Avoid introductory offers with high penalties later
One way to save money on your debt repayment is to avoid introductory offers that come with high penalties later. While it may seem like you are saving money in the short-turn you can end up spending a lot for your debt when your introductory offer has expired. Here are some things to consider when looking avoiding introductory offers with high penalties later-
- Understand what the offer really is. Introductory offers on credit cards usually entail the consumer receiving a very low interest rate (or sometimes no interest rate) for a specified period of time. Then after the introductory rate period is over the credit card user then finds out that their interest rate has jumped significantly. This then becomes the new interest rate on the card. Along with the offer there are often penalties if the consumer makes a late payment or is over the limit that automatically negates the low introductory offer. This can happen at any time during the introductory period.
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- First and foremost-Find out what the introductory interest rate is and what it will be later. While many credit card companies are now offering 0% and other extremely low offers to entice new credit card customers many people in their excitement of gaining a nearly unbelievable rate fail to find out what the interest rate will be when the introductory period is over. Keep in mind that while most credit cards will have the interest rate jump up after the introductory period some do not go as high as others.
- Find out how long the introductory period will be. While some credit cards will only offer introductory period for 3 months other credit card companies may extend it even to a year. There are even a few credit cards that for a small purchase every month will allow you to keep your introductory rate indefinitely. (Keep in mind that for this option you will have to exercise extreme self-control). Finding out how long the introductory period will be is crucial to determining if this could be a good move to make in your debt repayment plan. Sometimes the low introductory rate can be beneficial if you think you can pay off the debt during the introductory period. If you do not think you can then you need to figure what the debt will really be costing you when the higher interest rate kicks in.
- Find out what happens on the side of the introductory period. Some credit card companies will even waive the fees during the introductory period. Consumers then blithely go along using their card with their low introductory rate only to emerge out of the introductory period with not only a much higher interest rate but fees attached to their card as well. Having a clear understanding of what your credit card costs are is essential to using credit wisely and making a viable debt repayment plan.
The bottom line is this: While most financial experts urge staying away from credit cards that have low introductory rates with higher penalties later there are a few exceptions to this rule. These are:
- Consider using this type of credit card if you can pay the debt off before the introductory period expires.
- Consider using this type of credit card if the interest rate or fees are not much higher after the end of the introductory period.
- Consider using this type of credit card if you are 100% sure you can always make your payments on time.
If your situation does not fall into any of the above categories you are much better off seeking out a credit card with a low fixed interest rate. This enables you to save money while you pay off your debt with no unpleasant surprises along the way.
