annual fees and high interest rates (the average APR is 14%), so they’re really for high rollers who spend a lot and pay off their balances in full each month.

Frequent-flyer cards. I was once quite seduced by the idea that I could run up a gigantic tab on my credit card and end up with a free round-trip ticket to Greece. Then I did the simple math and realized that even earning one frequent-flyer mile for every dollar I spent, I would have to shell out $40,000 before I would get even a one-way to Athens with the livestock. I was more likely to pay the price of a ticket in annual fees and interest before I ever earned enough miles to cash in on them.

The facts: Miles cards charge from around $39–$139 per year. Unless you charge at least $9,000 per year, you’re not flying anywhere.

Department store cards. It seems like you can get a dedicated credit card for pretty much any store at which you drop cash regularly these days. They lure you in with the immediate 10% off your purchase today just for signing up. Okay, that’s a good deal if you’re spending a lot of money. So if you absolutely must, get the card, take the discount, go home delighted with your purchases and the money you saved, and then pay that card off. Before the plastic even comes in the mail, call, write, e-mail, pay it off now. Then cancel the card.

Store credit cards have some of the highest finance charges of all credit cards out there. Read that fine print, those Terms and Conditions. We’re talking 20% APRs or more, with severe penalties for late payments. My advice: Resist the temptation and steer clear of them in the first place.

The facts: High fees, sneaky APRs—why not just wait for a sale?

Gas cards. The dedicated gas station cards (Mobil, Shell, etc.) are nobody’s friend. They’re like department store cards—good at that station only. The only perk you get is you can charge Cheetos along with your gas at the mini-mart. But you can get gas reward cards from most stations, as well as MasterCards and Visas from banks that have partnered with gas companies that give you instant rebates or rewards. These are much more sensible.

The facts: Gas reward cards usually give you 3% back on gas charges and 1% on other purchases—the rebate is credited to your account.

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