What to Be Wary of in Credit Card Offers

The envelopes do a sneakily solid job of catching your eye.

Usually stamped with a colorful “Pre-Approved!” or “Immediate Cash Back!” to grab your attention, credit card offers are not always what they seem. Military families as well as young or newly married couples are likely bombarded by these kinds of mailings.

Worse yet, credit card companies are going after consumers with subpar credit scores. Twenty-five percent of the new cards issued during the third quarter of 2011 went to customers with credit scores below 700, according to TransUnion data. That figure was 23 percent during the third quarter of 2010.

Here are some things to be wary of when you look at credit card offers:

Fees galore
Don’t expect to find information on fees in large print. Look at every character in fine print. Offers littered with dozens of fees—maintenance fees, activation fees, monthly fees, service fees—can put a dent in your balance. For example, if your limit is $1,000 but you pay $200 in fees, your real cap is $800.

Doubling interest rates
Beware of cards that feature an interest rate on balances you carry from one pay period to another and a different rate on new purchases.

Introductory APR
Low annual percentage rates get customers to sign on the dotted line. But read carefully because that introductory APR will expire and get higher.

Variable rate
Variable interest rates change based on the national interest rate. It’s more reliable to get a fixed rate rather than one the credit company can change without sufficient — or any — warning. Note that issuers can change fixed rates, too, but only if you’re given 15 days notice.

Grace periods
When you make a purchase will you immediately start accruing interest? With a grace period, that won’t happen. Grace periods give you time to pay off your balance before the interest kicks in.

Your financial habits
Consider how you use credit cards to determine what offers best align with your needs and wants. Variable interest rates may not matter to consumers who pay their balance in full, while fixed interest better serves people who think they’ll carry balances.

Now you’ll at least be prepared to decide what’s best for you while spotting the less-favorable terms in credit card offers.