Don't Be Fooled By Introductory Rates
It's easy to become so enamored with a new credit card's introductory rates that you lose track of the real fees
In recent years, credit card issuers have hit upon an amazingly profitable sales tactic: incredible introductory rates. In some cases, they can be as low as zero percent -- which, on the face of it, seems like a great reason for you to transfer your balance immediately.
After all, with such a low (or no) interest rate, you can manage your money better... so it makes sense to switch, right?
Not necessarily.
False Economy
Most introductory credit card offers take advantage of a regrettable human tendency: our willingness to snap up what appears to be a bargain without looking at it too closely. We all know the old saying about not looking a gift horse in the mouth, after all.
Of course, most of us know the story of the Trojan Horse, too.
The standard introductory period is six months, whereupon they set the hook by shifting over to their new rates, which are often shockingly high. Interest rates of 18-20 percent are quite common, though some card issuers charge even more... at which point your bargain abruptly stops being a bargain.
Stuck With It
This may seem like a bait-and-switch tactic, but it's not -- at least according to the letter of the law. Credit card issuers are very careful to include all the relevant information in the promotional offers they send you, including the interest rate changes and when they take effect.
The fact that it's presented in fine print and buried within a lengthy, boring document doesn't absolve you from your responsibilities. Once you've signed the contract, the agreement is binding. At that point, you're generally stuck with the deal until you can pay off the card and cancel the account.
Stop and Think
Before you sign any credit card agreement, do your homework. Read the fine print from beginning to end -- and don't just focus on the interest rates. They're important, but you may just discover a few other things that could jump up and bite you later if you're not careful.
Realize that the fine print will probably be written mostly in legalese rather than plain language. Issuers are better about this now than they used to be, but it can still be a problem. If you're confused, do some research to clarify things before you sign. If you're still confused, don't sign at all.
Bottom Line
Never forget that the ultimate aim of any credit card issuer is to extract as much money from you as possible for as long as possible. No matter how good a credit card's introductory rates may seem, keep an eye on the long-term rates -- because those are what the issuer really cares about.
« Beware Debit Card Holds, Especially at the Gas Pump | Home | Reloadable Credit Cards for Teens »
