Take Your Credit Seriously
When the credit markets were functioning, I can’t tell you how many new offers for credit in the mail (0% transfers!!) I received. The odd thing is I am still getting them when you would think banks would have stopped it. One day last week, I got two offers from the same company on the same day. How’s that for coordination?
I don’t necessary want the offers to stop, I like to look at the pitches they come up with. Yes, junk mail is interesting to me. For a time, AMEX was offering me credit and in each mailing, they included a refrigerator magnet. I have about 10 of those. One time in the past, I got an offer that offended me. It wasn’t “0% transfers with no annual fee”, but “5.9% transfers with a $39 annual fee”. Maybe they didn’t like my credit score?
When it comes to credit, I haven’t voluntarily opened a credit card in about 15 years. The same credit card that I have been using for 15 years has the same credit limit when I opened it: $5000. I say voluntarily because when I took out a home mortgage, the broker also signed me up for a credit card (I must have missed that part of the conversation). Watch out for these slips.
The credit offers that are hard to pass up are those store credit cards that you open up when making a purchase. They make it easy and enticing by giving you a 10% break on your first purchase. I was in Lord & Taylor during the holiday season with a checkout bill of over $500. Then, the offer came. Save $50 on your order right now by opening up a credit account with L&T. I politely said, No Thank You.
If you take the offer it’s not saved money, there is a cost here. The cost comes to your credit score since the more credit you take out it can lower your score. If you accumulate too many accounts (even with no balance) this is another nick against your score. Also, as we have read in the news in the past year, one creditor can change their terms at will based upon the actions you take with other creditors. Be selective in who you chose to open credit with, treat it as though you are building a relationship with the institution.
Also, there can be “payment risk”, because when you open a new account you need to learn the terms of a new account: when to pay it, what the interest rate is, when fees are accessed, as well as going to the trouble of setting up bill payment. I am lazy when it comes to paying bills, I like simplification. The one credit card I use was issued at the same Credit Union where I have savings and checking. It’s a no brainer to pay the bill as I discussed in this post about payments.