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Halloween just past, but it doesn`t have to be a scary time for a finances. Right now, your credit card is probably the scariest weapon that you wield in your wallet, with all those scary penalty rates, ghostly APR percentages, and howling minimum balances, one must tread lightly when using their credit card around the holidays and other times of the year. Here are some nightmares to avoid:
Falling For the Marketing
Don`t believe everything you read, and believe only half of what you see. Credit card offers are very similar. Credit card issuers advertise the lowest possible rate, which they usually offer to excellent credit consumers. So if you are a consumer with good or average credit, you may be enticed by the great low introductory offer, but once you sign up, you could be paying a different, higher rate. Credit card issuers have recently begun marketing again to subprime borrowers, according to the Wall Street Journal. These subprime credit card consumers are being solicited for credit cards with lower credit lines and higher interest rates. In order to avert this, do your research on a website that compares APRs side by side. Once you get those numbers, call up the issuers of your top three credit cards and ask them if those numbers are still valid. If you are a low or bad credit consumer, you can end up signing up for a card at what you think is a low rate, and end up paying high APRs up to 25%.
A Cut in Spending Limit
This could be very detrimental to your credit score. Credit card issuers have begun cutting credit card consumers credit limits that aren`t spending enough or aren`t making the issuers enough money. When a bank cuts your credit card spending limit it can send you into a frenzy, and force you to sign up for the nearest credit card in order to make up for the lost funding. A cut in your spending limit is a serious blow, but don`t sign up for the nearest credit card, put all the energy into it as if you were looking for a completely new credit card, pay attention to the fine print, penalty rates, high APRs, etc. Another side effect of your credit limit being cut is your credit number decreasing. Credit reporting agencies use the ratio of how much credit you have available versus how much credit you have used, to create your credit score. When your credit limit is cut, the ratio inevitably becomes smaller and looks bad on your credit report.
Deferred Interest Charge
This is common in a lot of health-care credit cards. These high-interest cards offer deferred interest, so consumers can get surgeries and procedures and not have to pay interest if they pay off the total between six and 24 months. A little like a balance transfer offer, you have to commit to paying off these charges before the interest-free time period ends, or else you will be subject to a boatload of fees. If you are even a day late of paying off your balance, all the interest accrued from Day 1 will be added to your balance.
It`s a scary world, avoid credit card mistakes.