Jul 21, 2008 3:07 pm US/Pacific
Which Credit Card Deal Is Better?
QUESTION: A quick and easy question for you (I think):
We have a balance on one credit card with zero interest. The interest rate is due to go up next month. We have two new offers of zero interest and we don't know which offer we should take.
The Capital One card that we already have will charge us a 3% balance transfer fee (about $180). The normal interest rate on this card is 8.90%. The zero interest is for 12 months.
Chase is offering us a pre-approved/pre-selected account with zero interest for 12 months, no balance transfer fee, with an interest rate of 6.99% after the promotional offer. However, we would have to open (apply) for this card.
Our credit is very good--a high 700 to low 800 FICO score, so opening the new account shouldn't be a problem. We have no other debt except our mortgage (but we do have several credit cards with zero balances). On the surface it looks like the Chase offer is best, but the application would show up on our credit report. We try very hard to keep our credit in good standing. Which offer would you take?
Thank you for your help.
~ Joanna
ANSWER: My opinion on credit cards is to minimize the use of them as much as possible. I am comfortable with having one credit card that you use during the month, if the balance is paid off in full each month. If you find yourself not paying off the balance each month, I would suggest you use a debit card instead If you have no debt other than your mortgage, I see no reason to apply for any additional credit cards. I would also suggest using a card that has no annual fee.
As a society we have gravitated toward the thought that we can earn "reward points" for using our credit cards. This has been an unbelievable job of marketing by the credit card companies. These "points" must be paid for by someone. Credit card companies charge vendors for the ability to allow partrons to use their credit cards at the establishment in question. For example, let's say credit card companies charge the local department store 2%, if customers make a purchase using their credit card. This 2% is then built into our costs when we purchase goods and services. In the end, the cost is not borne by the establishment, but by us the patrons. So basically, we are buying our own reward points with a "haircut" going to the credit card company. In a sense, the credit card company is nothing more than a high priced travel agency.
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