The holiday shopping season has begun! Merchants aren’t the only ones who want to capitalize on all Christmas 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 some good legitimate deals can be found, there are also a number of pitfalls in the fine print. Make sure you keep your credit sanity in check by avoiding these potential credit hazards.
The first of these is found in the words “without interest.” A favorite of retailers who promote their cards in store, they promise you can buy something “interest free until 2018”. While it is true that you will not pay interest, the monthly statement generally encourages a minimum payment that will not allow you to cancel the purchase when your 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, sometimes retroactive interest is applied to your debt if it is not paid within a certain period of time.
Be careful with store credit cards. Although they may come with tempting coupons or purchase discounts, they probably carry a high interest rate, sometimes as high as 21%.
Be wary 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. Do you offer a low introductory rate and hit you with a higher rate at a later date? What about cash advances? Do they have a higher interest rate than normal purchases? Don’t overlook those expensive details hidden in the fine print.
Thousands of Americans use credit cards as a way to finance their vacation expenses and then cannot afford them. With high interest rates, that can be the beginning of a vicious cycle of bad spending and credit 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 in a Christmas Club account. Both of these options make you less reliant on plastic, giving you peace of mind that you’ll avoid all the pitfalls during the holiday season.