Watch Out for These Card Offers

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Uh-oh. The credit card companies are losing money, which can only mean one thing: Card carriers are going to be more aggressive about reaching out to qualified customers with "great" offers that some consumers can't resist.

The most recent evidence comes from last weekend’s holiday shopping figures. According to America's Research Group, just 26% of U.S. shoppers paid for their purchases with a credit card.

It’s an alarming shift in credit card company profit margins. The ARG estimates that shoppers who pay via plastic are prone to spending up to 40% more on holiday gifts.

To get back in the game, card issuers will no doubt dive head-first into the marketing waters, and once again send those ubiquitous credit card offers that fill both mail boxes and inboxes.

But be careful — some of those offers are just bad deals. Here’s a list of which ones to avoid.

Watch out for zero-rate, low-balance deals. Card companies aren’t reaching out to you for humanitarian reasons. They’re in it to part you from your cash. Keep that in mind when you see an offer for a zero-interest or low-balance transfer credit card. Buried in the fine print on such offers are traps like automatic rate-hike triggers when you pay late or change the rules on rate increases after card balances are paid off. Make sure you read the fine print and ask questions. Know specifically what can create a rate hike. If you don’t like what you discover, take a pass.

Ignore cards that ask for annual fees. Why pay for something you don’t have to? Annual fees just about always work out in favor of card companies. Some might offer “rewards” points to suck you in, but chances are the rewards points won’t amount to any great savings when the annual fee factors into the calculation. Take airline cards. If you’re paying $99 a year for an airline credit card, and it takes you three years to accumulate the points you need for that free $275 round-trip ticket to Key West, who really comes out ahead?

No-Interest, No Payments? Be cautious. You have to admit, it sounds good. No interest and no payments on that $2,000 living room furniture set for one year or more? Where do we sign? But watch out. If you accept the $2,000 up-front offer, it’s given to you as a $2,000 line of credit that is essentially maxed out at 100% of the balance. That can adversely impact your credit score, as the amount of debt balances is a big factor in credit agency scoring models. Even as you pay the money down, your line of credit stays at 100%, all the way down.

Keeping an eye out for tricky credit card offers can be a real money-saver. All it takes is a look at the fine print and a healthy dose of skepticism.

Not for nothing, but a big trash can nearby can help too.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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