There are questions I should have asked before getting my credit card. Questions like: “Did you get that tattoo in prison”, or “Is it safe to buy credit cards from a known identity thief”. But I didn’t, and as a consequence, I was eventually forced to feed one more salesman to my pet shark. They love eating their own kind! But for those of you without a Great White, you’ll have to be more inquisitive when signing up. Be sure to ask these questions:
1. How Long Do These Promotions Last?
Knowing most credit cards, about as long as Rupert Murdoch’s integrity when he spots a dollar.
Many credit card salesmen go through a “scam artist” phase, which lasts from the start of their career to the end of it. During that time, they will lie by omission. Sure, they’re telling the truth when they talk about the 10% rebate, or the 0% interest free payment. But they won’t emphasize that these are temporary.
Most people know the 0% interest trick by now, where you pay no interest for the first month only. But there are other things to watch for. For example, you don’t want to get a frequent flier card because you’re holidaying in Spain in December, only to find the promotional miles expiring in October.
So if you spot a feature that’s attractive to you, make it a point to ask if that’s just a promotion. And if it is, when is the exact expiry date?
2. What is the Balance Transfer Fee?
Say you’ve maxed out a high interest credit card, because life has no meaning without both of of Illidan’s swords. Now that you’ve blown your credit on World of Warcraft, how do you get it back?
With a balance transfer. That’s when you pay for a credit card with another credit card. It sounds like a good deal: transfer the debt from a higher interest card to a lower interest card. And if you split the debt between the two, you manage to keep both credit lines open.
But what’s not being disclosed is the balance transfer fee. This is a percentage of the amount transferred, which is billed to your account. This amount often ranges from 2% – 3%. And even if there’s no balance transfer fee, there may be other penalites; like a time limit on the lower rate, or an adjusted interest rate for balance transfers.
3. What is My Exact Credit Limit?
With most credit cards, going over the credit limit imposes a fee. And like every other credit card fee, it’s in stealth mode. Often, you won’t even be told that you’ve gone over the limit; the charge just appears on your bill.
Also, you know how the credit limit is often generalized as “twice your income”? Yeah, that isn’t universal. Exceptions are sometimes made. If you’re self-employed, for example, Stephen Hawking would get a migraine working out your credit limit. So be sure to ask the exact amount.
Also, if you’re doing a balance transfer (see point 2), you need to make sure the transferred debt doesn’t break the limit of the new card. Remember, you are never informed unless you ask. A bank’s concept of customer service is throwing your wallet back when they’re done emptying it.
4. Do These Promotions Apply Universally?
Credit card promotions can come with more conditions than an alcoholic’s liver. Often, advertising copy will simplify the terms of a card’s promotions.
For example, a 10% discount at Motor Oil Diner might only be valid between 2pm – 4pm, only on Mondays and Wednesdays, and only if you sport a birthmark resembling Bruce Willis headbutting a helicopter. But advertising copy will write that as: “Enjoy discounts at Motor Oil Diner”.
Some cashback cards only give you rebates only at selected malls, or only after exceeding a minimum expenditure. Watch for these; if you won’t meet the conditions, the card’s not worth it.
I know comparing credit card benefits has all the excitement of being anaesthetized, but you can quickly shop at comparison sites like MoneySmart. It pulls up a list, and it won’t take five minutes to pick the right one and apply.
5. What is the Billing Cycle?
When do you have to pay off the card before you’re considered to have defaulted? “End of the month” is a convenient phrase, but what is the exact day?
Nothing sucks worse than paying your credit card bill on the 29th, then finding out the last billing cycle closed on the 28th. Missing it by one day adds significant (and unnecessary) interest. Also, you need to synchornize your credit card with your income payments; you want to dodge cards with a billing cycle too far from pay day.
Apart from the threat of rollover debt, credit cards can also impose late fees. Sometimes, you aren’t even informed of the late fees until you’ve incurred them three or four of them. No use screaming about it then; the guy at the bank will just shrug and say “Hey, it was in the 4,000 word contract you signed.”
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Tags: Credit Cards