Many credit card companies are raising the bar when it comes to enticing consumers with the hopes of making them loyal customers. Whether it’s a host of new and impressive credit card offers hitting your mailbox or inbox, all with remarkable perks and benefits or if it’s big sign up bonuses, competition in this area of the financial sector is heating up – and it’s your signature they want.
The new credit card laws keep unethical offers to a minimum, but there are ways that might not be considered unethical, but are still unwise choices for some consumers. Here are a few of the newer ways credit card companies are attempting to woo you.
First things first – if you’re really looking for the “meat and potatoes” of any offer, your first best place to look is in the terms and conditions, otherwise known as “the small print”. This is where it all comes into play. The good news is there are measures in place now that will help eliminate some of the legal jargon in lieu of easier to follow language that actually makes sense to those of us without a law degree.
The big bonus offers are still the preferred method of catching your attention and then reeling you in – and from what we’ve seen during the first few weeks of 2013, this is going to be a big marketing effort for some card companies. The offers are quite impressive. Remember, it’s all about spinning the good and turning the focus away from the “whole picture”. Free airline tickets, which is a great draw for those credit cards with travel rewards, might require you spend a minimum amount in relatively short period of time. If it’s not likely you can meet that condition, that credit card might not be the best choice for you – besides, there are other offers that might not be as restrictive that will benefit you in other ways. The key is to do a bit of comparison shopping. If, however, you do anticipate dropping a few grand on your credit card, then it could be the perfect credit card offer for you.
Ah…that confusing “pre approved” offer – everyone has received these kinds of offers. Pre approved, in many (if not most) instances is nothing more than the card company verifying you have an address to send that offer to. That could be its version of “pre approved”. You will still have to go through the traditional approval process – which means filling out the application, having your credit checked and waiting to see what kind of APR you’re offered. Pay attention – if you weren’t shopping for a credit card when you received the offer, then don’t let that be the reason for you to suddenly wonder if a new credit card is what you need. In fact, it could be detrimental to your efforts of a financially sound decision.
Teaser rates are perhaps the most frustrating of all marketing ploys. There are so many dynamics that go into these temporary rate reductions. First, you have to qualify – and until and unless you read the terms and conditions, you don’t know if there’s a minimum credit score that would make you eligible for that initial drop in APR. Also, these rates may be applicable to purchases or balance transfers and not both. Then, of course, there’s the length of time the rates are good for. They vary greatly, too. Some include six month intro APR rates while others can extend out for a year or more. This is just one more reason to truly understand what you’re getting into. You don’t want to transfer a balance on one credit card that has a 12% APR to a new credit card with a 0% APR and then learn it was good for six months only and are now paying 14% on that balance you initially moved. In other words – become your own best advocate.
We mentioned that the jargon is much better than it was, say, five years ago – but it’s not perfect. You still have to go into these offers in a defensive mode. Pay attention to the clever wording, understand that “Number 1 ranked credit card” doesn’t always mean it’s been judged the best credit card ever – it could mean that it ranked number 1 for donating food to an animal shelter in some foreign country that you and I have never heard of. Also, don’t get taken by names like “platinum” or “diamond”. It rarely means anything. It just sounds better than “plastic credit card”.
Finally, don’t overestimate the cash back offers associated with any credit card offer. Pay attention to the prerequisites. For instance, you might have to spend a certain amount each month while not going over another amount. There are very detailed conditions associated with many credit card offers. Many of the rotating cash back categories that credit cards are offering these days are great – provided you spend in a certain category and provided you meet other criteria. Even then you need to do the math – it could be you max out each quarter earning $40 or less. Approach it with the goal of understanding those dynamics. It’s the only way you won’t be disappointed.
Other things to look for are the fee structures, the new rules you must adhere to if you break the initial rules – for instance, if you’re late with a payment, you may relinquish all of those perks that made you want to carry that card in the first place. Also, check out the reviews. Are other consumers happy? Is its customer service ranked high? What about replacement cards? Fraud protection? Fees to speak with a live person? These are all factors that you should be thinking about right now – before you apply. Every detail you cover now is one less that’s going to bite you six months from now.
So what are your plans going into the new year? Are you paying down credit card debt or are you looking to add another credit card to your financial arsenal? Share your thoughts with us.