Don't fall for these 5 credit card offers
Every business has tricks of the trade, and credit cards are no exception. Here's how they try to get you to sign up -- and how to tell which cards might be a good deal for you.
This post comes from Jeffrey Trull at partner site Money Talks News.
Credit card companies love to dangle juicy offers in front of you. You might be "preapproved" for a 0% interest credit card or valuable sign-up bonus. Maybe it's a fancy "gold" or "platinum" card you never knew you were eligible for.
Understanding the tricks of the credit card trade will make you less likely to fall for them.
Rates that aren't guaranteed
One of the big draws of new credit cards is a low interest rate. But what you might not notice are the subtle caveats to the special rate that's prominently shown. Some offers will have "as low as" printed in small letters in front of the APR. You might also see asterisks and superscripts that refer you to the fine print, where the text explains the best interest rate is available only to applicants with the best credit.
In other words, the rate they're using to lure you in isn't necessarily the one you'll get.
The best defense? Read the fine print, especially the "Rates and Disclosures" information. It's not exciting, but it will reveal what, if anything, is actually guaranteed. Banks are legally required to furnish this information in the easy-to-read format shown on the Federal Reserve website. And if you're uncomfortable applying for a card when you have no idea what the ultimate rate will be, don't.
Avoid fool's gold
"Gold" cards have been around for decades, with American Express debuting theirs in 1966. Since then, credit card companies have added "silver," "platinum" and even "palladium" to the list of cards named for precious metals.
While these cards may have indicated prestige in the past -- and there are still elite cards requiring exceptional income and expenditures to qualify -- most precious-metals labeling is meaningless.
Solution? Choose a credit card by comparing the benefits that really matter, like low interest rates, low fees, or valuable rewards.
Bogus business credit cards
Small-business credit cards might seem like a great way to track business expenses and develop a credit history for your business. But with most small-business cards, it's your personal credit on the line, not your business'. So you're not creating or developing a credit file for your business.
In addition, small-business credit cards lack important protections that consumer cards have. The Credit CARD Act of 2009 applies only to consumer cards, which means your business plastic can still be hit with fees and rate hikes that would be illegal for personal plastic. So even if a particular business credit card has advantages, like enabling you to isolate and track business expenses, you're sacrificing consumer protections to get them.
Big bonuses with a catch
It's easy to get drawn in by the sign-up bonuses offered on new cards. You might see an offer of $150 back or 25,000 airline miles just for opening an account. But there's often a catch.
In many cases, you'll need to charge a certain amount on your card within a specified time period, like $1,000 in purchases to get $150 back, or $2,000 charged to earn 25,000 airline miles. While the details vary, completing these offers as stipulated may be difficult or even impossible, given your budget.
Cash-back bonuses might not be all they seem, either. Some offers boast "up to 5% back" on your purchases, but that may be only at certain retailers, not for every purchase you make. Some cash-back deals might be for a limited period after you open the account and may cap how much you can earn.
When it comes to rewards cards, be sure you know what it takes to get the advertised perk. Consider the reason rewards exist: to make people spend (and borrow) more than they otherwise would. If that's a trap you're likely to fall into, a rewards card may be less than rewarding.
Credit card offers come crammed with language that makes you feel like you're getting a special deal. Envelopes might be stamped with "Important" or "Confidential" to heighten the urgency. Once opened, you might be excited to find you're "preapproved" for a new credit card.
Unfortunately, being preapproved doesn't actually mean the new card is yours. In fact, it doesn't really mean anything. You'll still need to apply for the card and go through the same approval process as you otherwise would.
Be careful when choosing a card just because it's a special offer that appears to be just for you. It may just be another trick to reel you in.
More on Money Talks News and MSN Money:
- 10 money mistakes that can ruin a marriage
- The top 5 airline miles cards
- The woman with the award-winning debt
Luckily I am smart enough to pass on the above offers. I use a credit card with no fees. No minimum purchases. No special offers. No expirations on benefits.
Just cash back, nothing more. Makes my purchases cheaper, and it's a lot safer then carrying around enough cash to cover my daily expenses.
It makes me sad to see the number of people who don't understand how to use credit properly or don't take the time to research their credit applications. The worst part is that the people who don't take the time to educate themselves, are the same ones who bad mouth the credit industry when they make a poor decision or lack responsibility. The credit card companies don't make you spend more then you can afford. But most poeple these days are under the mindset that you must blame someone else for your mistakes.
Of course, it makes sense to pay your card in full if you can in order to avoid interest and make that extra little cash back. The banks are basically relying on most people to not pay their balance every month and paying that interest.
Most people who pay with cash don't go running out and blowing (except for those who feel they have money to burn). So there is that fundamental of saving by using cash. Unfortunately, there are those bull headed characters who see only their side of the coin and will brand the writer of this factual article as a fool.
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