This is a guest post by Mr Credit Card from www.askmrcreditcard.com. Mr Credit Card writes reviews on credit cards. You can subscribe to his blog feeds here.
We get lots of junk mails from credit card companies offering us credit cards. Given that sending bulk mail is one of key ways to generate new customers, they have sort of perfected the art of crafting compelling “sales headlines” and feature bullet points to entice you to sign up. But, the truth of it is that we absolutely don’t need most of the credit card offers that are sent to us. So how does one distinguish between all the marketing hype. Understanding and dealing with all of the various credit card marketing tactics that are out there can be pretty difficult. So, first of all, let’s look at some of the more common ways that card issuers try to entice you to sign up for their credit card offers.
Teaser Promotional Offers – Perhaps the most common tactic used by all card issuers are teaser promotional offers. Credit card companies hope to lure you in with the teaser offer and then ”lock you in” after the teaser period expires. A common teaser is a 0% balance transfer offer. Transfer a balance from another card that you are paying higher rates, the offer might read. Many consumers have actually taken advantage of these deals at the expense of the credit card companies. Rather than a balance transfer, some will offer to charge you a 0% interest on any purchase you make for a set period.
Promises of Easy Credit – While I’m generally fine with credit cards offering teaser promotions, the most blatant form of deceptive marketing comes from sub-prime credit card issuers. In fact, the FTC has frequently charged many such companies with deceptive marketing practices (I’ll give you a few examples later). One common marketing pitch is ’Guaranteed Approval, No Credit Checks, No Income Checks’. While the headlines themselves might not be deceptive, the fine print in many of these cards is.
Most prepaid credit cards, for example, will definitely approve you with no credit checks or income checks. The reason is simply because they are not extending you any credit, similar to a debit card. But what many people do not realize that these cards won’t help to rebuild your credit history. They frequently also charge exorbitant fees for simple transactions and even for calling customer service!
Many unsecured sub-prime credit card also make these claims. Once again, approval may be easy, but the deceptive part is not fully disclosing the fee. Even if they did, the description of the fee would be in the fine print and very few people would understand it anyway. Many of these sub-prime cards charge an up-front application fee along with other fees that, in some cases, totals several hundred dollars. The cards might give you an initial credit limit of say three hundred dollars, but with all the fees deducted, you end up with a credit limit that in many cases is less than one hundred dollars and, to add insult to injury, the fees are tacked on upfront to the balance amount owed and immediately starts accruing interest.
Here are a couple primary examples. In June of 2008, the FTC charged Compucredit with deceptive marketing practices only to settle most of the charges out of court in December 2008. Here is another example of telemarketers selling bogus advance-fee credit card packages under false pretenses under the names Advantage Capital, Capital First, and Premier One.
How do you protect yourself from some of these deceptive credit card marketing tactics. Here are a few suggestions:
- Ignore teaser deals unless, you are already looking to get that particular card: Most of us should simply just ignore credit card teaser deals unless you are already looking to get that particular card. But there may be some cases where you should actually take advantage of promotions. For example, you just became a frequent flier member and your new job requires that you travel a lot using that airline. Then taking advantage of any bonus miles offer makes sense. Another example would be that you really do have a balance with your present card and you want to take advantage of an introductory 0% interest deal. Then, by all means do so. But do not fall into the trap of having to constantly transfer a balance because you do not make any attempt to reduce or get rid of your credit card debt.
- Learn to Read the Terms and Conditions: It may take a while but force yourself to read and understand the fine print of the terms and conditions in a credit card offer. This FTC’s website has some great information about credit card terminology and disclosures.
- Ignore the Junk Mail: This advice is particularly true if you do not have good credit. If you have poor credit, you are the target of many sub-prime credit card companies who would go through to almost any length to take money right out of your pocket.
- Get off the Mailing Lists: You can choose to stop receiving credit card offers. There are a couple of ways to do so. You can go to the National Do Not Mail List at DirectMail.com. From this free service, you can choose to add or remove your name from different companies marketing lists.
As with most products, it takes research and effort to find a product that specifically meets your needs. Most direct marketing tactics are designed to “spur you into action”. Hopefully, this post will give you a few tips to help you navigate any credit card offers in the mail in case you are ever tempted.
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