Credit card promotions that offer low interest rates can be quite tempting, but unless you read the fine print, you could be hit by hidden fees or unexpected rate increases. There are a few things to look out for when examining your credit card or when applying for a new card.
Teaser Rates
The biggest culprits of hidden credit card costs come in the form of teaser rates. You probably get these offers in the mail all the time trying to lure you in with a low, or even 0% interest rate. While these appear to be good deals, these rates never last. Typically the teaser rate will only last a few months, and occasionally up to a year.
Before signing up for any card with a low rate, read the fine print to find out what the standard rate will be once the teaser rate period is up. These offers almost never clearly promote the standard rate, so you'll probably have to look through the full terms to find out.
Balance Transfer Fees
Another tactic that credit card companies use is to offer a very low or 0% rate on balance transfers. This can certainly be a good thing to do if you're stuck with a balance on a card with high interest, but you still need to be careful. The balance transfer may come with a fee upwards of 3% of the balance you transfer, a time limit on the low rate, and possibly even another higher rate on new charges. If you can pay off the balance before the rates adjust and don't make any new purchases, this can be a good idea, but if not, the low-interest balance transfer may not be the best deal around.
Late Fees and Rate Increases
It goes without saying that it is extremely important to make your monthly payments on time, but you should still find out the specific terms for the card. One missed payment can cost as much as $39, and your interest rate may skyrocket to over 30%. Not only does that hurt financially, but it can damage your credit score and make future loans harder to obtain and cost more.
One hidden cost that is largely out of your control is an interest rate increase that happens across the board. Depending on the interest rate and lending markets, banks may occasionally increase their standard interest rates with little or no warning. One thing you can do is to give your credit card company a call and ask for a lower interest rate. You may be surprised to find that if you have a good payment history, you may very well be offered a lower rate.
Michael Carter, Realtor Greenville, SC www.beachboyrealestate.com
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