Don’t Let Credit Card Bonus Offers Turn Into Debt!

For many, credit card bonus offers can be a great perk but they can also be the gateway to debt.

Have you ever bought something at the store because you had a coupon for it, only later to realize you don’t really need or even want the product? Well, it’s not only the retail industry that uses this technique, but also credit card companies. As we all know, they frequently offer miles, points or cash back to try and get you to apply. Both major and store credit cards do this.

But do thses credit card bonus offers ever make sense or are they just a debt trap? Well here are three questions you should ALWAYS ask yourself beforehand…

3 Questions to consider before accepting those credit card bonus offers.

(1) Do you always pay your balance in full every month?

If your answer is “no” then you can go ahead and skip the next two questions, because I can tell you right now that credit card bonus offers are something that you should 100% completely avoid. If you are the type of person that is prone to getting into credit card debt, then it would be pure stupidity to sign-up for “10% off today’s purchase” or “$50 cash back” only to be left with a piece of plastic that will tempt you day in and day out to spend beyond your means. In a nutshell, credit cards don’t make sense if you are someone that uses the “credit” part of them!

(2) Why do you want the offer?

Just like the coupon example I opened with, some people signup for credit card bonus offers when they don’t really even want the card to begin with. This is worsened by the fact that we get pressured to apply at a very inconvenient times. Airlines do this – they set up their booths in the terminal, hoping you will make a rash decision and signup without missing your flight. Department stores do this – they ask for you to apply at the spur of the moment during checkout.

I give people a simple litmus test to gauge whether they should signup “How long have you wanted this card offer?” If the answer is 2 minutes, then they obviously haven’t had time to think about it. However if they’ve been deliberating for a while, then that’s a healthy sign. And sometimes, credit card bonus offers can be beneficial.

For example, my mom and I have been planning a trip for this spring and have been keeping our eyes and ears out for ways to reduce the cost of it. We had come across the Hyatt credit card offer last September which seemed good – we figured we could use the two free nights at Hyatt and then stay the other four nights at a different hotel more appropriate for our budget (like Super 8 or a local motel). But even though we both initially liked the idea, we thought about the Hyatt credit card for three full months before actually signing up for the offer. I think when in doubt, you can never take too long to make your decision with finances.

(3) Will the credit card cause you to spend more?

Getting 5% cash back, double miles, or whatever the reward may be won’t actually save you money if it causes you to spend more. For example, will higher rewards at the grocery store cause you to buy things you normally wouldn’t? Or would 5% at drugstores cause you to go to Rite Aid to buy your toothpaste and shampoo, instead of going to Target or Wal-Mart where you can get it significantly cheaper?

The bottom line is that the rewards from credit card bonus offers only make sense if you are earning them on purchases you would be making regardless. This especially holds true for airline cards – they typically give 25k miles at signup but often times you may need 25% to 50% more miles than that just to get one flight. Will that deficiency cause you to spend extra? If it will, then you shouldn’t have the card!

Conclusion?

For the right person, credit card bonus offers might make sense in certain situations. For many others, it is nothing more than a hook, line and sinker that leads to debt. Make sure you know what category you fit into before you ever bite the bait!

Related Posts:

• How to Settle Debts On Your Own.
• Balance Transfers – Simple Solution or Debt Enhancer?
• How Credit Repair Now Can Save You A Lot Of Money Later.
• Which is Larger: Your Credit Card Debt or Your Savings Account?
• What kind of Spender Are You?