3 Biggest Credit Card Traps To Watch Out For

By GoBankingRates.com. May 7th 2016

Sometimes an offer that's too good to be true is -- well -- too good to be true. Case in point: credit card rates and rewards credit cards. The offers might sound attractive, but you're going to be unpleasantly surprised when the other shoe drops. That is, unless you read this article where we deconstruct what's actually behind the "best" interest rates and rewards credit cards. Keep in mind, owning a credit card can still be beneficial (see: 7 Important Benefits Of Using A Credit Card), but don't let these common traps lure you into making a bad financial decision.

#1. Zero Interest Offers

Zero interest credit cards sound great, and they can be. After all, zero is without question at the top of the list of best interest rates. But there's a catch.

While you might not be keeping track of how much interest you'd accrue with a zero-percent interest offer, your credit card company is. If you haven't paid off your credit card by the end of your one-year grace period, for example, you'll get hit with all the back interest that you haven't paid over the course of the year.

This can be significant and it won't be waived. Zero interest credit cards can be a good deal if you plan on paying off the entire balance within the grace period, but if you can't, it's going to be far more trouble than it's worth.

#2. Alluring "Free" Rewards Points

As with everything else in personal finance and credit, the devil is in the details. You should spend copious time reading the fine print on your rewards credit card applications before you sign on the dotted line.

For example, a credit card company might severely limit the amount of rewards points that you can use for things that you actually need, restricting usage to certain purchases only. Travel restrictions and blackout dates are common travel-based rewards credit card catches, and on some credit cards your points might expire quickly, making them meaningless.

Also, "free" rewards points might not be free at all. There's a good chance you have to spend a certain amount of money to qualify for the points automatic free points. If you don't need to spend $1,000, rewards cards with free point promotions may just be a wasteful way to spend.

If you're still interested in finding a credit card with a good rewards program, check out Tips For Choosing The Best Credit Card Rewards Program.

#3. Waived Annual Fees

A lot of credit card companies try to lure you in with "waived" annual fees. Like the attractions offered above, these might not be all they're cracked up to be.

"No annual fee" might mean a few different things. It can mean that you won't be paying an annual fee during the first year that you have the card, but that you will have to pay an annual fee every subsequent year that you use it. It might also mean that you won't have an annual fee provided that you spend a certain amount on the card before a specified date.

Even if none of these circumstances are the case, you'll almost certainly have to pay an annual fee if you make a late payment or default on any of the other terms of the credit card.

When it comes to annual fees, "free" doesn't usually mean anything of the kind.

Making an educated decision about what the common credit card traps are, can help you better find a credit card that is right for your borrowing needs. Just always make sure to read the fine print and terms of use before sending in an application, and always be wary of offers that seemingly promise too much.

Nicholas Pell is a contributor to www.GoBankingRates.com, your source for the best CD rates, savings account rates, personal finance news, and more.

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