How well do you read those credit card offers that you are always getting in the mail? If you are like most people, you look at the larger print items. You may know there is no interest, for the first six months, that there is a balance transfer special, that you can get cash back, but what about the real legal description of the card?
When you are shopping around for the best credit card, the more you know about cards, the better decision you will be able to make.
Here’s a rundown of many of the terms you will see on those credit card offers and what they meant to you:
Introductory Rate – You will get this interest rate when you initially sign up for the card. With many companies, this is 0%. They want to get you in the door with a great rate. You need to make sure you know how long this great rate will last and what the permanent rate will be after that time. A high rate down the road may negate a low rate in the short term.
Annual Fee – While you would think credit cards would be free to have and use, that is not the case. Many credit cards have annual fees associated with them. These fees, often on rewards and cash-back cards, are essentially fees for being a member of their program. Find out what these fees are and if you will be getting enough in rewards to make sense in paying them.
Pre-approved – It sounds great to hear you are pre-approved for something. Unfortunately in credit cards, this does not always mean what you think it should. When you see pre-approved on a credit card offer, that’s not a guarantee. It simply means you seem to be within the general guidelines of the people they are looking to convince to get their card. However, you won’t know if you are really approved until you sign up and they look at your credit report.
Grace Period – Essentially the grace period on your credit card is the same-as-cash time-period. If you make a charge and pay it off within this time, there will be no interest charged on the purchase. Grace periods differ by company. Some offer no grace period; others will give you a full month to pay before they start adding finance charges.
Transfer and Transaction Fees – Many credit cards offer great deals if you want to move a balance from another credit card to the new one. Often they will put this new debt on the card at 0% interest for some time. While you may think this is great way to stop accruing interest, make sure you are not paying a ‘transfer fee’. These can often be higher than the interest would have been if you were paying off the initial debt at a good pace. Also many cards offer cash advances, to make purchases. While the idea of being able to write a check off of your credit card is nice, there are often fees attached to this kind of transaction. Read the fine print of the card you are considering.