Credit card companies offer rewards, but should you take them? - Toledo News Now, Breaking News, Weather, Sports, Toledo

Credit card rewards often have a catch

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(Toledo News Now) -

If you're the kind of person who always pays your plastic on time, some credit card issuers think you deserve a reward. It's just one type of a financial treat that companies are using to lure you in, but should you take the bait? 

While being treated for Lyme disease, Cheryl Laughlin had an idea to start her own jewelry business. There was just one problem...

"I was only doing freelance work at the time, so I was just racking up the medical bills," said Laughlin.

Laughlin's bills were in the thousands, making it tough to kick-start her start-up. 

"I really needed a way to, you know, pay them with a credit card and kind of float them for a while, until I could get regular work or regular business," said Laughlin.

In the wake of the financial crisis, consumers, like Laughlin, are cautiously using plastic again, while remaining focused on paying down debt.

Greg McBride, with Bankrate, says credit card issuers have taken notice, luring high-risk customers with attractive offers that go beyond slashed fees and 0 percent introductory rates.

"Credit card issuers, they don't issue a card that's designed to be a one size fits all for everybody. Instead, they issue a variety of different cards, each one targeted to a specific type of consumer," explained McBride.

The latest trend is rewarding consumers who pay on time, or pay more than the minimum. Perks include cash back or interest rate rebates. 

Joe Ridout, with Consumer Action, says while these carrots, so to speak, provide incentive to pay down debt...

"If you carry a balance even a couple of times a year, the interest you're going to pay on a rewards card, which is always going to be higher, that will generally outstrip whatever rewards you're building up," said Ridout.

If you have trouble paying your monthly bill, there are now credit cards that will spare you late fees and penalties. This is the type of card Laughlin chose.

"Since I was using that card to start up all the research and development, I didn't have to worry. Oops, it's been sitting there for a week too long" said Laughlin.

But Ridout warns consumers not to wait longer than 30 days to pay.

"Unfortunately, a late payment very likely will still be reported to the credit bureaus. It very likely will take down your credit score," explained Ridout.

To make the most of the card you choose, experts recommend you: 

-Evaluate its incentives.
-Pay off your debt before any interest-free period ends.
-Then, focus on paying your balance in full each month.

"That will do two things: It will keep you out of debt, but it will also help establish a strong credit history," said Ridout.

Laughlin will soon be debt free and her business is thriving. She credits her credit card for the success.

"You just don't want to be sitting around waiting to start your business, so when it showed up, it was perfect timing," said Laughlin.

One more thing to keep in mind: Cards that reward good financial behavior still charge a fee if your monthly payment is late. If you're more than 60 days delinquent, your annual percentage rate could take a big hit.

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