The holiday shopping season has commenced! Merchants aren’t the only ones who want to capitalize on all the holiday spending. Credit card companies will make even more money than the retailers. To attract your business, credit card companies aggressively promote low rates and special offers. While there are some legitimate good deals to be found, there are also a host of pitfalls in the fine print. Be sure to keep your credit sanity in check by avoiding these potential credit hazards.
The first of those is found in the words “interest-free.” A favorite of retailers who promote their in-store cards, they promise you can buy something “interest-free until 2018.” While it is true that you won’t pay interest, the monthly statement usually encourages a minimum payment that won’t have you paying off the purchase by the time your interest-free period runs out. This leaves you a high interest rate on the remaining balance at the end of the promotional period. Even worse, sometimes-retroactive interest is applied to your debt if not paid off in a certain time period.
Beware of store credit cards. Even though they may come with tempting coupons or purchasing discounts, they probably come with a high interest rate – sometimes as much as 21%.
Watch out for balance transfer fees. Most major card issuers charge 3% on average for transferring a balance. For example, if you transfer a $5,000 balance, you could pay as much as $150 fee.
Always read the fine print. Make sure you know the terms of your credit card. Does it offer a low introductory rate and hit you with 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 costly details that hide in the fine print.
Thousands of Americans use credit cards as a way to finance their holiday spending, and then aren’t able to pay it off. With high interest rates, that can be the start of a vicious cycle of bad spending and credit habits.
Instead of potentially becoming a victim of the problems of plastic, take out a low-interest holiday loan from your local credit union. If you are short on money this year, start saving for next year by putting money away in a Christmas Club account. Both of these options make you less dependent on plastic, affording you peace of mind that you’ll avoid all of the pitfalls over the holiday season.