What’s The Real Deal With Interest Rates?
Friday, December 5th, 2008
It is pretty common for consumers to get a plethora of credit card offers in the mail, promising zero to low interest rates. It may all seem like a great idea to jump on a card (or several cards) that offers low interest rates. However, don’t be fooled. What may say low interest may not mean what you think it does and it is your responsibility to find out the real lowdown on the credit cards you are interested in before applying for the cards.
Low interest rates are an excellent way for credit card companies to attract attention to the cards they are marketing to the public. Many people think that low interest is the only thing to be looking for in a card. In reality, you should be reading all of the terms and conditions of your credit card offers before agreeing to anything.
What You Get Ain’t Always What It Seems
When you see an advertised offer for a low-interest credit card, chances are good that the great offer is only for a limited time. The introductory period for your low interest will usually expire within six months, which means if you retain a balance on your credit card during the time the introductory period expires, you’ll be hit with much bigger charges. If you miss or are late with a payment, you can bet your interest rate will skyrocket.
Another point to make clear is that oftentimes the low interest rate will only apply to purchases. The interest rate for cash advances and balance transfers can be dramatically higher, even though the credit card company pushes only the low rate for purchases. That is because the interest rates for advances and transfers can sometimes exceed over 20%.
Read The Terms Carefully
The only way to avoid an unexpected surprise of outrageous fees and charges is to review the terms and conditions of the card before completely your application. The information will contain all the important details about how the card works and will show you just how “low interest” your credit card will really be. You want to make sure that you are getting what you want. You want to make sure your card has a grace period, the period of time you have between purchases and when the interest starts to accrue. While most people assume all credit cards come with a grace period – that is just no longer true so make sure you check that the card you are interested in has a grace period.
Ultimately, applying for just any old offer than comes in your mailbox is a bad habit that can land you in some serious financial trouble if you are not careful. If you do not make a habit of reading the agreements before you sign on the dotted line, you are not using credit responsibly even though technically you don’t even have a card to shop with yet. Finding a great offer is indeed great but make sure that it truly is the best offer for you and your personal finances.
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