Credit card companies have hired marketing experts that pull out every trick in the book to get you to sign up for their credit card. The credit card companies are desperately trying to sign you up and they’ll do practically anything to get you to sign on the dotted line. Your mailbox is probably full of credit card offers with new ones arriving every other day it seems.
So why not sign up for a credit card, or two, or three? Using a credit card has its perks after all. There is of course the convenience of paying with a card instead of carrying cash around and bothering with loose change. Then there’s credit cards with rewards programs that actually reward you every time you make a purchase. Some credit cards will offer roadside assistance and will insure your car rentals too. All this and the card is actually given to you free of charge.
It sounds great, but it’s not all fun and games. Irresponsible use of a credit card can land you in serious debt trouble. If you don’t use a credit card wisely, before you know it you may be lost in a mountain of debt with a bad credit score to boot.
The credit card companies try and lure you in with promises of a 0% interest rate for an introductory period of up to one year. That sounds amazing, but why would they want to do this for free? They are in business to make money off of you, not to be a charity. So you know there has to be a catch – and there are plenty of them. First all, this 0% rate is only valid for 6 months or 1 year. Afterwards, your interest rate skyrockets.
Did you also know that there are fees associated with a balance transfer card? This fee is typically 3 to 5 percent of the balance you are transferring. So if you’re transferring a $10k debt you may pay $500 just for the transfer.
Low APR Promise
When you get a credit card offer in the mail you’ll see a very low interest rate being offered to you. Sometimes it can go as low as 9.99%. If you have a credit card already that’s in the 20% range this may seem like an amazing deal. But you know the old saying, if it’s too good to be true, it probably isn’t true at all. This amazing rate may indeed be true, but most likely it’s only given to those with perfect credit scores. So what ends up happening is you sign up and end up receiving a very high interest rate instead. It’s a classic bait and switch.
If you do end up getting a good interest rate, don’t get all excited. This is not a fixed rate that you’ll keep forever. It is likely a variable rate that can (and will) change very soon. And when I say change, I mean increase.
Credit card companies will inundate you with credit cards that have a rewards program. You figure it’s a great idea, right? I mean imagine using a credit card (for free) and accruing points that you can later redeem for gift cards, airline tickets or a statement credit. Sounds good. But what if these rewards cards had fees attached to them? You may end up paying $5 a month yet you’ll earn less than $1 a month in rewards.
Some rewards cards only give you points when you spend at participating retailers. Other rewards cards have points that expire. Some require you to spend a lot of money or else you lose your points. Others have caps on the amount of rewards you can earn and redeem. As you can see, rewards cards may not be as rewarding as they appear.