5 Red Flags on Credit Card Offers

Younger consumers often receive credit card offers in the mail.

The appeal of charging wish-list goodies to a credit card allures shoppers in their late teens and early 20s. Young military families, especially those in financial trouble, need to look out for predatory offers.

During the third quarter of 2011 credit card companies issued 25 percent of new cards to customers with credit scores below 700, according to TransUnion. That’s up from 23 percent during the same quarter in 2010.

With companies targeting consumers with lower scores, it’s smart to arm yourself with knowledge. Below are some red flags that appear in credit card offers that arrive in your mailbox:

Initial annual percentage rates (APR)

Introductory APR is usually low to attract customers. However, it will expire per the fine print and increase.

Credit Card Offer Tips and Warnings

Variable rate

Again, that APR may look good, but check the asterisk(s) next to it. If it’s a variable rate that means the issuer can adjust the rate according to the national interest rate, but the issuer does not need to warn you. Fixed rates can still change too as long as the issuer gives you 15 days notice of the change.

Two interest rates

Credit card companies might charge an interest rate on balances that roll over from one billing period to the next and another on new purchases.

Excess fees

There’s no end to how companies name their fees: activation fee, maintenance fee, annual fee and much more. The obvious downside is that fees shrink your credit limit. A $500 limit with $100 in fees is really a $400 limit.

No grace period

Be on the lookout for credit cards that start charging interest as soon as you make a purchase. Ideally, you’d have a grace period, giving you time to pay off your balance before interest starts to accrue. But balances that roll over each pay period will be charged interest.

Analyze how you spend and pay

Think about how you want to use the card. If you don’t plan to pay your bill in full, you should get a card with a permanently low interest rate. For consumers who can pay the bill immediately, it’s best to get a grace period and no annual fee.

Regardless of what you decide, look for the red flags before you sign any agreements.

Thanks to Charles Williams for the photo under a Creative Commons license on Flickr.