Are you in the market for a credit card? If so, then you know there are a lot of different kinds of credit cards and credit cards companies have to come up with all kinds of sales pitches to lure customers to their products. But, no matter how much or how often you are confronted with credit card company tricks of the trade, these ploys can be tantalizingly difficult to resist.
Pre-Approved Credit Cards
On the surface, it may seem awfully flattering to find out you have been singled out to get this credit card, but that’s pretty much it. The only thing you’ve been “pre-approved” for is to receive a credit card application. Receiving the card itself is more than a matter of accepting the offer. You must still fill out and submit the application so the credit card company can make a “hard credit inquiry” to see if your credit is worth the risk. Not only is there the chance you won’t qualify — a good chance if you have bad credit — but the hard credit inquiry will remain on your credit report for up to two years and affect your credit score.
Offering Low Interest Rates
“As low as…” never means guaranteed. Only those with the best credit qualify for the lowest of rates offered with that particular card. In other words, what’s implied, but only made evident in the fine print, is that your interest rate could be “As high as…” the highest rate the company dares to charge. And even if you are approved for the lowest rate possible, there’s always the possibility the credit card company will raise your rate “at any time, for any reason,” a decision they need only make you aware of two weeks prior to the hike.
Blurred Credit Limits
Instead of cutting you off at your pre-established credit limit, credit card companies may allow you to exceed it. On the surface, this sounds like a good deal — your credit card company bending a little to help you get more of what you want. On the contrary, all this does is help the credit card companies get more of what they want — your money. Not only are you incurring more debt for which you will be charged interest, but you’ll be slapped with a fee for going over your credit limit.
Offering Cash Back Rewards
This incentive can be especially seductive: Your credit card company paying you for using your credit card? Not quite. Whatever the cashback reward, it likely comes with restrictions that make it far less helpful than it seems. Just because an offer says “cashback up to five percent,” for example, it could mean as little as one percent cashback. And it likely only applies for a certain amount charged to the card, and within a certain period of time. While this may still sound like a good deal, not so much if it’s this incentive that compels you to charge more and/or sooner than you normally would. In that case, cashback rewards could end up costing you more in the form of interest in the long run.
Zero Percent Interest on Balance Transfers
It’s unlikely these days that any balance transfer will enable you to avoid any sort of transfer fee. Plus, you only benefit from the zero percent interest rate on the balance transfer itself. Any new debt charged to the card will have its regular interest rate apply. That’s pretty widely understood, but this isn’t: your payments will probably go toward the lower interest rate balance first, giving the credit card companies more time to rack up interest on your new debt until the original balance transfer amount is paid off.
Credit Cards With Fancy Names
Our egos love this one. Surely not just anyone can qualify for a card deemed gold, platinum, elite, or the like. Whether you need it or not, the appeal to apply and see just how special we are can be a lot to resist.
Small Business Credit Cards
The difference between a small business credit card and a personal credit card is in name only. Oh, unless you count the fact that business credit cards do not carry the same protections for you as personal credit cards do.
Now, none of this is to suggest complete avoidance of credit cards. Not only can they be a helpful supplement to our financial lives, but they also help build good credit. The key is to use this information to make the best possible credit card choices. And chances are good the best among them don’t come calling for you in the mail, but are ones you seek out and weed out for yourself via a deliberate search for the best deal.