|
Credit Card Introductory Rates Can Bite You
By: Charles Essmeier
The credit card industry is a competitive one; all you have to do to see that is
open your mailbox. For many consumers, pre-approved credit card applications can
be found every week in the mail, often accompanied by offers to let you transfer
an existing balance from another credit card at a low interest rate. Sometimes
these rates, known as "teaser" rates, can run as low as 0%, which can make
applying for one of these cards rather tempting. Be careful, though. The fine
print in the terms of agreement on those cards could hide some very expensive
surprises.
Here are some things to watch out for in the fine print when you apply for a
card with a low-interest introductory offer:
Default rate - How high can the interest rate go if you fail to make a payment
on time? This is known as the "default rate." If you pay late, your 0% or 3%
interest rate could rise to 30%. Make sure you know.
Duration of the low rate - How long does this "teaser" rate apply? Six months?
Until you pay off the transferred balance? Make sure you find out, as these
rates often rise to the regular rate that applies to the card after some limited
period of time.
Other debts - Does this card agreement have a universal default clause? Many
credit card companies will now raise your interest rate if you make a late
payment on any bill, such as a telephone bill. Credit card companies claim that
paying any bill late makes you a higher risk customer. You don't want your
interest rate to rise because you forgot to pay the cable TV bill, so read your
terms carefully.
Other charges - These "teaser" rates apply only to transferred balances; they do
not apply to new charges. If you use the card to make purchases, those purchases
will accrue interest at a higher rate. When you make payments, the payments will
be applied to the portion of the balance with the lowest rate first, meaning
that these purchases could be accruing interest at the higher rate until you pay
off your balance completely.
Any reason, or none - Most card agreements permit the company to raise your
interest rate at any time, for any reason. All that is required is two weeks'
notice. Keep this in mind if you are transferring a large balance that may take
you several years to pay off. Sometimes, "until you pay off the transferred
balance " only means until someone at the corporate office changes their mind.
As long as you are aware of the terms, these teaser rates can be quite helpful.
If you pay late or fail to read the fine print, you could find yourself paying a
lot more in interest. Read the agreement before you apply for the card.
About the Author:
©Copyright 2006 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com a site devoted to debt consolidation, credit counseling, payday loans and
personal bankruptcy. |
