Credit Card Debt Management

If you are among the 10 percent of holiday shoppers hitting the stores at the very last minute, keep in mind a survey done recently in the Colorado Springs area. According to that, women prefer diamond earrings above all other jewelry. Tools are still at the top of men’s gift list, while clothing is still at the top of women’s.

Of course, some will choose to defy the stereotypes. Ironically enough, I hinted at diamond earrings and got a golf putter instead. Really, it’s a selfless gift considering it will take strokes off my golf game. Whatever you settle on as you run around getting those last-minute gifts, remember to consider taking advantage of those store brand credit cards to get extra discounts on the already great prices available at the last minute. However, these usually come with higher APRs and temptation to spend more than necessary, but can bring useful perks like VIP discounts that are useful at stores you frequently visit. And remember men, with diamond earrings you can hardly go wrong.

During this, the busiest shopping time of year, it can be tempting to take advantage of discounts available from various retailers through the acceptance of a store credit card offer. Not only will you get a discount, but these retail credit cards generally have very liberal acceptance policies and can help you build or rebuild a strong credit rating.

However, it is very true that people spend more liberally with plastic. According to the Motley Fool:

Studies show that people spend more — and more stupidly — when no actual cash changes hands. We succumb to impulse buys (an estimated 59% of grocery store purchases are not planned) and even tip more at restaurants when we put the tab on plastic.

Why Apply for a Department Store Credit Card? 

The phenomenon of buying bigger now and paying more later (in interest fees) may be manifested in the form of an extra special holiday gift for someone else. It may be a little reward for yourself to celebrate the three miles you’ve walked around the mall in search of the perfect gift. It may be manifested four months down the road with a spring wardrobe overhaul that you really can’t afford. Either way, there is no immediate pain so it’s very appealing - especially when you are a member of the store’s “VIP Club” and receive notices of all the exclusive special offers and sales.

Another thing to beware of with credit cards from department stores and other retailers is the “High-Flying APRs.” Weigh the pros and cons in each individual situation such as:

• What is the APR on this card?
• Is this a store you shop frequently?
• Do you have good spending self-control?

Reasons Not to Apply For A Department Store Credit Card

Merely accepting a card to get the discount is a bad idea because it goes on your credit history regardless. The more credit cards held simultaneously, the worse off you are. At least make it worthwhile and make sure the card and all extra perks like exclusive offers will benefit you often. Otherwise, you’re better off just getting a regular credit card if you are able.

Good Reason to Get a Retail Credit Card

Again, if your credit rating is preventing you from getting a decent offer on a regular credit card, retail credit cards can be a good way to rebuild that rating. They also typically have lower credit limits, so can be a good way to test the waters of self-discipline before moving up to regular credit cards.

Bad credit is no fun - that goes without saying. But don’t make the mistake of assuming your credit is improving, based on the number of credit card offers you receive in the mail on any given day.

My really bad-credit friend said this once: “I guess my credit score must be improving because credit cards are starting to send me offers again. I get them all the time.” No, in this case that probably means my friend’s really, really bad credit had improved to just bad credit status. After all, credit card companies have also been known to inadvertently offer credit to a 13-month-old.

All the offers being sent to my friend were secured credit cards that switched to unsecured over time (with good customer history). Not that there’s anything wrong with that! In fact, that may be one of the best ways to improve bad credit. It essentially means your card has a credit limit equal only to the amount of the deposit you put in the bank that issues the card to you. It works much like a reloadable prepaid debit card, the main difference being that a secured credit card can improve (or hurt) your credit score and a debit card really has no such effect.

Unsecured credit cards, on the other hand, are a whole different ball of wax. They are the ones everybody else gets, but customers with bad credit typically get much higher interest rates and annual fees attached. Mr. Credit Card provided a very thorough answer to a reader question along these lines, along with a list of bad credit offers. This fine Banks.com article will also teach you more about credit card offers for those with bad credit.

Whatever “bad credit” improvement method you choose, examine what is often the root problem - controlling monthly spending. That will help you have enough money to pay your credit card bill on time, one of the strongest determining factors in whether a credit card will help or hurt your credit rating. The other thing to remember: check your FICO score on your own, and don’t assume that your credit score is climbing because credit card companies suddenly have renewed faith in you as a customer.