BOSTON (CBS) – More of the trick or treat tips on credit from the National Foundation for Credit Counseling.
- Purchasing Extended Warranties
- Treat: An extended warranty can provide you with peace of mind.
- Trick: Some items are inexpensive or have a very good track record, thus you don’t need to pay for a warranty on them. If the item under warranty does break, you may be asked to jump through some difficult hoops to activate the warranty, or the warranty may not cover what you thought it did.
- Dee: Don’t bother if this is a small appliance such as a toaster oven or the new Yonana. Consider it for your computer if you are not tech savvy or if you buy a large expensive flat screen.
- Reward Cards
- Treat: You can earn miles, airline points, gift cards or even cash back with reward cards.
- Trick: Reward categories often change each month, resulting in fewer rewards than hoped for. Further, some people tend to spend more simply to earn the rewards. If you can’t pay the balance in full each month, a reward card is probably not for you.
- Dee: Very true, but there are many consumers who have learned to manage those points as they would cash. If you can do that, then you can benefit greatly from using your credit card. But know thyself and look for a free credit card that provides points.I had accumulated many United points and when my son got married my points got everyone to Hawaii.
- Balance Transfers
- Treat: With a lower interest rate, you can repay the debt sooner and save the money you would have paid with the higher APR.
- Trick: Faulty thinking leads you to believe that since the interest rate on the new card is so low, it won’t hurt to charge a few things. Before you know it, the introductory period with the low rate has expired, and not only is your original balance not paid off, but it’s higher than when you began.
- Dee: Right on! Most of us can rationalize our poor behavior and then we repeat it!
Credit is a tool to help you reach your goals. Having a credit card is a privilege. A privilege you do pay for in many ways. Credit cards are great equalizers. No matter how much or how little we earn we can all go into debt purchasing stuff! Don’t do it. To reach your goals the only debt you should be carrying is your mortgage and car loan and maybe your school loans.