Take a look at this cartoon.
It pretty much sums up how credit card companies think of you.
You are fish to be hooked, and big banks don’t believe in catch-and-release. Once they have you on the hook, they are going to have you for dinner. So how do you avoid getting roasted by the credit card companies? Know the bait they use.
The Low Introductory Rate
Banks want to make as much interest off of you as they can, but in order to do that they first need to land your business and get their card in your wallet. Now that consumers are getting smarter about debt and recognize that they need to shop around for good deals, companies put out attractive “teaser rates” to get you to sign up and then raise the rate after the introductory period.
If you rack up big charges you’ll then end up paying off the debt over time for big bucks.
The Balance Transfer Game
If you already owe a significant amount of money on credit cards, banks will dangle a low-APR balance transfer rate (sometimes even 0%) to entice you. However, these rates almost always expire in a few months, leaving you right back where you started. Even worse, most balance transfers require you to pay an upfront fee of 3% to 5% of the amount transferred, so that low rate isn’t real.
The Status Card
Unless you are a platinum selling rapper, you shouldn’t have a platinum-colored credit card. Card companies have spent decades marketing “premium” or “status” cards to their “elite” customers. Regular credit cards have undergone an alchemy change from paper to gold to platinum to titanium to… black.
These cards carry exorbitant fees and bad terms, all so that their holders can show them off when they pay for their dinner at the Olive Garden. Don’t get sucked in, it’s just plastic.
The Affinity Card
It’s basic human psychology that everyone wants to belong to a group that they’re proud of, and show off that affiliation. You can do that with a credit card that pegs you as a graduate of a particular college, owner of a certain car or member of a special organization.
For nothing more than a printed logo, you can end up paying more in fees and interest than you would for a plain-Jane card. Credit cards spend most of their lives in your wallet, don’t pay more to have them there.
These are just some of the various things that card companies dangle in front of you to get you to pay more for credit and get into debt. Know the bait and you can avoid being a fish.