When looking for a new credit card, it can be tempting to go with the card offering the most incentives just for signing up. Credit card companies know they have a lot of competition to gain customers so many will use introductory tactics to bring in new business. These intro offers are very appealing but often do not reflect the actual long-term conditions of a credit card. If you do not understand what is coming down the line, you can end up hurting your own finances and credit.
Credit card companies want to attract your attention fast. They want to offer you something you think you can’t refuse so you’ll sign up without thinking past the initial offers. Some companies will give away cash incentives, exclusive merchandise, and other free items as soon as you fill out the application. Other companies lure you in with 0% or other low interest rates for the first year. Some card companies offer to double your rewards points during an introductory period. Whatever the incentive, it is likely to be attractive enough to get you to turn in an application.
Looking Beyond the Intro
When you take away the introductory incentives, you will get a clearer picture of what to expect from a credit card offer. This information is at the heart of the matter. You need to be informed of all the card conditions as they will be after the introductory period expires. For instance, a 0% interest rate for the first few months may be unbeatable but in order to accurately compare card offers, you need to look beyond the incentive period to see what the real interest rate is. If it jumps to 18% after the introductory period has expired, you may not be able to afford the terms. Read the fine print that spells out what is in store for you later.
Weigh Your Options
There are many resources now available to compare credit card offers. Since new offers are always changing, it would be beneficial for consumers to make notes about card offers that appeal to them and then compare each card against each other. Understand terms like grace period, billing cycle, and of course interest rates so you can get more out of your card than just those introductory incentives, you’ll know which card offer is truly the best deal for you.
Avoid the Hook
You may attend events or be at locations where card companies have set up promotional tables in order to secure new business. The kiosks or tables will often been filled with novelty items you get for free after completing an application. It can be very tempting to go from vendor to vendor filling out applications just to get the free swag but what you are really doing is ruining your own credit. Too many credit card applications and your credit score will drop. Never apply for cards you have no intention of using. Never apply for cards if you do not know where you stand credit-wise. Whether or not your application is accepted for the new credit card, the inquiry to your credit report will be a mark against you and potentially drop your score. Having too many credit accounts will not boost your credit and it leaves the possibility that you will overextend your credit by spending too much.
If you are serious about getting a new credit card, forget the free stuff. Look past what the terms will be for the first few months of the card and focus on the terms for the first few years of a card. If you open an account and only use the card through the intro period and then opt to close the account, you are damaging your credit further by erasing an important credit score factor – the length of your credit history.
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