- Oct 9, 1999
- 21,019
- 156
- 106
With the high interest level 
here related to credit cards, let's take a look at an offer I got in the mail today and see why it's exceptionally crappy.
First, the big print. 0% Fixed APR on Purchases until January 2003! No annual fee! 9.99% Fixed APR Balance Transfer! So far, it sounds interesting, but let's look further.
What does "fixed" mean? Does it mean my interest rate can't change? No, it does not. The fine print says it means that "rates are not tied to an index that varies based on market rates." They can change your rate at any time to a new "fixed" rate.
A little card in the envelope says, "The benefits of this Visa Platinum card are hard to beat... You've earned it, so don't let this offer pass you by!" Saying "you've earned it" is meant to make you think you are special, and this is a sweet deal for special people only. Don't fall for that.
Now let's dig into the very, very fine print for the bad stuff. Under "Other APRs" it says the Default/Closure APR is up to 24.99%. That rate applies each time you fail to make at least the minimum payment when due OR upon closure of your account. The rate "may" be raised up to 24.99%. The bank is betting you drop the ball someday and they can jack up your rate into the stratosphere. In fact, banks often ask the credit bureaus for listings of people who have reasonably good credit but occasionally made late payments - in the hope that you sign up for their card and they get a chance to stick you with that 24.99% interest rate.
Next, we have the Grace Period disclosure. Boiling it down to plain English, if you don't pay your balance in full, your new purchases will accrue interest from the date of purchase. That's bad.
Convenient payment option? Sure! If you pay by phone or online, they "may" charge a fee of $9.95. I will bet you that when you pay online they don't remind you of the $9.95 fee.
Now what happens if I have a nice balance at the special 0% interest rate and continue to purchase things after the 0% expiration date of January 2003? My payments are applied to the lowest APR balance first. So if I don't pay off immediately, my payments all go against the 0% balance. My balance that is racking up interest won't get touched until all the 0% balance is paid off. That's pretty common, but again they are hoping you carry a big balance during the zero interest period and can't afford to pay it off in full in January 2003. And don't forget, they won't remind you in January that your interest rate is changing. It will just show up on your new statements.
And the grand finale: if a change is made to the Finance Charge, the new rate will apply to your entire balance from the effective date of the change. The new rate applies whether or not you continue to use the account. Here's where they are hoping to hit the jackpot. Let's say you don't have an extensive credit record, so you aren't getting offers in the mail every day. You sign up for this card, run up a decent balance, and a few months down the road they tell you your rate is going way up. Since they know you might not have other cards to move your balance to, they can arbitrarily raise your interest rate to whatever they feel like, hoping you can't move it to another card. Even if you have a perfect payment record.
Before you jump at a credit card offer, you must read that incredibly dull fine print to see where they are going to stick it to you.
here related to credit cards, let's take a look at an offer I got in the mail today and see why it's exceptionally crappy.First, the big print. 0% Fixed APR on Purchases until January 2003! No annual fee! 9.99% Fixed APR Balance Transfer! So far, it sounds interesting, but let's look further.
What does "fixed" mean? Does it mean my interest rate can't change? No, it does not. The fine print says it means that "rates are not tied to an index that varies based on market rates." They can change your rate at any time to a new "fixed" rate.
A little card in the envelope says, "The benefits of this Visa Platinum card are hard to beat... You've earned it, so don't let this offer pass you by!" Saying "you've earned it" is meant to make you think you are special, and this is a sweet deal for special people only. Don't fall for that.
Now let's dig into the very, very fine print for the bad stuff. Under "Other APRs" it says the Default/Closure APR is up to 24.99%. That rate applies each time you fail to make at least the minimum payment when due OR upon closure of your account. The rate "may" be raised up to 24.99%. The bank is betting you drop the ball someday and they can jack up your rate into the stratosphere. In fact, banks often ask the credit bureaus for listings of people who have reasonably good credit but occasionally made late payments - in the hope that you sign up for their card and they get a chance to stick you with that 24.99% interest rate.
Next, we have the Grace Period disclosure. Boiling it down to plain English, if you don't pay your balance in full, your new purchases will accrue interest from the date of purchase. That's bad.
Convenient payment option? Sure! If you pay by phone or online, they "may" charge a fee of $9.95. I will bet you that when you pay online they don't remind you of the $9.95 fee.
Now what happens if I have a nice balance at the special 0% interest rate and continue to purchase things after the 0% expiration date of January 2003? My payments are applied to the lowest APR balance first. So if I don't pay off immediately, my payments all go against the 0% balance. My balance that is racking up interest won't get touched until all the 0% balance is paid off. That's pretty common, but again they are hoping you carry a big balance during the zero interest period and can't afford to pay it off in full in January 2003. And don't forget, they won't remind you in January that your interest rate is changing. It will just show up on your new statements.
And the grand finale: if a change is made to the Finance Charge, the new rate will apply to your entire balance from the effective date of the change. The new rate applies whether or not you continue to use the account. Here's where they are hoping to hit the jackpot. Let's say you don't have an extensive credit record, so you aren't getting offers in the mail every day. You sign up for this card, run up a decent balance, and a few months down the road they tell you your rate is going way up. Since they know you might not have other cards to move your balance to, they can arbitrarily raise your interest rate to whatever they feel like, hoping you can't move it to another card. Even if you have a perfect payment record.
Before you jump at a credit card offer, you must read that incredibly dull fine print to see where they are going to stick it to you.
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