Bad Credit Card Offers

Credit card offers which claim low interest rates can be very tempting and usually have limitations.

Most people receive more credit card offers than they can even remember. These offers come in brightly-printed text with extraordinary offers of low percentage rates. These offers usually try to tempt you with the promise of transferring balances from other credit cards with a lower interest rate.

These offers, however, are usually only introductory offers. These offers usually have very specific terms. In addition, it is often true that the percentage rates printed on the envelopes of these offers come with even more terms and restrictions. Before applying for these offers, it is important to know what they actually mean.

Limitations

The introductory offer that is printed in large type is usually only for a set amount of time. It is often for 12 or 15 months that the 0% APR is offered. After that, the percentage rate goes back to a normal rate that is usually based on a person's credit rating. In addition, many low, introductory APRs are only for the amount that is transferred from other credit cards. It is important to know if the lower interest rate is for any purchase that is made during the introductory period or only for transferred balances.



Also, cash advances usually do not get the same low introductory APR as purchases. So, if a cash advance is taken during the introductory period, it is usually subject to a higher percentage rate. In fact, most credit cards have a higher interest rate by default for cash advances taken on the card. Also, most credit cards charge a 3% fee for cash advances on top of the interest rate.

Default

To default on a payment means simply to miss a payment. Defaulting on a credit card also usually means that the introductory period comes to an immediate end. The percentage rate for the entire outstanding balance goes to a higher rate. This higher rate is usually not the normal interest rate that would be charged based on a person's credit history, but the default interest rate that is usually around 20%.

Payments

Finally, it is important to understand how payments that are made on outstanding balances are applied to a credit card. If the introductory lower interest rate is for transferred balances, then the payments are usually applied first to the amount of the balance transfers and then to any new outstanding balance on the card.

This is important because what it means is that payments are applied to outstanding balances on the card with the lowest interest rates first. So, the portion of the balance with the highest interest rate will be the last to be paid down. It will also be the portion of the card that will be the last to be paid off.

The bottom line on introductory offers for credit cards is to understand what exactly the offer entails. The offer is typically not for more than 15 months and is sometimes only for balance transfers from other credit cards. In addition, if the account goes into default for any reason, the introductory rate usually reverts to the default rate of the card.

It is also important to note that these limitations on introductory rates do not necessarily make them a bad thing. If a person is trying to pay off high interest credit card debt and knows that it can be done within the time of the introductory APR, then it can be a very good thing. However, getting sucked into an introductory offer for a credit card and not understanding the limitations can cause a lot of stress down the road.

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