Beware of Credit Card Offer

Example Case: You get a credit card offer of a credit line upto $20000 with 1.99% APR interest for the lifetime of the loan or balance transfer. That is great! You may take it and use it for buying a car or having a vacation. Some other smart guys may keep it in high interest savings account like HSBC Bank to enjoy 4.25% APY rate to earn the difference months after months. One may also lock it in High yield CDs now being offered by so many banks.

Now comes another letter from the Credit card company with a typical heading like "For our valued customers like you, we are giving free gifts in the form of discount coupons valid in 1000s of restaurants throughout the country. Just use your card and enjoy the discount" or may be you will receive a large envelope with checks with no transaction free and for use wherever you want to purchase anything you want.

Remember: As soon as you use these checks or use the credit card to purchase anything, those purchases will be charged much higher interest. Your monthly payment first offsets your loan or transferred balance (on which the credit card company offered the low rate).

Unless you pay that off, you do not reach your purchase amount and so you continue to pay more and more interest months after months.

Be sure you do not fall in this trap. On the other hand 1.99% for the life of the loan is a great offer. So, accept it but lock your credit card deep inside your locker and tear apart any lucrative offer of purchase that arrives in your mailbox from that Credit card company. Also, do not forget to make your minimum payment every month!