Credit Card Debt Management

You know your spending limits and your financial boundaries. You understand whether you are a responsible credit cardholder, so the decision to get more credit cards can only be yours to decide. But there are some definite reasons why you should consider getting several. Yes, too many cards could possibly ding your credit, but a demonstrated history of responsible card management will help balance that out in your creditors’ eyes.

More credit cards can help you be prepared in case of financial emergency and rewards cards can help you earn flights, gifts, cash-back and a host of other perks. Of course, cash can do all that, too.

One of the biggest reasons a person would take out an additional credit card is specifically for business purposes. This eases the task of tracking business spending and can provide more tax-deductible options as well.

It is also a good idea for consumers to keep credit cards from several different companies (Visa, MasterCard, American Express, etc.) Especially if a person travels a lot, this can guarantee their ability to use credit cards to pay just about anywhere.

So when it comes to applying for more credit cards, you may shudder at the thought. But be savvy, be responsible, and shudder no more.

Banks.com’s Weamein Yee posted an interesting personal finance article recently on how consumer spending is slowing across all sectors. One of those sectors, of course, is credit cards. Even despite recent reports that American consumers were prioritizing credit card bills above mortgage payments, it seems the credit card industry is not immune to the current economic pressures. Companies are reporting less consumer credit card spending and more late payments.

Credit card companies are now getting more innovative in their marketing schemes. And we’re not talking about free sandwiches to lure college students off campus so they can fill out credit applications. Capital One’s Card Lab has seen much television commercial airtime recently and is being touted “a winner” by Ron Shevlin’s marketing blog.

Choose your own interest rate, rewards, card design, etc. It’s interactive marketing genius. By the time consumers get to the fourth and final step of “review and apply,” they’re already emotionally invested in this deal. They’ve answered the questions, picked the perfect balance of features and rewards and they’ve carefully selected the perfect picture of their kid, pet, spouse, favorite vacation destination, sports team logo, etc. And consumers feel completely secure because they were “in control” from start to finish in this, the first-ever “do-it-yourself” credit card offer. They are wanting that card in a bad way. I’d take it one step further than Ron Shevlin - this is sheer marketing genius.

Shevlin credits Capital One for being notoriously good at the marketing game and, he says, this Card Lab will only sharpen their efforts. It’s all about the actionable data, he writes.

“Analyzing the usage, trends, clickstream, etc. should help Cap One marketers get a really good understanding of who’s looking for cards online, what their preferences are, which features are most popular, and so on. And knowing Cap One, and what good marketers they are, they’ll use this data to develop and refine their offers and marketing programs.”

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.