Understanding a credit card offer

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You may have seen credit card offers in the mail or advertised on TV that seem too good to be true: zero percent interest, free balance transfers, no annual fee… While these offers are real, there’s definitely a catch in the fine print. And there’s nothing worse than getting surprised by unexpected fees and charges when you get a new credit card. That’s why understanding the terms of a credit card before you open it up is so important. By law, credit card companies have to disclose a card’s terms and rates upfront. But that doesn’t mean they make it easy on the consumer to understand how this could cost them in a long run.

So when reviewing the itsy bitsy fine print in a credit card offer, consider the following questions:

What is the APR or interest rate you would be charged for any money you owe? If you do carry a balance on your card, the interest rate will impact the amount of money you’ll be changed in addition to paying back the money you borrowed. Many credit card companies will entice new customers with very low introductory interest rates, sometimes starting at zero percent for the first several months. But be sure to read the terms that outline any changes in the interest rate over time, otherwise you may be caught off-guard when your APR spikes up to 15 or 20 percent.

What kinds of fees are associated with the card? Just like interest rates, many credit card companies will waive fees (like balance transfer fees or annual fees) when you first join. And just like the APR, the fees you’re charged can change over time. Be aware of how and when you’ll get charged a fee, both right when you open the card and later on.

How will my card activity impact my credit score? No matter what type of credit card you decide to open, your activity on your credit card will impact your credit history and your credit score. Before you open up a credit card, it’s important to understand the payment terms and the schedule when you’re expected to pay your bill each month so that you don’t miss a payment. Even one late payment can damage your credit score, so read and understand the expectations carefully!

About Stephanie Halligan

Stephanie is the founder of The Empowered Dollar, a site dedicated to helping millennials to fix their finances and find their stride in money and life. When she's not blogging, Stephanie is designing school curricula and online games to teach students about smart money management.

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