Is it Worth It?

This week’s blog may be somewhat controversial. It’s important to always weigh your options and the consequences of financial decisions you make. I recently made a decision that challenges what many financial gurus would recommend. I considered the consequences and decided it was worth it.

So what did I do? 

I’ve been wanting to upgrade my mobile phone, something I don’t do often and when I do it’s never the latest and greatest because I just need something that is practical and reasonably priced. The phone that I’m wanting is the latest model of my current phone, and an ideal fit for my needs (and tiny hands 😂).

The Problem

The problem is the phone is much more than I feel is reasonable for a phone. Cell phones discounts are extremely rare these days 😞 and so there’s not much wiggle room when it comes to getting a “good deal”. It just doesn’t feel right for me to spend so much money a cell phone. I need a deal!

My Solution

To feel good about the purchase, I decided to apply for a new credit card 💳 🤦🏾‍♀️ that offers a bonus reward for spending a set dollar amount after the first few months. I figured I would purchase the phone using the new card, get the bonus reward, pay off the balance in full (although there is 0% interest for the introductory period) and then I would have the phone I want (not need), but at a lower cost which will make up for any potential buyer’s remorse.

The Tradeoff

I’ll take a hit to my credit, that is a given. That’s an additional hard inquiry which you really want to try to keep to a minimum.  Right after applying for the card, I received notifications from credit monitoring services, one letting me know that one of my credit reports had activity and upon logging in I learned that my score on that particular report dropped by four points. Additionally, a new account will now be on my credit report (increasing that number typically isn’t a good thing), but the amount of available credit would also increase so that’s a good thing on the flip side.

Things to Consider 

There are definitely some things to consider before making a decision such as this one. It should be a rare happening and only when it really makes sense. These are some of the things to think about if you’re going to consider this drastic move.

• Can you take a hit? 
• First ask yourself if your credit is strong enough to take a hit? If you’re still building your credit, it may be best to avoid this approach.
• Also, if your score is lower and your credit history is poor, there is a chance you’ll be denied 🙅 which basically means you took a hit for nothing. OUCH! 🤕 
• Are you about to make a big purchase (car, home) or take out a loan of any type?
• If you’re planning to apply for a loan or line of credit in the near future, then you want to keep your credit report in pristine condition. Avoid hard inquiries that can lower your score and worthiness to creditors. 
• Are you easily tempted?
• Will you go crazy once you get the new card? If you have the tendency to spend, spend, spend and max out cards, then do not do this. It’ll hurt you more than it will help you. 
• Have you had multiple hard inquiries that still remain on your credit report(s)?
• If yes, this probably isn’t worth doing. 
• Will you read the fine print? 
• You must fully understand the terms of the offer to really take advantage of what it has to offer. You want to make sure you will come out on top. Don’t get burned! 🔥 
• Know exactly how much you have to spend and how long you have to qualify for the offer. 
• You’ll want to know about the interest rate for the card and take that into consideration. 
• If you’re thinking of closing the account later, read to make sure there are no penalties or to know how long you’ll need to keep the account open to avoid penalties. 
• Do your homework. This is not a decision to take lightly. 
•  Does the card have an annual fee? 
• I avoid these, but if you’re okay with one, just make sure the deal is still a deal once you calculate the annual fee.

Was it Worth it? 

For me, it is worth the trade off. Why? I didn’t want to pay full price for a phone that is very unlikely to go on sale. I lost four points which isn’t a terrible hit on my score and it will go back up in a short time. The hard inquiry will likely be there for a year, but I’m not planning to apply for any loans or other cards any time soon. I’ll likely use the card infrequently and will not carry a balance. I’ve read the fine print and can agree to the terms. There is no annual fee which is ideal for me. Most importantly, I will feel better about my unusually large purchase.

The lesson is that sometimes we make unpopular financial decisions, but if done right and for the right reasons, the payoff may be worth it. Always consider the consequences and plan accordingly to make sure you’re managing your money like a boss today and everyday!