While being treated for Lyme disease, Cheryl Laughlin had a gem of 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 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, senior financial analyst for Bankrate.com, says credit-card issuers have taken notice, luring high-risk customers with attractive offers that go beyond slashed fees and zero-percent introductory rates.
"Credit-card issuers, they don't issue a card that's designed to be a one-size-fits-all for everybody," said McBride. "Instead, they issue a variety of different cards, each one targeted to a specific type of consumer."
The latest trend is rewarding consumers who pay on time, or who pay more than the minimum. Perks include cash back or interest-rate rebates.
Joe Ridout, consumer services manager for Consumer Action, says these "carrots," so to speak, provide incentive to pay down debt. But:
"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. That's the type of card Cheryl 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: Don't wait longer than 30 days to pay up.
"Unfortunately a late payment very likely will still be reported to the credit bureaus," said Ridout. "It very likely will take down your credit score."
To make the most of the card you choose, remember to evaluate its incentives. Pay off your debt before any interest-free period is up. Then focus on paying your balance in full each month.
And 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 interest rate could go up dramatically.
