10 Credit Card Traps Designed to Trip You Up!
Article by Jason from ChristianPF.com
An article on Yahoo Finance referenced to watch out for. It was a good article outlining a few of the traps out there with credit cards.
Personally, I find credit cards to be extremely helpful as a business owner, and in our personal finances, but that comes only after a toilet-cleaning campaign wiped out $10,000 of credit card debt and after much-needed self control was applied to my use of credit.
Credit cards can be a slippery slope, and I can assure you that if you want to become a millionaire, you’ll have to get the plastic under control quickly!
These first seven traps are the ones referenced in the Yahoo article by Tal Boldo, and the last three are my additional traps to avoid.
1. Application and Balance Transfers
Tal says, “There are two credit card traps to avoid here. Be sure to include your balance transfer request with your application, and be sure to transfer funds from a credit card in your name, rather than a spouse, as the loan officer reviewing your application will see that your debt-to-income ratio will remain unchanged, which will increase your chance of being approved.”
2. Fixed Promotional Rates
Tal makes a great point to understand the promo rate. Sometimes the card company can pull one over on you without you even knowing it. She says, “To avoid this credit card trap ask the customer service representative helping you with the balance transfer whether the fixed rate applies “for the life of the loan.” Otherwise, find out when the rate will expire and what the new rate will be.”
3. Variable APR Rates
Variable rates are the bane of any credit-card-debt-carrying consumer! A simple nudge upward in the rate can send your payments skyrocketing.
Tal says, “This credit card trap can be avoided by applying for a credit card with a fixed APR, or balance transferring to a fixed APR promotional rate.”
4. Transaction Fees
Fees, fees, fees. It seems like every company has enacted a fee for something. Tal says, “Most credit card companies that offer attractive balance transfer offers also often charge a transaction fee of between 3% to 5% of the total amount transferred. This fee is added to your total debt at the moment of transfer.”
The sneaky part used to be that the card company wouldn’t apply any future payments to your high rate existing debt, but rather to the new low interest rate balance transfer. What that meant was essentially that you were racking up interest charges at a rapid pace.
5. Membership Fee and Cash Back Bonuses
Tal says, “Avoid credit cards that require membership fees unless other services like life insurance, travel insurance or higher cash back bonuses make the membership fee worthwhile.”
I refuse to pay a membership fee for any card. I don’t care how great the rewards are, it just doesn’t seem worthwhile to me.
Read full article on ChristianPF.com
