The Christmas shopping season has begun! Merchants aren’t the only ones who want to capitalize on all the holiday expenses. Credit card companies will make even more money than retailers. To attract your business, credit card companies aggressively promote low rates and special offers. While there are some good legitimate deals to be found, there are also a number of pitfalls in the fine print. Be sure to keep your credit sanity in check by avoiding these potential credit risks.
The first of these is found in the words “without interest”. One of the favorites of retailers who promote their cards in the store, promise that he can buy something “interest free until 2018”. While it is true that you will not pay interest, the monthly statement generally recommends a minimum payment that will not allow you to pay for the purchase when the interest-free period runs out. This leaves you with a high interest rate on the remaining balance at the end of the promotional period. Worse yet, retroactive interest is sometimes applied to your debt if it is not paid within a certain period of time.
Beware of store credit cards. Even though they may come with tempting coupons or purchase discounts, they probably come with a high interest rate, sometimes as high as 21%.
Beware of balance transfer fees. Most major card issuers charge 3% on average to transfer a balance. For example, if you transfer a balance of $5,000, you could pay a fee of up to $150.
Always read the fine print. Make sure you know the terms of your credit card. Does it offer a low introductory rate and offer you a higher rate at a later date? What about cash advances? Do they come at a higher interest rate than normal purchases? Don’t overlook those expensive details hiding in the fine print.
Thousands of Americans use credit cards as a way to finance their vacation expenses and then can’t afford them. With high interest rates, that can be the start of a vicious cycle of bad credit and spending habits.
Instead of potentially becoming a victim of plastic problems, get a low-interest vacation loan from your local credit union. If you’re short on money this year, start saving for next year by putting money away in a Christmas Club account. Both options make you less reliant on plastic, giving you peace of mind knowing you’ll avoid all the pitfalls during the holiday season.