A recent article on Yahoo Finance referenced 7 credit card traps to watch out for . It was a good article outlining a few of the traps out there with credit cards. Personally, I find credit cards to be extremely helpful as a business owner, and in our personal finances, but that comes only after a toilet-cleaning campaign wiped out $10,000 of credit card debt and after much-needed self control was applied to my use of credit. Credit cards can be a slippery slope, and I can assure you that if you want to become a millionaire , you’ll have to get the plastic under control quickly! These first seven traps are the ones referenced in the Yahoo article by Tal Boldo, and the last three are my additional traps to avoid. 1. Application and Balance Transfers Tal says, “There are two credit card traps to avoid here. Be sure to include your balance transfer request with your application, and be sure to transfer funds from a credit card in your name, rather than a spouse, as the loan officer reviewing your application will see that your debt-to-income ratio will remain unchanged, which will increase your chance of being approved.” 2. Fixed Promotional Rates Tal makes a great point to understand the promo rate. Sometimes the card company can pull one over on you without you even knowing it. She says, “To avoid this credit card trap ask the customer service representative helping you with the balance transfer whether the fixed rate applies “for the life of the loan.” Otherwise, find out when the rate will expire and what the new rate will be.” 3. Variable APR Rates Variable rates are the bane of any credit-card-debt-carrying consumer! A simple nudge upward in the rate can send your payments skyrocketing. Tal says, “This credit card trap can be avoided by applying for a credit card with a fixed APR, or balance transferring to a fixed APR promotional rate.” 4. Transaction Fees Fees, fees, fees . It seems like every company has enacted a fee for something. Tal says, “Most credit card companies that offer attractive balance transfer offers also often charge a transaction fee of between 3% to 5% of the total amount transferred. This fee is added to your total debt at the moment of transfer.” The sneaky part used to be that the card company wouldn’t apply any future payments to your high rate existing debt, but rather to the new low interest rate balance transfer. What that meant was essentially that you were racking up interest charges at a rapid pace. 5. Membership Fee and Cash Back Bonuses Tal says, “Avoid credit cards that require membership fees unless other services like life insurance, travel insurance or higher cash back bonuses make the membership fee worthwhile.” I refuse to pay a membership fee for any card. I don’t care how great the rewards are, it just doesn’t seem worthwhile to me. 6. Hidden Information Tal mentions, “A common credit card trap involves the confusing presentation of information.” Just like with the sneaky balance transfer payment method, there can be hidden tricks these cards are using to get you to keep spinning your wheels with your debt. 7. Pay Off High Interest Debt First Tal says, “Until the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card companies would apply your monthly payments to your lower interest rate loans first. Many consumers are not aware that this is no longer the case. You can now make use of balance transfer promotional rates even if your credit card has a high interest balance on it already. When you send your monthly payments in they will apply to the higher interest balance.” 8. Extended Credit Limit Card companies have tightened up with the credit limits since the 2008 meltdown. This is still something to watch out for — where the card company extends your credit limit because of your great payment history. If you don’t have the self-control to handle such a move, you’ll find yourself thinking you’ve just gotten a raise! 9. Minimum Monthly Payment This might be the trickiest trap of them all! Card companies love when you only pay the minimum payment. And that amount looks so attractive doesn’t it? I mean, who wouldn’t want to just pay $50 on a large debt amount!? But, if you continue paying the minimum, it will oftentimes take decades to pay off your debt! This is what suckered me when I first used credit cards in college. I ended up paying the monthly payments thinking I would just pay it all off when I earned more money. Two IRA withdrawals later, which resulted in IRS penalties and the wiping out of my savings, I learned my lesson. 10. Free “Checks” Received in the Mail I remember the first few times I received these in the mail thinking I had just won some promotion or contest! I nearly cashed a check until I read the fine print. That’s when I realized they essentially counted the check as a cash advance (which naturally has higher interest rates), which results in your charges adding up faster than a Paris Hilton shopping spree! Credit cards are not for everyone. You need to have the self-control and ability to pay the debt. But, if you’re able, credit cards can be a great tool. Either way you slice it, watch out for these 10 traps! Card companies are just waiting for you to trip up! What other credit card traps would you include? Meet us in the comments! Related Articles: Make the most of Credit Card debt (part 2) 6 steps to reducing your credit card interest rates 3 new credit card fees you should know about How to negotiate with credit card companies Credit card use – my thoughts Negotiate Credit Card Interest Rates with NegotiateMyRate.com Make the most of Credit Card debt (part 1) Jason writes at Redeeming Riches where he helps others Restore Their Money and Renew Their Minds . If you want to learn how to save money be sure to subscribe to to catch more of Jason’s posts! The articles on this site are for entertainment purposes and should not be taken as financial advice. Please contact a financial professional for specific advice regarding your situation. Also, many of the CPF articles help us pay the bills by using affiliate relationships with Amazon, Google, eBay and others. Find out more here .
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10 Credit Card Traps Just Waiting to Trip You Up!