Hidden Costs in Credit Card Offers
Hidden Costs in Credit Card Offers
As the holiday season rolls around, many American households are being flooded with new credit card offers that are designed to attract new customers at first glance. Typical examples include cash back offers, balance transfer offers, or low interest rates for a specific period of time. But whether or not these offers are actually as attractive as they seen should be looked at as an entirely different issue. Of course, it should always be remembered that credit card companies are in business to make money, not to give it away. So while it might seem like these are reputable companies that always have your best interests at hand, you will still need to dig into the details of the actual card agreement in order to ensure that you are actually choosing the best credit card for you.
In many cases, credit card companies will lure you in with an attractive initial offer that will actually only last for a short time. The expectation is that you will hold onto your card over a much longer period, and that the credit card terms will revert back to a scenario that favors the lender over the borrower. According to studies by the US government, credit cards companies will then be able to recoup the losses incurred by giving you the initial offer, as over time, the less favorable consumer terms help to boost revenues. One of the ways credit card companies will often tips the scales back into their favor seen in their ability to change interest rates after your introductory period has finished.
Finding Low Interest Terms that Don’t Expire
For these reasons, it is important for borrowers to find card agreements that do not revert to a much higher interest rate at a later date. Luckily, there is much competition in the credit card industry, and this means that all of these companies are looking to better one another in order to get your business. This means lower interest rate cards are easier to find than you might otherwise think. For example, BestCredit has a list of low interest credit cards that also come with various rewards programs for borrowers. Sites like these should be used to get a sense of the comparative value that is made available by each of the major credit card companies because the reviews enable borrowers to see a consider set of terms that characterize each prospective agreement.
Those terms can be compared with one another and then matched against your own needs for credit card borrowing and regular purchases. For example, borrowers that expect to have a revolving balance will need to pay special attention to the minimum payment terms and the rates for long term interest. Official surveys show that American consumers have more than $11 trillion in debt, and these trends show no signs of slowing any time in the near future. So, this is an issue that households must consider before committing to any credit card agreement that is likely to change in the future.
Be Aware of the Changes
It is important to remember that many introductory credit card offers are finite in nature. That is, the terms will usually change after the initial three or six month period has finished. Those terms will then change to a situation that you might not have wanted in the first place. If this is the case, it means you should just avoid the card completely -- or at least cancel the card once the introductory period is finished. In some cases, credit card companies will have early ending pentalties, so this is another consideration that must be factored in. On the whole, however, there are many competing companies that will avoid some of these problems in order to gain your business. Because of this, it should be remembered that it is always OK to simply wait for the credit card offer that perfectly matches your needs. With a little time and effort, it is usually possible to find an arrangement that is ideal for your needs.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.