Chances are you’ve recently received one of those pre-approved, low-interest rate credit card offers. Perhaps even dozens of them. Sounds like a good deal, right? Well, before you go ahead and accept one, here are a number of things you should beware of:
• Many of these cards are just preliminarily approved. This means that when you actually apply, the company can do some additional research and then reject your application, which could cause at least minimal damage to your credit report.
• The low interest rate being offered is usually only an “introductory rate,” which means the rate can – and probably will – increase significantly at the end of the introductory period. This means that balances transferred from higher interest rate credit cards to the new, low introductory rate card could, over the long run, actually cost you more in interest payments.
• The low introductory rate may apply only to purchases, not to cash advances or balance transfers.
• Many of these cards charge fees: annual fees, balance transfer fees and/or cash advance fees. Others trumpet no fees but then require that you pay $50 to $100 or more for services that offer little or no benefit, such as “credit protection.”
So, how do you protect yourself? First, carefully read all of the fine print in the offer and, if you don’t fully understand and like everything you read, throw the credit card offer away. Second, even if you do like what you read, do some calculations to be sure that the lower introductory rate – especially in the case of balance transfers – will actually save you money over the long run.
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Rick Shaffer is an attorney, financial writer and host of “The Money Show,” a call-in radio show.