Waived registration fee. No annual fees. Zero percent interest for the next six months, or even a year. Rewards points. Free airline tickets, hotel stays, car rentals, a variety of great brand-name products. Low teaser rates and other deals sound great, until you find out what you’re really paying – if you find out.Who could resist such a deal?
Well, if you’re smart, maybe you.
Enticing offers like these from your bank or credit-card issuer are increasingly filled with traps that can pile on unexpected fees or trigger punitive interest rates, some as high as 35%. True, the details are spelled out in the fine print of promotions and cardholder agreements. You have to be incredibly diligent to avoid the tripwire.
The strategies that follow will help make sure you don’t get caught.
Trap No. 1
Bait and Switch: The Oldest Trick in the Book
You’re tempted by one of the many low-rate or zero-percent card offers you get in the mail claiming you’re pre-approved for the deal. But the fine print often contains qualifying language that can result in your getting a higher rate than advertised. If you do land the stated rate, you’ll often find that it applies only to balance transfers, not new purchases. Your monthly payments, however, will be applied first to the low-rate balance transfer, helping the new, higher-rate debt to grow. And if you’re late with just one payment, the issuer may well boost your rate on the whole amount outstanding, even though the low rate was supposed to be in effect for six to 12 months.WHAT TO DO The cardinal rule of balance transfers is to take the card transferred to and put it in a dark place where you’ll never be tempted to use it again. Before you apply for a low-rate deal, make sure you understand the terms in the disclosure box and read the fine print to see what can trip you up.
Trap No. 2 Late Payments?: One Strike and You’re Up
You probably know that late payments can prompt your card issuer to increase your interest rate, even of you’re a first time offender. And you may know that some issuers will raise your rate if you’re late paying a bill to a different company altogether – a policy called universal default that is practiced by 45% of banks nationwide.
WHAT TO DO Call and ask your issuer whether it has a universal default policy. If so, consider switching cards. Check your monthly statements carefully to make sure a rate hike hasn’t slipped past you, and read all notices that you’re sent. Some banks, now give a two-weeks warning and let you pay off your balance at the lower rate. The catch: The account will be closed, so you can’t make additional charges on it. If your rate does jump, ask the issuer to lower it. Tell the rep that other banks have made you better offers, which is undoubtedly true.
Trap No. 3 Two-Cycle Billing System: Twice Is Not So Nice
If you carry an occasional balance on your credit card, you may get hit with higher than expected finance charges if your issuer uses a two-cycle billing system vs. the standard one-month cycle. That’s because carrying a balance wipes out the grace period on new purchases, and in a two-cycle billing period, the issuer can impose interest retroactively. Say you charge a P30,000 laptop on Oct. 15 and can’t pay the full balance when you get your bill in November. Under double-cycle billing, you’d be hit with interest based on your average daily balance in October and November, resulting in 50% higher finance charges than if you’d been charged for November alone.WHAT TO DO Check your cardholder agreement to see if you’re subject to two-cycle billing. If you are, and you carry a balance from time to time, switch to an issuer that bills on a single-cycle.
Trap No. 4 The Not So Courteous Service
It sounds like a nice gesture: Your bank automatically covers you if you overdraw your account, saving you the humiliation of a bounced check or a declined debit card. What your bank doesn’t spell out is the hefty cost of this courtesy service per transaction.WHAT TO DO Sign up for overdraft protection linked to a savings account or credit line instead of relying on the default service. Better yet, stop living so close to the edge. The easiest way to avoid overdraft fees? Don’t spend more than you have.
Waived registration fee. No annual fees. Zero percent interest for the next six months, or even a year. Rewards points. Free airline tickets, hotel stays, car rentals, a variety of great brand-name products. Low teaser rates and other deals sound great, until you find out what you’re really paying – if you find out.Who could resist such a deal?
Trap No. 2
truly enlightening. I really don’t know that these things really happen. thanks by the way!
How to Escape Bank Traps?…
explained some of the real deal between banks transactions. Also show some of the hidden services….
How to Escape Bank Traps?…
hidden strategies by bank to lure customers into transacting….
well, i can only say that this post really open my eyes. I didn’t know these things really until I read your post. great thing you post this! keep up!
sad to say, but these are some of the lamest tactics i ever heard! shame on them!
as the name implies, you’ll be trapped by these tactics unless you’ll be vigilant. thanks for the info!
thanks also trudy! yes you’re right on that one
always use cash and cut back on senseless spending. Those work for me.
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