Can We Talk 2

Credit Cards and Extended Warranties

         I used to work in credit. I belonged to a professional club for women in credit. There are still a lot of wrong ideas about credit out there among consumers who believe they are experts. And every retailer pushes their employees to open new accounts and sell extended warranties, an unrelated item.

         The primary reason for chain stores to open accounts is to create loyalty. If you have an account at Wal-Mart or Kohl's, you're more likely to go back there. Or you buy more than you had planned, if you know your credit card is good. That's great for people who have the money in the bank. But a lot of people should not apply or should pay it off in full immediately each month.

         People who should not apply include those who have had trouble and gotten behind in their payments any where. To clean up their credit records, they should go at least six months with all on time payments, making sure every account is up to date, and have no inquiries during that time before opening another card. If someone has more in debt, not counting the house mortgage, than they make in a year, they should not apply for an account. If they already opened a new account in the last 3 months, they should not apply any where even if their income is good, and all accounts are up to date. Excessive inquiries count against the applicant.

         I'm the kind of person who has good credit, but I have to pay in full each month as soon as I get the bill. I don't make enough to build up debt. And I know from experience in a bad marriage that when you think you're just going through a rainy spell and will catch up, the catching up almost never happens. You can't risk getting in over your head.

         Now people who don't need credit can take advantage of all those credit offers. They open one, get approved on the spot, save 10% that day on their purchase and get special offers through the year to use their card. They, too, should pay off as soon as possible, and resist the urge to go to that store just because they have the card. But they can take advantage of the savings offered.