Red Flags In A Credit Card AgreementJanuary 25, 2010 - 1:49 am
When applying for a credit card, it is important to be aware that there are some credit card red flags to watch out for. Even people with excellent credit ratings may end up getting a credit card that is far from ideal, because they did not read the fine print and pay attention to the terms and conditions of the agreement. The following are some of the main red flags that you may find in credit cards:
Watch out for credit cards that charge unreasonable fees. Check to see if you will be charged an annual or a monthly fee, and be certain that it is an amount you are prepared to invest in. Although some credit card fees are reasonable, many cards today will tack on a number of additional, unecessary fees. Such fees will be often be labeled either as activation, acceptance, or participation fees, and will range from anywhere around $35 up to hundreds of dollars. Another credit card red flag is credit card transaction fees. These type of fees can be triggered by several different actions, but large transaction fees are often seen when the credit card user gets a cash advance. The fee will normally take the form of a one time charge, but it is also often accompanied by a higher percentage rate on the transaction. If you plan to get cash advances on your credit card, it is especially vital that you understand exactly how much the advance will end up costing you in the long term.
Watch out for aggressive default agreements as well. Some cards will consider you in default of your agreement if you are even one day late with a monthly payment and will raise your annual percentage rate. This is magnified with a universal default clause. If you see a universal default clause, it is a definite red flag since it can impact not just the card you are currently considering but also every other credit card you have. Every one of your creditors who has a universal default clause has the right to raise your interest rate if you are late paying any of your other credit cards. Some creditors will even request a copy of your credit report regularly so that they can monitor any late payments and raise your percentage rate the moment they see an opportunity.
It is vital that you carefully consider all of the above warning signs as you are applying for a credit card. Read the entire contract carefully, including the fine print and disclosure information, so that you are able to spot any of the above red flags and avoid ugly surprises in the future.