Credit Card Deals and Their Catches

September 06, 2007

There isn't such a thing as a free lunch.

The TANSTAAFL principle is probably one of the only universally true principles around. Don't expect something for nothing and especially do not expect this out of any credit card deals.

This seems obvious enough, but many people look for the best credit card deals, compare credit cards until they find the right one and then do exactly that. They ignore the catches, ignore the fine print and just assume that since they've done a little bit of research, everything is going to work out perfectly.

Imagine their surprise when they look at their credit card bill one day to see that their interest has doubled, their minimum payments have gone up, their credit limit has gone down and they are now being charged a fee every month for having a balance in excess of the credit limit.

It's at that moment that they start thinking to themselves that maybe reading the fine print would have been a good idea. Well, they're right about that.

Credit Cards Come with Catches

No credit card in the world, no matter how good they seem, offer something for nothing. Credit cards are controlled by a credit card company, which is a for profit organization. For profit organizations do not give away something for nothing. They do everything in their power to increase their bottom line and even good credit card deals will have fine print catches in them that increase the company's bottom line.

Great credit card deals are called that because of the benefits they offer, the low interest rates or just the overall desirability of the account as a whole. Just remember that credit cards are nothing more than instruments for taking out unsecured loans; nothing more and nothing less. To find out what the catch on the loan is, you absolutely must read the fine print. If you don't and trouble arises down the road, guess who the only person you have to blame is.

Yep, that's right. You.

So now that we know that fine print has to be read, what is the fine print? Well, it varies from credit card to credit card and can take on a number of different forms, a few of which are discussed below.

APR and Interest Rate

This is the double-edged sword that makes or breaks credit card companies. If it weren't for interest rates, the whole idea of unsecured credit cards would be null and void. The credit card company makes up for the risk involved in a non-collateral loan by charging an interest rate. They do this to make the reward greater than the risk, much like an investor might do before investing. You're the stock and they've got the money.

Now pretty much every single credit card in existence brags about a low APR (or in some cases even a 0% APR) whether or not they actually provide it. Lying in an advertisement of this kind is illegal, but the company isn't lying. While they might offer you a low APR credit card, it is quite possible that this might change into a high APR credit card after a certain trial period and if you've still got a balance by then, your newfound high APR will definitely be applied to that balance.

So how do you find out if this might happen to your credit card? Have a look at the fine print, of course!

Fees, Fees and Even More Fees

There are three primary types of fees: annual fees, monthly fees and transaction fees. Some lucky recipients receive all three of these and if they don't make their payments on time a whole slew of late fees and inactivity fees might be tossed into the mix.

That same credit card that was bragging about its APR might also tout itself as one of the no fee credit cards and the combination of both the APR and fee benefits can be a very alluring siren song for most people.

But once again, remember the principle of TANSTAAFL. Check the fine print. How long is this so-called fee free credit card going to stay fee free? While it's true that no annual fee credit cards exist and are rather numerous, some credit cards are only no fee for an introductory period of time, at which point they revert to a fee payment schedule. The only way to find out if this applies to your credit card is to read the fine print, so make sure you do it!

If you have poor credit history or bad credit history, expect some more fine print from the credit card company. This can take the form of higher interest rates than advertised, a lower credit limit than advertised, or even both.

It bears repeating; read the fine print. Reading the fine print is the only way to truly know everything about credit cards and a few minutes spent in quiet reading could end up preventing a multitude of nasty surprise in the near and far future.