To sort out the credit card deals from duds, take a closer look before you apply. Keep these five red flags in mind.
Credit card companies love to dangle juicy offers in front of you. You might be “preapproved” for a zero-percent interest credit card or valuable sign-up bonus. Maybe they want to offer you that fancy “gold” or “platinum” card.
The amazing benefits you see in the bold lettering aren’t always what they seem. The real deal is in the fine print.
1. Rates that aren’t guaranteed
In other words, the rate they’re using to lure you in isn’t necessarily the one you’ll get.
Read the fine print, especially the “disclosures and rates” information. Banks are legally required to furnish this information in the easy-to-read format shown on the website of the federal Consumer Finance Protection Bureau.
And if you’re uncomfortable because you can’t tell what the ultimate rate will be, don’t apply.
A low interest rate is one of the big draws of new credit cards. You might not notice the subtle caveats to the special rate.
Some offers will have “as low as” printed in small letters in front of the APR. You might also see asterisks and superscripts that refer you to the fine print, where the text explains the best interest rate is only available to applicants with the best credit.
2. Fool’s gold
Solution? Choose a credit card by comparing the benefits that really matter, like low interest rates, low fees or rewards. We have a credit card page– complete with reviews and a search function– that can help you find the right card.
While such cards may have indicated prestige in the past– and there are still elite cards requiring exceptional income and expenditures– most precious-metals labeling is meaningless.
” Gold cards” have been around for decades. Credit card companies also have added silver, platinum and even palladium to the list of precious metals used in card names.
3. Hyped-up business credit cards
With most small-business cards, it’s your personal credit on the line, not that of your business. Using the card does not develop a credit or create file for your business.
Even if a particular business credit card has advantages– such as enabling you to track business expenses separately– you could be sacrificing consumer protections to get them.
Offers for small-business credit cards might seem like a great way to track business expenses and develop a credit history for your company. These cards seldom live up to the hype, and they offer fewer protections than consumer cards.
In addition, small-business cards lack important protections that consumer cards have. The Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009 applies only to consumer cards, which means your business card can still be hit with fees and rate hikes that would be illegal for your personal plastic.
4. Big bonuses with a catch
Some offers boast “up to 5 percent back” on your purchases, but that may be only at certain retailers, and not for every purchase you make. Some cash-back deals might be for a limited period after you open the account, and there might be a cap on how much you can earn.
Understand what it takes to get the advertised perk when it comes to rewards cards. Rewards exist to make people spend (and borrow) more than they otherwise would. A rewards card may not be for you if that’s a trap you feel likely to fall into.
Shop rewards cards and all other cards before you commit. Again, check out our credit card page to find additional choices.
It’s easy to get drawn in by the sign-up bonuses offered on new cards. You might see an offer of $150 back or 25,000 airline miles just for opening an account. There’s often a catch.
In many cases, you’ll need to ring up a certain amount on your card within a specified time period, like $1,000 in purchases to get that $150, or $2,000 charged to earn 25,000 airline miles. While the details vary, completing these offers as stipulated may be difficult or even impossible, depending on your budget.
5. Not-so-special offers
Being “preapproved” doesn’t actually mean the new card is yours. It doesn’t really mean anything. You’ll still need to apply for the card and go through the whole approval process as you otherwise would.
Credit card offers come crammed with language that makes you feel like you’re getting a special deal. Envelopes might be stamped with “Important” or “Confidential” to heighten the urgency. Once opened, you might be excited to find you’re “preapproved” for a new credit card.
Credit card offers come crammed with language that makes you feel like you’re getting a special deal.
Credit card companies love to dangle juicy offers in front of you. You might be “preapproved” for a zero-percent interest credit card or valuable sign-up bonus. Choose a credit card by comparing the benefits that really matter, like low interest rates, low fees or rewards. We have a credit card page– complete with reviews and a search function– that can help you find the right card.
Because it appears to be a special offer made just for you, be careful about choosing a card simply. It may just be another trick to reel you in.