Have you recently received an offer for a credit card in your mail? Did the offer promise incredibly low interest rates, maybe even zero percent? That sounds like a great deal! However, remember that if something sounds too good to be true, it often is. The credit card companies are in the business of making money. So make sure to read the fine print before you make a decision.
Teaser rates, also known as introductory rates, are low interest rates that a lender charges you for a few months, or sometimes even up to a year, in the hopes of getting you to apply for and use their credit card. After the introductory-rate time period expires, the balance on your new card will be subject to a much higher interest rate.
Here are some credit card tips you should keep in mind:
- Typically the teaser rate will only last a few months, and occasionally up to a year. Before signing up for any card with a low rate, read the fine print to find out what the standard rate will be once the teaser rate period is up. These offers almost never clearly promote the standard rate, so you’ll probably have to look through the full terms to find out. Look for the APR rate, which is a standardized way of comparing yearly credit card interest rates.
- The credit card companies do not have to, and most likely will not notify you when the introductory rate expires. Be aware of this date if you intend to carry an outstanding balance on your card, because after this date your balance will be subject to the standard (higher) interest rate.
- Many individuals apply for cards with teaser rates so that they can transfer a balance from a higher interest rate credit card and, hopefully, reduce the amount of interest they are paying. However, when the intro period expires on the new card, they often find themselves right back where they started, paying a high interest rate because they couldn’t pay the balance in full.
- Consider the impact of repeatedly tapping promotional offers on your credit score. Too many open lines of credit, as well as too many recently opened accounts, can lower your credit score. The same can happen if you often close old accounts and open new ones to take advantage of promotional offers.
- If you would like to stop receiving unsolicited credit card offers in your mail, you are in luck! You can do so by following the link below to the Federal Trade Commission’s website, and follow the outlined steps: http://www.consumer.ftc.gov/articles/0262-stopping-unsolicited-mail-phone-calls-and-email
Credit cards can be very helpful, especially for students that want to start building their credit score. However, make sure to carefully read the fine print of the credit card offers, and follow the above tips to make sure your credit score or your wallet don’t take a hit.
Tomaz Bogovic, Peer Counselor I Powercat Financial Counseling www.k-state.edu/pfc powercatfinancial@k-state.edu 785-532-2889
