We all know what to look for when we’re shopping for the best credit card offers, but how many of us know how to avoid choosing the worst credit card possible for our unique spending habits? A new report tells us all about it.
This week, MasterCard reported its profits of $772 million in the third quarter alone – and that’s an 8% increase from this time last year. Clearly, many are beginning to use their credit cards again. It makes sense that the card companies would want to recoup some of its lost profits from the past few years, but too many are resorting to unethical manners to collect those profits.
With more banks offering bigger and more impressive incentives, including 0% intro APRs, annual fees that are waived and no fees for balance transfers, there’s no denying the many opportunities to make great choices when it comes to our credit. But there are red flags to look out for, depending on what your needs and credit scores are. And it appears no one is safe from the grow fee scales.
It can’t be stressed enough the importance of reading the terms and conditions of a credit card offer before you apply. A perfect example of that is found in the offers that instantly discontinue any introductory rates or savings if you fail to meet some miniscule requirement. They don’t have to necessarily give you fair warning either since it’s assumed you know the risks before applying. A new way some card companies are making this happen is by spelling out in the terms and conditions the requirement that balances be paid in full for the first six months – even if it’s a traditional credit card (versus a charge card). If you don’t know that, the 0% APR you’re enjoying could kick into an 18% rate overnight.
Read the terms and conditions – read them more than once, in fact.
Many consumers see ‘low intro APR’ and they can sometimes assume “low” means “no”. Don’t fall into that trap either. Not only that, but one’s definition of low may not be remotely close your definition of what a low APR is.
We’re beginning to see more and more card offers that include high processing fees. Historically, these kinds of fees were found in prepaid card offers; now, though, they’re increasingly being found in traditional credit card offers. Some are quite high, too. The Visa Black card, reserved for those in higher income brackets, boasts a $450 annual fee. Others are beginning to require $95, $150 and even higher fees just to process your application. Of course, you’re not charged that until and unless you’re approved, but it can be frustrating to already owe a balance before you ever even use your new credit card.
Those whose credit histories are less than ideal seem to be on the receiving end of many of these high fee structures. First Premier is one of those that include a seemingly endless source of fees. It says, though, that it targets those “at the lower end of the credit scale” as justification for its 36% APR, monthly fees, an annual fee and other fees for late payments on top of their traditional late payment fee. It also said in it statement,
More and more people are finding themselves with damaged credit due to unemployment, unexpected medical expenses, divorce, etc. The primary purpose of our credit card is to provide these individuals with an avenue to obtain a tool to help them begin to demonstrate positive financial patterns to the major consumer reporting agencies. Therefore, credit lines are kept low (usually around $300) so that these individuals are not put in a position to further hinder their financial progress.
Shockingly, First Premier isn’t the one with the highest fee structures, though. In fact, it’s a credit card designed for college students. This borders on illegal since new laws make it illegal for companies to approve applicants under the age of 21 unless they can prove repayment capabilities or if someone is willing to cosign for them. One credit card’s APR for college students was at 20.99%.
Small businesses aren’t out of the loop either. They are increasingly being hit with higher fees, bigger repercussions for a late or missed payment and downright denials of credit. Not only that, but the rewards appear to be drying up for business owners, too. That’s evident in some of the credit card offers that aren’t even paying a full point for every dollar spent. Their annual fees are on the rise, too.
So what’s the solution? That’s one thing that’s not changed: how to avoid being stuck with these higher fees and payment dynamics comes down to one simple thing: it is absolutely crucial to read the terms and conditions in their entirety. It’s the only way anyone can know for sure they’re making a solid choice when it comes to selecting a credit card.