If you’ve been struggling with the economic recovery, it may be very tempting to loosen your financial needs by signing up for one of the numerous low credit score credit card solicitations you’ve received. But do a little research into what these cards offer and you may discover that they’re not such a deal after all.
Offered by the industry’s big boys like Citigroup, American Express and Capital One, low credit score cards arrive with all the bells and whistles of their lower-interest siblings but have a series of hidden fees, rising interest rates and dangers buried in the fine print.
Fifteen percent of your credit score is dependent on your past credit history. If you’ve had late payments, over credit limit balances or defaulted on a credit card, then a low credit score will be issued by FICO, the agency assigned to determine credit scoring. The lower your credit score, the less likely you’ll be receiving offers for a respectable interest rate. Now ask yourself, if I’m having difficulty paying off my current debt, is it really wise to assume more? NO! Run don’t walk to your nearest trash recepticle and throw out those credit card offers!
If you simply cannot resist the offer placed before you, I advise that you ask the credit card company a few basic questions about the terms of their agreement:
1.Will the new credit card offer allow you to consolidate your current credit card debt onto a lower interest rate card?
2.Will the lower interest rate remain in effect indefinitely or will it expire after three, six, or nine months after which time the rate may skyrocket?
3. Will a default on another credit card trigger a higher interest rate, even if all of my payments with this card are current?
Make sure that you receive all of the terms of the credit card agreement in writing BEFORE signing. All that dreaded fine print holds the key to interest rates, penalties for over the credit limit and late payment charges, due dates and a myraid of other hidden arrangements. So pull out your magnifying lens and READ it. Once you sign, you’re agreeing to these terms, whether or not you’ve read the fine print or even understood it.
Do yourself and your bank account a huge favor and sign up for only ONE charge card – not a credit card, but a CHARGE card. What’s the difference? Charge cards don’t allow revolving balances – those purchases that roll from one month into the next. Rather, charge cards must be paid in full at the end of each billing period. That means that you have the convenience of a credit card for hotel reservations, car rentals and purchases, but you must pay off whatever you purchase within that timeframe and no longer. This type of card, American Express GREEN for example, will help you to better manage your money and prevent you from spending friviously.
So tell me – are you recieving invitations for low credit score credit cards? What is the interest rate? I’m interested to hear what these bad boys are charging.