We love credit! It’s a powerful tool that can give us the things we really want in life. Try buying a house completely in cash. You might have great-grandchildren before you actually pull off this goal. If you’re going to buy a house, chances are good that you’re going to need a mortgage. A bad credit score pulls down your ability to get a great mortgage. You can still find lenders that will take a chance on you, but they have to make money. They’re more than happy to charge you an enormous amount of interest just to have you own your own home. And since they’re shelling out the cash, they get to make the rules. You might have a lower limit of purchasing than another person, which means it’s going to be three times as hard to find your dream home. What a drag.
But it doesn’t have to be that way if you’re willing to use credit wisely and rebuild your score. Even if you have excellent credit, be aware that it only takes a handful of mishaps and mistakes to send your credit score plunging down.
Here are 3 pitfalls to new credit card offers that you should be aware of.
1. Expiration Dates on Promotions
When the credit card says “0% APR for six months”, they really do mean it. So you need to make sure that you get your purchases paid off on time, every time. If you have any balance due when that promotion is up, guess what? They will charge interest on it.
2. Order of Purchases
Cash advance? Purchase? Did you know that the credit card company categorizes these things ahead of time? If you are given a special promotion, you need to make sure that it actually goes for the type of purchase that you’re doing. If your promotion is for new purchases only, don’t expect to be able to use it with a balance transfer. And speaking of balance transfers…
3. Watch Out For Fees
Balance transfer fees are quite common. Did you know that they can be up to 3% of the total amount that you’re transferring, or a fixed amount? It just depends on which one is highest. The credit card company wants to make a profit from the transfer, even if they’re going to allow you to pay it off interest free. That is why you’re considering a balance transfer, right? 🙂 If you have 17 months to pay it all off, then you definitely want to take advantage of the opportunity. The fee that you pay could still leave you with a big savings.
You might read these pitfalls and think that new credit is a bad thing. It isn’t a bad thing at all, and it certainly doesn’t have to automatically be bad. Yes, there are a lot of people that ruin their lives with credit. They add a lot of stress to their family’s everyday lives. They end up having to spend years turning the tables and improving their credit rating. But for everyone that’s reckless with credit, there are at least three people that aren’t. It’s time to stop blaming tools and start holding people responsible for their actions.
If you know that you’re good with credit, apply for those new credit cards with confidence. Just remember that you need to pay them off on time, keep a modest balance without getting too close to your limit, and avoid lateness as much as possible. Universal default rules have changed where you can indeed get your interest rates raised if you are late on other credit cards, so be careful of that as well.
Go out there with confidence and take back your finances!