Credit cards are useful when you need to make large payments on your purchases, in emergencies, or even for regular day-to-day expenses. Although there are many benefits of credit cards, you should be aware of a few important things when you are using them.
Promotions and offers are great when they are for the benefit of the users, but quite often, they can even be deceptive. Whenever you come across such deals, study them carefully and read the fine print. For example, you might be surprised to learn that the low interest rates advertised or the suspiciously large overdraft facility come at a very high price. Here are a few things you need to watch out for when you use a credit card:
Balance transfer charges
Most credit card companies charge exorbitant interest rates and you might be exploring the possibility of switching your balance to another one with lower rates. You may be getting a seemingly reduced rate but on closer inspection of the details you might find a fee for transferring your balance to the new card. It normally ranges from 2% to 4% of the total amount.
Introductory interest rates
Credit card companies use adjustable introductory rates or what is commonly known as teaser rates, to boost business. As soon as the validity period for the offer is over, you will find that your card will go back to a high rate of interest.
Rate increase
The lending institution increases or decreases the interest rates depending on the prevailing conditions in the economy. When they increase the rate, they normally do it with only a few weeks’ prior notice. If you have pending payments but a good credit history, banks sometimes use their discretion and allow the original interest rate to remain for an extended period.
Other instances of hidden charges come in the form of a fee for exceeding your credit limit and foreign currency charges. Moreover, if you don’t use your credit card within a few months, you might have to pay inactivity fines. If you make purchases while traveling abroad, you may have to pay a 2%-3% foreign currency conversion charge.
The only way to deal with hidden charges is to be well informed. Pay close attention to the fine print, and ask the right questions at the time of applying for a credit card.