Credit Card Deals: A Marketing Gimmick or Genuine Deals?

The fierce competition in the credit card market coupled with an increased demand for credit cards has given rise to a surge in credit card deals. From 0% interest being offered on balance transfers and purchases, increased credit limits, cashback, cash rebates etc. – the list is virtually endless.

How do you decide which is for real?

It can be quite a confusing experience to determine which one is the genuine deal among the flurry of schemes being offered. There are hoax companies who do cheat and lie to customers, promising fancy deals. So, how do you determine which are fake and which are for real?

Here are some of the characteristics of genuine credit companies:

• Upfront and honest: Most of the genuine credit companies will be upfront about the scheme on offer and will lay down the terms and conditions clearly. Usually, when discussing term of the credit card contract, the conversation between you and the creditor will be recorded for quality assurance. That’s a plus which helps protect you and the lender.
• Not much puffery: If you notice too much self trumpeting and fancy words, you should have reason to be suspicious. Often times fake offers are fluffed up with empty promises. Be suspect of anything that’s “sounds too good to be true”.
• Read the fine print: It helps to read the terms and conditions in detail. Even though it may take some more time, it is well worth the effort. Not doing so could mean missing out on some ‘catch’ in the promotional deals being offered. Fake offers will often have some fine print that is hidden within their lengthy contract. I personally like to comb through any contract, just to be sure there are no hidden clauses.

There are plenty of promotional deals doing the rounds such as:

• 0% APR:
  APR stands for Annual Purchase Rate and refers to the rate at which all your credit card purchases are subjected to. A 0% APR means that all your purchases made via your credit are not charged any interest. However, this promotional rate is valid only for a particular period – be it 6 or 12 months. On rare occasions, creditors may offer 24 months at zero interest. These 0% APR interest rates usually have strict repayment terms. Often times missing a payment on a 0% APR credit card will result in a high penalty interest rate. These rates can be 29% or higher, and what worse you may be charged in full off the interest you have previously saved on before the missed payment. (For example: Joe has 0% APR. Joes has been making payments on time for 10 months. Joes missed a payment. Joe is now charged for all 10 months of interest he was saving.) So missing a payment could result in hundreds of dollars being charges!

• 0% Balance Transfer:
  Balance Transfer is a method to transfer current outstanding balances from your high interest rate credit card to a lower rate credit card. A 0% Balance Transfer rate means that all transfers done will not be charged any interest. However, this too, is only for a certain period of time. After this promotional period, the rate goes up to the standard market rate.
• Cashback cards:
  These refer to credit cards that reward you for making purchases on the card – this reward could be in terms of reward points, frequent flyer miles (which you can redeem against airline tickets), or even subsidized rates on gasoline etc.
• Cash rebate cards:
  These are credit cards that give you cash for a certain amount you spend on your credit card. The cash rebate percentage ranges from 0.5% to even a substantial 2%.

Applying for that fancy, low-interest credit card does not guarantee that you would get the same card. It doesn’t even guarantee that you’ll get it at the same promotional rate it was offered for. The primary reason being all credit card companies conduct background checks into your credit history. Therefore in case you have had a history of delinquencies or defaults in your payments, then you may not get that coveted 0% rate you expected. Also, the promotional rate on offer is never for an unlimited duration. It comes with an expiry date just like all good things. So if the 0% rate on your balance transfers is for 3 months make sure you transfer your balances within this period. Else you risk incurring the higher standard interest rate on the transfers.

Reading the fine print will help you understand their terms and conditions. For example, most credit card companies will clearly state that in case any defaults in payment occur, then the interest rate reverts to the standard high rate. Therefore credit card deals can be a dicey game if you’re not careful enough.