Decoding Special Credit Card Offers
Do you ever get credit card solicitations in the mail? You know...the ones that say 0% interest. Like anything else, there are some really good offers out there. We can also tell you there are offers that look good until you read the fine (and sometimes not-so-fine) print. Many cards will lure you in with 0% interest, travel rewards, free gas, etc., but how much will that end up costing you down the road?
The first thing you should do when you get a special offer is find the disclosures, which are usually on a chart and very legible. You’ll see Annual Percentage Rate for purchases, balance transfers and cash advances. That is where you look to see what the standard rate will be once the special offer ends. If the card charges a penalty APR, meaning your rate will increase if you make a late payment, it should be on that chart. There should also be fees listed. There may be a fee for cash advances, balance transfers, late payments and sometimes foreign purchases.
These are all things to consider before you apply for the card. Let’s say your current credit card has a rate of 12.99%. Another card is offering 0% for a year when you transfer your balance. In the disclosures, you learn the standard rate on the new card is 16.99% after the introductory period. If your balance is not paid in full during the introductory period, you will start paying more interest on the new card. Does that outweigh the amount you saved with 0%? You have to do the math.
Some people accept the special offer with the intention of transferring the remaining balance back to the old card. That could work, but the old card may have a balance transfer fee. Most cards charge about 3% and add it to your balance immediately. If your balance is $1,000, the one-time fee is only $30. If your balance is closer to $5,000, you’re looking at $150. Again, you have to do the math to see if you’re still saving money.
Introductory offers and other rewards are not bad things. You could save a lot of money while earning free stuff. But you have to be smart about the card you pick. Read the disclosures. Do the math. Make an informed decision to be sure you truly are coming out ahead.