Credit cards, as a whole, are essentially convenient spending implements, designed to charge you for using your own money. However, as opposed to discussing the evils of credit cards and how they are capable of wreaking havoc on your financial situation, savvy consumers know that some cards (and companies) are better than others. Know the rules of engagement with a credit provider before you sign on that dotted line and be wary of some cards to avoid altogether.
-Annual Fee Cards
An annual fee is an additional charge that you pay to a credit card company just for the “privilege” of using that card. These fees range from $25 to $125 –more in some cases- and are automatically charged to your card on the anniversary date of its issuance. Annual fees are nothing more than throwing money at a mindless, faceless corporate giant, and make no financial sense.
-Introductory Rates
There is an old saying, “If something seems too good to be true, it usually is”. This has never been truer than when it comes to introductory rate credit cards. These cards lure consumers in with a siren’s song of 0 percent APR or some other significantly reduced rate offer, only to increase the rate after 6 months or a year to an astronomical and unheard of percentage. The credit card company banks on the likelihood of the consumer to make large purchases and max out his credit limit during the initial period, carrying a balance on the card when the introductory period expires. Thus making the credit card company money, and keeping the borrower in debt with a revolving balance. Before saying “yes” to any introductory rate offer, read the fine print.
-Store Cards
Even though the nice clerk at the register is offering you 10 percent off your purchase if you apply today for an in-store card, these tiny little strips of plastic tend to come with the worse possible terms for any buyer. Store cards are renowned for charging interest rates well into and above the 20 percent annual range, and often have hidden annual, monthly or transaction fees attached to them. When it comes to store cards, “yes” is virtually never the right answer.
Ultimately, all credit cards come with drawbacks. The reason that they do is that the lender knows that even the most sensible of consumers typically won’t be able to pay off his balance each and every month in full and avoid all of the charges associated with the extension of credit. Credit cards can be terrific tools, if used responsibly. However, all credit card offers come with fine print that a consumer needs to read and understand before accepting any credit card offer in order to avoid costly mistakes.