Everyone knows how incredibly easy it is to swipe a credit card when you’re shopping. Credit cards come with a number of benefits – delayed payments, financing options, and points collection, to name a few. However, it’s important to stay diligent when using them as it can be an easy to fall into credit card debt. Many credit card companies offer special deals and incentives to entice people to sign up for new cards. These deals can seem appealing, as they advertise low or 0% APRs, low interest rates, or even a freebie for signing up. Unfortunately, these deals can be deceiving and many people fall victim to changes in terms and loopholes. The following credit card usage tips will help keep your money safe.
Be wary of low interest rates and APRs
Many credit card companies advertise low or 0% APRs and low interest rates to get you to open an account. This can seem appealing – in the event that you carry a balance on your card, you won’t have to worry about high charges, right? Unfortunately, this is not always the case. Usually, low or 0% APRs only apply to balances that are transferred. Any new purchase using the card will have a higher APR. APRs and interest rates can increase if you make a late payment or if you go over your credit limit. If you get caught in any of these circumstances, your interest rate could increase drastically and you could be stuck with a higher credit card bill than you expected. One of our top credit card usage tips is to read the fine print on any promotion involving low interest rates or low APRs. Be aware of how you can avoid unexpected charges. Of course, paying your credit card balance off completely each month is a great way to avoid any interest fees and you don’t have to worry about an APR at all.
Avoid foreign transaction fees
When traveling abroad, using credit cards is a good way to avoid carrying large amounts of cash. However, many credit cards have foreign-transaction fees – a charge from the credit card company when you make a charge in a foreign currency. Your credit card company does not have to notify you of these as the terms are stated in your contract. These are usually around 3% of the total transaction cost, so they can add up quickly and be a nasty surprise on your statement when you come back home. It’s important to find out your credit card company’s policies before you travel so you can choose the best way to use your credit card abroad. Some companies offer lower transaction fees or only charge them if you pay in local currency. Some credit card companies don’t charge any foreign transaction fees at all. One of our credit card usage tips is to ensure you are prepared for extra fees on your credit card statement when you return from your trip.
Watch out for promotional periods
Any advertised promotion to sign up for or transfer a balance to a new credit card must come to an end. Often, the promotional period will only last a couple of months. Whether it’s a low interest rate or APR, a perk, or a waived fee, it will eventually finish and your credit card will revert to regular terms and conditions. The promotional period could be advertised upfront when you sign up, or more commonly, simply included in your contract for you to find for yourself. Most credit card companies are not required to notify you when the promotional period comes to an end. This means your interest rates and other fees could go up without you noticing, creating a higher balance than you anticipated. These changing fees can make your balance difficult to manage and you often have no recourse with the company. It is important to know the terms of the promotions when you sign up so you can avoid having extra credit card debt.
Don’t fall for perks or freebies
One of our top credit card usage tips is to be aware of perks or freebies with credit cards. Often, credit cards will come with a perk or freebie to entice people into signing up. These could be anything from cashback rewards, bonus travel miles, points, or even hardware such as tablets or laptops. These various perks seem great upfront. However, the cards that usually come with these freebies have an annual fee, high interest rates, or minimum spending requirements. These stipulations are not always disclosed upfront, and people can end up with a card that is out of their means to support. There will often be hidden fees in these promotions. It is essential to look past the promotions and perks and see what the credit card is really offering in the long term.
If you need more advice on our credit card usage tips, feel free to reach out to one of our Licensed Insolvency Trustees at Spergel. If you have questions on our holiday spending money guide, contact us at 310-4321, email us, or visit our nearest location for a free consultation. You can also fill out our free assessment form online and one of our representatives will contact you directly.