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The Top 3 Pitfalls of Misunderstanding Promotional Interest Rates

Sep 6, 2007
Perhaps you are thinking about getting a credit card. You have gotten a few offers in the mail that say they have great interest rates. You might not be sure just exactly how great they are, especially a few months down the road, or if you happen to make a late payment on that card.

Doing a little research on just how much interest you will be paying in such cases would be of great benefit to you. Understanding how interest rates work and getting the specifics on the offers you are getting is important if you want to go into this with no surprises or extra expenses.

The Top 3 Pitfalls

1. Getting a low interest rate in one way, and sky high rates in another.

In some cases, low interest rates only apply to one aspect of your credit card. Take balance transfer offers, for example. Sometimes people think that it would be more beneficial to them if they transfer all the balances of their existing credit cards onto a card that has a low interest rate.

In many cases, it is beneficial to do so, but before they do, they need to know for sure if that low interest rate is going to stay low. Perhaps they may think that the interest rate applies to the balance transfer, when in actuality it only applies to new purchases on that card.

2. Store-bought and interest free...sort of.

Let's say you want to buy a dishwasher. You go to the store and find out that there is one on sale, and even better, if you buy it with your credit card that is specified to that store, you get 0% interest for the first six months, and you do not even have to make a payment until that six months is up. Great!

Only there's one problem that they probably didn't tell you about. Once you have passed the six months, the interest rates sky rocket to a number that would instantly turn down had you known that was what you were going to pay in the first place. Unfortunately, too many people neglect to investigate just what possibilities there are of raised interest rates, leaving them paying way more than they thought they would ever have to.

3. Such good things seldom last.

Misunderstanding the time frame in which you will be able to take advantage of low interest rates is a huge drawback. Make sure you know exactly how much your interest rate will increase if there is an expiration date, or what it will be if you happen to pay your bills late. Knowing the penalties of the mistakes you make and just how much you will be paying when the expiration date passes will leave you with peace of mind and no surprise increases.

When you go to get a credit card, make sure you know what you're getting into. There are too many people today who misunderstand interest rates and end up paying the consequences in full.
About the Author
Court is an expert on student credit card offers and helps people become internet marketing experts.
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