"0% interest* for the first six months, no annual fees** and a
low fixed*** rate of only 8.9%****!"
* Unless you count the deferred interest we will charge you if
you don't pay off the full balance transfer amount when the
promotional period ends.
** Except the ones we charge for "late payments****", going
over your balance, cash advances, balance transfers,
membership in "rewards" programs, etc., etc., etc.
*** Fixed for the first month, but after we may change it
without notice for: late payments, going over your balance,
changes in the prime rate, or just cause we want more of your
money.
**** Rate depends on your credit score. (Which we already
checked and intend to charge you 19.8% or we wouldn't bother
sending you this great***** offer.)
***** A payment may be late if we just don't get around to
processing it in time no matter when you actually mailed it to us.
****** May not be great in all states.
Yes, folks, "the devil is in the details" and the truth is in the fine
print.
While this is obviously an exaggerated and fictitious example I
have seen most of these "weasel" clauses in the 100s of credit
card offers I receive each year.
Some of these tricks and traps are practiced by local and
national merchants with their "store credit cards" and "discount
cards".
I have seen stores and even car dealerships make "no interest
for a year" type announcements and advertisements. But when
you actually read the contract (and who does that - they count
on you to not read the whole thing and you probably won't
understand it without your attorney) you may find that instead
of the regular payments you would expect to start at the end of
the no interest period, you are required to pay the full purchase
price.
If you want to make installment payments, you will be required
to pay the payment plus the interest (look for the rate in the
fine print) and you may also be required to pay the interest that
accrued during your "interest free" period. Gotcha!
Or how about the "no annual fees" bit. Look out for the contract
to say "no annual fees FOR THE FIRST YEAR". Or first two years
or that a "membership" fee is required. How that differs from an
"annual fee" is beyond me.
Also watch out for the "no annual fees" for the use of the card
but "membership fee required" to participate the in frequent
flyer miles or cash back points program (which was probably
why you chose that card to begin with). Gotcha!
And how about the "fixed" rate? Read the fine print, it will
actually say "subject to change without notice". Is it just me or
do I misunderstand the meaning of the word "fixed"?
Also your "fixed" rate may be raised to the "maximum allowable
by state law" if you go over your credit limit (including fees that
may put you over your limit before you even know it), make a
late payment, miss a payment or do not pay the full amount.
Gotcha!
And then there is that low "teaser rate". Yes that's what it is
called in the industry and it is appropriately descriptive. That
rate is given out, they aren't lying about that. But it is only given
to the people who have 700 or above credit scores, minimal
debt, and a high paying job.
The majority of the people who are sent the ad will not get the
lowest rate. But you won't know your rate until you apply for
the card. But by the time they tell you what rate you will be at
they have already signed you up and issued your card.
They count on the fact that most people will just accept the rate
and go from there. Gotcha!
So how can you avoid these traps?
Rule #1, read ALL of the fine print. If you are not clear on
something ask someone else what they think it means. Ask an
attorney friend, CPA (certified public accountant), financial
planner, banker or other person in the financial industry.
Chances are they will have several questions about the fine
print, too.
Rule #2, don't apply for a card unless or until they tell you what
your actual rate will be. This is hard because most of them are
not set up to tell you. Generally you will need to know your
credit scores and have a copy of your credit report handy.
Even then you are unlikely to find someone through their
telephone maze that will or can actually answer your question.
Try to find a card that gives you a confirmed rate before you
apply. A conscientious company will first request a copy of your
credit report from one of the credit bureaus before quoting you
a rate.
Look on http://www.bankrate.com for current rates offered by
various credit card companies and banks. Often smaller banks
and companies offer better deals and are not as strict or hard to
deal with. Check with your local banks also. At least with a
locally issued credit card "you know where they live".
Rule #3, always mail your payment at least 7 days before it is
due. Or try paying through the Internet. Many companies now
offer that payment method. It can also save you time and
stamps.
Rule #4, check your statement each month to be sure you are
still at the interest rate you signed up for. If your rate has been
increased, look for a late payment fee, or some other reason for
the increase. Call the company and ask them why they
increased your rate.
If your rate was unjustly increased (they processed the
payment late or credited it to your account late, but it was not
received late) then ask them to change your rate back to what it
should be.
Even if you did make a late payment, most companies will
reduce your rate after six months of on-time payments. But if
you don't ask, they will keep you at the higher rate as long as
they can.
In the credit card business it is definitely "caveat emptor" or
buyer beware!
David Berky is president of Simple Joe, Inc. One of Simple Joe's products is the
Debt Eraser PC software which help anyone get out of debt quickly and inexpensively by creating a Rapid Debt Reduction Plan. To learn more visit http://www.simplejoe.com
