Traveling can be a bit monotonous sometimes. So I like to break it up the monotony with a little bit of lame humor. Here is a recent exchange that I had at a car rental agency:
Rental Car Agent: “That’s everything! Do you have any questions before you go?”
Bryce: “Actually yeah, how fast does this car go from 0-60pm”?
Rental Car Agent: “…..uh?”
Bryce: “Just kidding. But on a serious note, does your insurance cover drag racing accidents”
Rental Car Agent: “Have a safe trip sir…” (Rolls eyes while handing me the keys)
Bryce: “Hopefully safer than my last rental….”
I’m still a few years short of 30 and already I’m beginning to appreciate the power of Dad humor. My kids are going to hate me.
Dad humor aside, you can learn a lot about someone by the types of questions that they ask. I have found this to be particularly true since I introduced Free Credit Card Consultations on my site.
While most of the questions I have received are the standard “what can I get with my points” and “what is the best card to use for spending money on X”, some questions are a bit more suspicious.
I refer to these suspicious questions as “Red Flag Questions”, because like my sarcastic rental car questions they indicate an interest in misusing the product that is being offered.
So if you find yourself asking any of these “Red Flag Questions”, you probably should think twice before applying for a new credit card.
1. What is the interest rate on the credit card?
I have applied for dozens of credit cards over the past few years and I honestly have no idea what the interest rate is on any of them. I never check and frankly I don’t care.
I’ve never paid a dime of interest on a credit card because I always make my payments on time and in full. Unless you plan on doing the same, I highly recommend that you do not apply for a credit card.
2. What is the cash advance fee?
Most people don’t realize that you can withdraw cash from an ATM using your credit card, which is definitely a good thing. Interest rates on cash advances are even higher than standard credit card interest rates (20-30%) and do not have any sort of grace period.
Using a credit card for a cash advance is a clear sign of other financial issues and should be avoided at all costs.
3. Is there a promotional interest rate on this card?
Many major credit cards offer a promotional interest rate for the first few months of card memberships. These interest rates can be as low as 0% and last as long as 12 months.
While this does present a potential arbitrage opportunity for savvy financiers, promotional interest rates are often misused to rack up an unhealthy amount of debt. Even the most disciplined spenders can get in to trouble with these teaser rates.
4. What is the interest rate/fee for balance transfers?
A balance transfer is essentially a way to pay off one credit card with another credit card. These are typically marketed toward people who have a lot of credit card debt and are looking to consolidate or effectively “refinance” their debt at a lower rate.
While balance transfers can be a good move for people with a large amount of credit card debt, constantly shifting credit card balances from one card to another is an indicator of irresponsible spending.
5. How many points do I earn for every $1 spent?
On the surface this seems pretty important, but my experience tells me this question generally hints at a misunderstanding of how “points” and “miles” work.
Judging the value of a credit card by the number of points earned per $1 spent is generally a bad idea. Doing this implies that every “point” has the exact same value, which is far from the truth.
The focus should be on the overall return that the reward program offers you, which is determined by what your points can be redeemed for.
The best two credit cards on the market earn only 1 and 2 point per $1 spent. We’ll talk about which two those are next week.
That’s all for today.