How to ignore shrewd credit card offers and avoid new debt
During holiday shopping, credit card companies are hard at work. They’ve built huge, successful businesses on the fact that, despite sincerest and best intentions, most people lose track of how much they’ve charged and do not pay off their balance before interest begins to accrue. Any “savings” or “benefits” you originally earned using the card are quickly wiped out. And during holiday shopping, in particular, we’re presented with offers nearly every place we shop.
So here’s how to ignore shrewd credit card offers and avoid new debt…
How no interest or zero interest really works.
You’re offered zero interest or no interest for a specified amount of time, such as 6 months or even a year. This can seem like a good idea but can set you up mentally to take on too much debt. This is because, psychologically, it can feel like “free money” but it’s not.
Please note that zero percent interest or deferred interest for cards or offers by places like furniture stores can be even more dangerous.
If you don’t pay off every penny within the allotted time, the interest can be back-calculated to the original amount borrowed – regardless of what you already paid down and how little you may still owe – and is calculated for the entire time period. This can result in a very hefty new balance. Retroactive interest can even be activated by other slip-ups, such as a late payment, any payment that doesn’t meet the minimum requirement and going over your credit limit. Be sure to read the fine print before even considering these types of offers that look good on the surface.
How interest rates can change on you.
When any special offers conclude, interest rates are often higher than you might expect, as high as 23%. As if that isn’t bad enough, what many people also don’t realize is card companies are fully within their rights to jack up interest rates if a borrower goes more than 60 days without making a payment. Although you can ask for your rate to be reduced after making 6 months’ worth of on-time payments, the interest accrued during that time period can really set you back.
How extra amounts or extra percentages off at the register work.
Card issuers rely on impulse to drive these type of sign-ups. You’re at the register and the clerk asks you if you’d like to save an extra 15% off your purchase today by applying for a new store-branded credit card. Maybe the clerk even gives you an…
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