Using Common Sense with Credit Card Offers

Here is a list of various tips that can turn having a credit card into a benefit rather than a detriment to you and your family.

• Avoid having too many credit cards – many experts advise people that having two credit cards is enough. When stressed, having access to too many credit cards can be addicting. When choosing credit cards you should pick the ones that will fit your specific needs.
• Watch out for solicitations – Getting too many credit cards offers in the mail or by e-mail doesn’t mean that you can afford more credit. A lot of credit card applications are sent by lenders who are targeting consumers who will run up large balances, since big spenders will pay more in interest.

Even though the credit card offer may say so you may not have been singled out because of your good credit, but because the lender believes, because of past habits in spending, they can make more money off you. It is the case that lenders give credit card offers not based on your income or credit record but on marketing profiles.

• Look carefully at the credit card terms – The interest rate on the card is an important factor and you should try to keep it low but it is not the only factor. Lenders can legally change the rates on their cards without giving a reason.

If you pay off the balance in full every month other credit terms that are added to the cost of the credit cards can be more important than the rate, such as annual fees, late charges, or other ways of calculating the balance.

• Read the entire credit card offer – Most credit card offers have a sales pitch and in small print the actual terms of the card. Do not worry if you cannot understand them. If you do not contact the lender and have them fully explain them to you before applying for the card. If you still do not understand them do not apply for the card.
• Reject “teaser” rates – Most lenders will offer artificially low “teaser” rates that will only last a short period of time, such as a few months. After the short period the rate may go up significantly. The “teaser” rate may look good but what is important is what happens when the “teaser” rate expires.
• Watch out for variable rates – Variable rates are very difficult to understand and project, even for experts. If you do not understand the language of the variable rates it may be a good option to avoid that credit card. It is also the case that as well as being confusing some variable rate formulas hide importance and not obvious advantages.
• Be aware of late payment charges and penalty rates – Even a card with a great interest rate can be a nightmare if you happen to miss a payment. The late charges can get very large.

More important than late charges is that a lot of lenders reserve the right to significantly raise your interest rate if you miss a payment. If you are having problems financially these terms can have a big effect on your ability to get out of debt.

• Do you have grace period? – There are some credit cards that have a grace period, generally 25 days, running from the date of your billing statement each month. During this grace period you are able to fully pay off the balance and avoid more finance charges.

You should know that not all credit cards have a grace period and not all grace periods are the same amount of time. You should also be aware that even if you mailed your payment today it does not mean that it was received and credited tomorrow.

• Try to make more than the minimum payment – Because of a lack of income consumers sometimes only make the minimum payment on a credit card. Considering the high rate on many cards this only adds to the financial problem.

An aspect that many consumers do not realize is that minimum payments can increase. Lenders have the option to increase a minimum payment, and do so often, when the consumer looks to be on less than stable financial ground.

• Watch out for ancillary solicitations – Once you apply and get your credit card the same lender or their affiliates usually send you other solicitations such as life insurance, disability insurance, credit card protection, etc.

Be wary of these, as they are generally not a good deal. For example insurance can be purchased, many times cheaper, by a mainstream insurer. And unless you travel extremely often travel clubs rarely save you any money.

• Keep your priorities in order – If you are having financial trouble you should decide what payments are the most important to make. A good thing to take care of first is life necessities such as food, clothing, and shelter. Having a roof over your head is more important that having a credit card.

Watch out for credit cards where the lender reserves a security interest in the equity of your home. The home is something that should be the last thing you use for securing a debt since it is the most valuable asset you generally have.

• Do not jump for “teaser” rates – A lot of people are under the assumption that they can save money by jumping from card to card and taking advantage of the teaser rates. But if your timing is off you can wind up paying a hefty price.

You should know that lenders do not make money on teaser rates as they make it when the borrower does no keep up with the changes in the rate and lets the teaser rate expire, therefore being locked into a rate that is higher.

• Look into canceling the card – You do not have to keep a card if you do not like it. You can cancel a credit card at any time you wish. It is not unheard of for lenders to lower rates or remove some terms in order to keep a customer.
• Live within your means – Just because you have credit it does not mean you can use it to live a lifestyle you cannot afford. Try not to use credit cards to wiggle out of problems you have financially. Be wary when a lender gives an unsolicited offer to increase your limit. Try to make more than the minimum payment every month as only paying off the interest can cause your debt to increase significantly.
• Know your rights – The Federal Truth in Lending Act provides for the ability to dispute inaccuracies on credit card bills. The instructions for the dispute generally are on the back of the monthly billing statement.

If the lender does not comply with the regulations they are subject to harsh penalties. When you receive a receipt for your notice of dispute the lender is required to look into the charge and notify you. If the merchant cannot or does not validate the claim then it will come off your bill along with any interest that is associated with the charge.

During the investigation you are not required to pay the bill or interest on it, but you have to pay the part of the bill that is not being disputed. You may also be reported as being delinquent on the bill during the time of the pending investigation.