Judging by television commercials and store windows, the holiday shopping season is upon us. Every year, retailers and credit card companies team up to make it incredibly easy for American consumers to borrow money. I will explain two of the most common credit card traps to avoid.
10 Percent Off, If You Open A Credit Card Right Now
If you have ever made a purchase in a big department store, you have probably been offered a store card at the checkout. The most common offer is a discount on all purchases made on the day of the credit card application.
These offers can be valuable if you spend no more money than you had originally planned, and pay the statement balance on time and in full at the end of the month. Just beware the following:
Interest rates on store cards are extremely high. Even worse, most store cards do not use risk-based pricing. For example, the Macy’s credit card has a flat 24.50 percent interest rate. Whether your credit score is 600 or 800, you will receive a 24.50 percent interest rate. If you use the credit card to finance a big purchase, the high interest expense would quickly eliminate any savings or bonus points you received.
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