April 5, 2005
CONSUMER ALERT: EVALUATE CREDIT CARD OFFERS CAREFULLY
Credit card offers touting low annual percentage rates or balance
transfer deals may look tempting, but Attorney General J. Joseph
Curran, Jr. says many consumers find that the low interest
rate doesn’t last or they are hit with unexpected fees after
getting the cards. The latest issue of Curran’s Consumer’s
Edge newsletter explores the "catches" in credit card
For example, a consumer who got a new credit card with a 5.9%
interest rate was happy until the rate skyrocketed to 21%.
Reason? She had
made a payment late to another creditor. Another consumer took
advantage of an offer to transfer her balance to a card with
zero percent interest– but her first statement showed a $90 transfer
Curran noted that many consumers carry high balances on their
credit cards, so unexpected fees and interest rate increases
have a serious
impact. "To avoid these unpleasant surprises, consumers should
read credit card offers carefully," Curran said.
Some items to check out include:
long will that promised low rate last? Often, a low rate is
an introductory rate that will last a few months and then jump
to a very high rate. Consumers
should find out how long the introductory rate will last and what their
rate will be when the low rate ends.
the interest rate be raised if you make a late payment, or
for any another reason? Some common reasons for "penalty" increases
include being late (even by one day) with a payment; making
a payment late to any other creditor;
or having a balance that goes over the credit limit.
transfer fees: An offer to transfer your balance to a card
at no interest or very low interest sounds tempting, but often
comes with a fee–3% or
4% of the balance. On a $4,000 transfer, a 3% fee amounts to $120.
pre-approved for the card: Don’t count on it.
The credit card company got your name on a list of consumers
that meet certain basic criteria.
Once you apply, it will seek your full credit report to determine
if your qualify. It might decline to issue you a card, or send
you a card with a higher interest
rate or lower credit limit than advertised.
annual fee: Sometimes this promise is good only for the first
that, you may be automatically billed for an annual fee.
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