What To Look For In The Fine Print of Your Credit Card Application

The credit card offers that you find in your email inbox or in your regular mailbox contain some pretty attractive promises.  Credit card companies try to lure new customers by offering low introductory interest rates.  People with a decent credit score often get 0% introductory APR on purchases and balance transfers for a set period of time (usually six months to one year).  Other companies offer seemingly generous rewards benefits.  They claim that you can earn up to five rewards points or eight airline miles per dollar spent.

These claims are not lies(usually), but the details of these offers make them less sweet than they firs appear.  To get the real information on to-good-to-be-true credit card offers, savvy credit card shoppers look at the fine print and dissect the offer’s wording like a high school English teacher.  Here are some of the things that they are looking for.

1. Balance transfer fees.  Even if a credit card charges interest on purchases, it might offer new card-holders an introductory 0% rate on balances transferred from other credit card accounts.  Usually, these transfers are accompanied by extra fees. Card-holders who transfer balances are saddled with a one-time fee that is equal to 3%-5% of the amount transferred.

2. Rewards program rules.  When a credit card company offers a generous amount of points or miles per dollar spent, the devil may be in the details.  You can earn four points per dollar spent, but spent on what?  Some cards require you to shop at a handful of stores or websites in order to get your full reward.  If you don’t spend at these places, you end up earning the usual one point per dollar spent. Airline-specific cards are notorious for this.  You can earn a high amount of miles per dollar, but only when buying airline tickets or some other service or item directly from the airline or a website associated with the airline.  Of course, this might not always be a bad deal, especially if you are a frequent flier, but for most card-users, the deal is not as sweet as it first sounds.

3. Online payment posting time.  Every credit card company offers users the chance to pay their bill online.  Convenient, right?  Yes, but this is only a good deal if you pay on time.  When you make a payment online, the due date is not a calender date, it is a specific time on the calender day.  If the payment is not made by 5 p.m. Eastern Standard Time, for example, it is considered late, even though there are seven more hours left on the due date day.  The time difference between time zones can also trip people up (they have to pay by 2 p.m. on the due date if they live on the West Coast, for example).  So it is possible to get hit with a late fee even if you paid on the due date.

4. Some credit cards offer users a lower balance transfer rate, but a higher rate on purchases and on cash advances.  What’s the problem with this? Most cards direct your payments to the part of your balance that carries the lowest APR.  That means that when you pay your bill each month, the money is going towards your 0% balance transfer, not the purchases that you made that are being charged 19% interest.  These purchases continue to earn interest month after month even though you are paying off part of your balance.  How can you avoid this?  Get a card that offers the same 0% APR for both purchases and balance transfers or simply reserve one 0% card for the balance transfer and don’t make any purchases with it.

5. Watch out for variable interest rates.  Variable interest rates mean that the interest that you pay goes up and down each month depending on the current prime lending rate.  This is the opposite of fixed interest rates, which do not change (unless you make a late payment or break some other fine-print rule).  If you don’t want any surprises, then you have to look though the fine print to make sure you are not applying for a variable interest rate card.

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