I remember the week following my 18th birthday, going out to the pick up the mail for the day, and finding the majority of my mailbox packed with a bunch of credit card offers from all the major CC companies – from Visa to American Express. I didn’t think much about them; these kinds of offers were a dime a dozen, and my parents usually tore them up and threw them out as soon as they saw them.
Then I noticed something quite odd about the name on the envelope. It wasn’t addressed to either of my parents at all – it had MY name in the box. My first credit card offer! Forget being able to legally vote, buy a pack of cigarettes, or getting into an R-rated movie without parental supervision; NOW, finally, I knew I had “arrived.” I was all growed-up.
And I’d be damned if I was going to ignore all these nice companies who were tripping over themselves for the chance to give me a credit card.
Even my parents were beside themselves. When they stopped laughing long enough for me to ask what was so funny, they simply said, “Don’t spend it all in one place.” I didn’t, and I had the credit card debts to prove it….
Just sign on the dotted line
You’d think that, to an average 18-year old kid who doesn’t know jack about credit, a simple credit card offer would be more than enough to make their day – especially if they’re still asking their parent’s to pay for something by check or card when they say they don’t have the money on hand for it because, “it’s like free money anyway, right?”
But banks and credit card companies won’t just stop there; they’ll do anything they can to get you in their pocket, including offering bonuses for simply signing up.
If you’ve received any credit card offers in the last few years, you know how awesome (read: superfluous) these offers can be, especially to an 18 year old kid with no real money in the first place. I mean seriously, it seems like every other credit card offers airline tickets or miles with each $1000+ purchase. Who’s really going to cash that in during times like these?
Not all offers are created equal
But I digress. You see, not everyone gets the same credit card sign-up bonus that you might be offered. Banks are kinda sneaky like that – they’ll offer the exact same card to two different people, but with completely different rates, terms, and bonuses. One man’s lower interest rate is another man’s airline miles, so to speak.
To illustrate this point, let’s take a look at a couple of credit cards and compare their sign-up bonuses:
• Discover More Card. In addition to receiving an extra $75 (up from the previous $50) for your first $500 in purchases – within the first 3 months, or no money for you – you also get 0% APR for six months on purchases (after six months, the APR can go anywhere from 12% to as high as 20%) and no annual fee.
• Citi Dividend Platinum Select MasterCard. Instead of a cash bonus of $75 dollars after your first $500 in purchases, this ridiculously-named card offers 5% cash back on restaurants, car rentals, and hotels (but only until Sept. 30, 2010) as well as additional cash back bonuses on select purchases. 0% APR for 15 months (after which point it falls between 13% and 20% as well) and no annual fee round out this card’s list of features.
That’s just two of the many credit cards out there offering sign-up incentives. As you can see, both cards offer similar interest rates, but where you fall in that spectrum could be wildly different depending on where the offer is coming from. A mail offer may promise a free airline ticket at the cost of a higher rate, while an online bid for the same card may come with no plane ticket, but lower interest as well.
The moral of the story
Don’t immediately rush for a pen or hit the “auto fill” button the next time a credit card offer comes in the mail or pops up on your screen. Take the time to research all the card’s features beyond just airline miles or cash back bonuses that run out in a few months. Choosing the wrong card could backfire if you’re just as careless with your money, and then you’ll end up in need of serious debt relief. Then you might not feel quite so “growed-up” anymore.
