1. You want to be rewarded instantly.
Retail professionals know that it’s hard to resist a good deal, which is why they often wait until you’re ready to check out to tell you just how much you can save if you open up a credit card through their store.
Ernie Almonte, chair of the American Institute of CPAs’ National CPA Financial Literacy Commission, has heard clients relay this story countless times. Unfortunately, this story rarely ends well, since few customers take the time to carefully review the card’s interest rates and fees, which can be staggering.
To be fair, Almonte points out that perks like retail discounts or airline miles can be beneficial—if you pay off the balance every month, and use the rewards to supplement proper budgeting practices. But if you know that you’ll just use the card as an excuse to spend, you won’t be able to make full payments on time or you aren’t comfortable with its interest rate and fees, politely decline.
2. You can’t be bothered to look at bills.
Ted Jenkin, co-CEO and founder of oXYGen Financial, has found that many of his Gen X and Y clients are clueless about the details enclosed in a billing statement, such as finance charges, interest rates and other fees.
“It’s extremely dangerous if you never look at your bill,” says Jenkin. “How do you know that the company didn’t raise your rates if you don’t question where the money is going?” This willful ignorance is the reason why we recommend only automating fixed costs, like your cable bill and rent.
3. You want your card personalized with a picture.
In this age of smartphones, any photo that you could ever want to whip out at a moment’s notice is just a tap and a swipe away. Why, then, do you need one emblazoned on your credit card?
Think about it: If your plastic is adorned with a picture that makes you happy, you’re more prone to pull it out. So if you absolutely insist on customizing your card, it might be a good idea to pick an image that will scare the living daylights out of you, thus discouraging you from using it. A big, furry tarantula ought to do the trick.
4. You want to charge a large purchase.
If you need to open a new credit card to make a big buy, chances are that you can’t afford to make the purchase. The logic works like this: Opening a new card is just like borrowing money—you’re looking to inflate your spending power beyond the funds that you currently have in your bank account. If you don’t have that money now, what makes you think that you’ll have it when the credit card bill shows up? Most likely, you’ll end up paying the minimum and carrying a balance on the new card, which multiplies exponentially with interest.
5. You can’t keep track of credentials for your existing accounts.
If this is your reason for signing up for a new card, you’re definitely on the wrong track. If you’re already having trouble remembering the information for your existing accounts, why on earth would you want to add another one to the list?
Forgotten usernames and passwords can be recovered with a few phone calls or emails to customer service departments. Doesn’t that sound better than spending several months paying off a new credit card balance?
6. You want to help your child establish financial independence.
You’ve raised your child to be smart about money, so you barely think twice about getting a new card and adding your kid’s name to the account. Unfortunately, this can be an unholy temptation to a teen—and you may be setting yourself up to take on some serious debt.
April Lewis-Parks, who serves as the director of public relations and education for Consolidated Credit Counseling Services, Inc., suggests a prepaid debit card for a smarter alternative. “With a prepaid debit card, they can’t go over the set limit, and it doesn’t affect your credit score,” says Lewis-Parks.