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Credit card traps - 5 Tips and tricks to avoid them

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By: anonymous
on 26th Feb,2014

However, there are also some dangers of using credit cards.
Credit card traps - 5 Tips and tricks to avoid them

Credit cards are beneficial for us in various ways - they help to build credit history, set up businesses, sponsor shopping endeavors, offer rewards and cash back bonuses, meet your emergency expenses, funds airline tickets, etc. However, there are also some dangers of using credit cards. Unwise use of credit cards may lead you to debt trap from which it may become very difficult for you to come out. The credit card companies also spread out various traps for the innocent consumers for making money. So, it is extremely important to be conscious of the common credit card traps that may lead to serious financial problems. Read on to know about 5 tips and tricks that should be used to avoid getting into credit card traps.  

Tips to avoid credit card traps

Read through the following lines to get an idea about 5 tips and tricks to stay clear from credit card traps.

1. Avoid variable interest cards: If you really don't wish to get into credit card trap, then avoid taking out variable interest rate cards. The variable interest rates are normally based on Prime rates. So, whenever the federal government increases the prime rate, the interest rate on your card will increase too. This means that after few months of taking out a credit card, you may end up paying far more on the interest rate than you've intended to.
2. Check the rates: If you are taking out a fixed interest credit card, then you should check the following things:

a) Whether the interest rate is valid for the entire term
b) Whether the interest rate is valid for the introductory period

A lot of credit card companies charge low interest rate on the cards to attract customers. However, most of the times, they don't reveal the fact that the low interest rate will only be valid during the promotional period. The credit card issuers hike the interest rates by several percentages once the promotional period is over and the consumers fall into debt trap. So, you should always ask the customer representative whether or not interest rate is applicable only in the introductory period.    

3. Don't pay membership fee: Nearly all the credit card companies have stopped charging membership fees. So, if any credit card company asks you to pay membership fees, then it is better to not take out cards from them. However, if the company offers other services such as life insurance or cash back bonuses, then you can think about paying the fee.  

4. Check the overseas fees: Are you planning to visit an exotic foreign country in your summer holiday? Are you thinking to make all your purchases through your credit cards instead of cash? If yes, then make sure you check the overseas fees. This is because a large number of credit card companies charge exorbitant fees for the overseas purchases. So, if you don't keep a close eye on the fees, then you can get into credit card trap. If your current credit card company charges huge overseas fees, then you can shop for the cards that offer you a better deal. 

5. Read through the contract: One of the most common credit card traps to watch out for is hidden information. You should always go through the contract papers before signing it. This is because the credit card companies often include the hidden information in the "disclosure" section at the end of the page. They include the miscellaneous fees in that section. So, if you miss out that section or overlook that part, then you may end up paying several extra fees, which you were not aware of. 

Finally, you should always check your mails to find out whether the credit card company is going to hike the interest rates. If your creditor is going to do so, then you can negotiate interest rates with him/her. If your creditor rejects your plea, then you can switch to another credit card company also.

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