Should I Apply for a New Credit Card?
I’ve thought about applying for a new credit card several times throughout my journey to becoming debt free. I know that might sound counter-intuitive (aka: CRAZY!) since I don’t have a very good track record of using credit wisely, but hear me out here.
Why I’m Thinking of Getting a New Credit Card
There are two main reasons that I’m thinking about getting a new credit card and they are actually on opposite ends of the spectrum. So I’m not going to lie, I’ve actually been thinking about getting not just one but TWO new credit cards…
A Card with a 0% Interest Balance Transfer
The first type of credit card I’ve been thinking about applying for is a card that offers a 0% interest option for balance transfers. This is a card I would apply for and then promptly transfer one of my other CC balances onto to eliminate accruing any more interest on them. Potentially this could save me anywhere from $700-1,500 of interest (depending on how high my credit limit is and how much I’d decide to transfer to the new card). While saving money on interest would be great and paying off my debts even sooner than my target dates would be even more amazing (due to no money being wasted on accrued interest every month), applying for a card with a 0% interest promotion does have some potential downsides too.
You have to be careful with 0% interest promotions. You need to read the fine print before you go whole-hog and transfer a lot of debt onto a 0% interest promotion. Lots of cards that offer a 0% interest period for new cardholders only offer it on new purchases, not balance transfers. Some cards also charge a pretty hefty fee for doing a balance transfer. This fee would take away from the savings of doing the balance transfer in the first place. Plus, whenever you sign up for a 0% promotional period, you need to make damn sure you can pay off the balance of the 0% promo sub-account before the promo period ends. Otherwise you could end up paying interest in arrears back to when you first make the purchase or did the balance transfer.
These are all things you should consider and account for in your savings equation before you decide to sign up for a new credit card with a 0% interest balance transfer option.
A Card with a Great Rewards Program
Behind the scenes of this blog, I have been putting some charges on one of my credit cards lately. For instance, when I bought my FinCon15 ticket, I put it on my credit card instead of my debit card. This is because the money I had saved up for my ticket was sitting in a savings account at CapitalOne360 and it takes a couple of days for that money to be transferred to the checking account I hold at my local bank. I didn’t want my account to go negative (or even low) due to this purchase, so I put it on my credit card and initiated the transfer from my savings to my checking that same day. As soon as the money hit my checking account, I made a payment on my credit card to cover the full price of the ticket I had charged. For things like this, having a rewards credit card might be handy to earn a little cash-back or some travel rewards.
Again, there are lots of things to consider before you decide to sign up for a rewards credit card. Some cards have a minimum amount you have to spend in a short-timeframe to get “bonus” points. Some cards have an annual fee so you’ll want to use that card, reap the rewards and then cancel it before the annual fee is due. Things like this need to be tracked meticulously so you can make sure you don’t end up paying for “rewards”, otherwise the rewards really aren’t worth it. This includes needing to be careful about not spending too much that you can’t pay it off within the same billing period to avoid interest charges.
I don’t know that I’ll sign up for either of these cards, but I have been considering it for the last couple of months.
What do you think? Should I sign up for one of these? Do you use either of these types of cards?
Image courtesy of: FreeDigitalPhotos.net
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