Plastic Rap Warning


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Most people use credit cards–but do they know the terms of the agreement they have with their card issuer. Credit is a valuable and necessary financial tool. It can help you establish a credit history, make purchases conveniently, and take advantage of the benefits and services offered by credit issuers.

  • Card offers often state: "You have been approved for a credit line of up to $100,000." The key words are "up to." When you apply, you won't know how much credit you will receive. The company can, and often will give you a lower credit limit.
  • "No annual fee" offers may require you to make a minimum number of purchases using the card or you will be charged an "inactivity fee," similar to an annual fee.
  • A "fixed introductory rate" is fixed, but only for the introductory period, such as six months. The rate will change after that time and may even become a "variable rate."
  • Fixed interest rates can change at any time after a 15-day change-in-terms notice. Fixed rates can also change if you pay late or do anything else to expose yourself to a penalty rate increase – for example, making a late payment or bouncing a check.
  • Many offers include the opportunity to transfer a balance from another card without paying a fee. Ask if you can wait until you get the card to transfer a balance. If the balance you want to transfer is higher than the credit limit on your new card, the company will only transfer a portion of your balance, leaving you with a balance on the old card.
  • Sometimes cards have low introductory rates that are good for balance transfers or purchases or both. In this case, your payments are typically allocated first to the balances with lower APRs. Higher interest balances are paid down only after balances with lower APRs. Sometimes the low balance transfer rate comes with a requirement that you must make a minimum number of new purchases each month.