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Many consumers have fallen into the trap of low introductory interest rates. They sign up without thinking it through, eager to take advantage of the limited time offer. However, once the introductory period is over, those consumers often find that the interest rate applied becomes too high to manage.
These low interest offers are especially attractive to many young Canadians who are starting out in life and trying to build a credit history of their own. It can seem like a good idea to get a credit card account in order to boost their credit score, and when a card issuers dangles a tiny interest rate in front of them it can often seem like a win win situation. However, there are a number of pitfalls which can be encountered along the way.
Higher Than Expected Interest Rates
The biggest stumbling block with these low interest rate introductory offers is that many consumers are so taken by the low interest rate that they fail to read the terms and conditions fully.
Often there will be a clause in the small print stating that once the introductory period is over, the interest will usually skyrocket to a fairly high APR, often to compensate for the revenue lost during the introductory offer, the cards will charge up to double the average APR for a similar type of card.
Even if you are aware of the high APR which will be introduced, if you do not keep track of when the introductory rate comes to an end you can end up getting a nasty surprise when it is suddenly applied to your account.
Similarly, if you get into the habit of not paying off the balance in full each month simply because there is little or no interest being applied, it can then become very difficult to get back into the habit of doing so once the higher rate of interest is applied to your account.
Often people then fall into a never ending cycle of using one card to pay off another cards fees. This does have a good impact on credit history, but will do nothing to reduce your debts.
How To Stay Out Of The Trap
There are a number of tips which can help you to avoid falling into the trap laid by low interest introductory offers.
- Read The Fine Print – When you receive a fabulous low interest or interest free offer through your mailbox, take time to look for the terms and conditions. The applications do all include information regarding what happens after the offer expires, but it will be in the small print and you have to look for it. Take time to read and understand the fine print before committing to the card.
- Carry Out Some Research – Take some time to look at websites belonging to a variety of banks and you will soon discover some credit cards which offer low interest rates which are not for a limited time. These are often cards aimed at students, businesses or wealthier clients. These rates are only increases if the cardholder defaults or otherwise abuses the card. If you are eligible to apply for these types of credit card then you may want tot consider those over cards that offer an introductory offer.
- Find The Best Deal – The best possible credit card to look out for is one with a low introductory rate, a low permanent rate and no annual fee. While such a card may not be easy to find, they do exist. Make good use of comparison sites to ensure you get the best possible deal.
- Keep Track Of The Introductory Period – When you open a credit card which has a low introductory rate it is very important that you keep a close eye on when the rate expires. The permanent rate will be applied without warning as soon as the introductory period is over. Find out exactly what date this will happen by contacting the credit card issuer and ensure that the card is paid off in full before this date to avoid unnecessary high interest rate payments.
In conclusion, in order to make the most of low interest introductory offers from credit cards, you should read up on the terms and conditions, research all of your options and make sure you are prepared for what happens when the introductory rate expires.
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