Holiday Credit Cards: Avoiding Traps
Do you have your holiday shopping done yet? If you’ve waited like most of us, you’re probably still searching for deals, discounts and ways to save money. With consumer spending predicted to increase nearly five percent this year, it’s not uncommon for customers to be on the bargain hunt. Although deals are great, be careful of companies trying to take advantage of consumer holiday spending. Not all deals come with no strings attached! Unfortunately, there are many companies who try to take advantage of customers looking to get nab a great deal. Not all deals are what they seem, so be careful this holiday season during your many shopping excursions. Here are just a few of the tricky credit card traps to be aware of:
Beware of retail credit cards. If you’ve shopped at a large department store, you know the cashiers typically tell you that you can save 10% or more if you open a store credit card. While this seems like a great idea at first, many department store credit cards aren’t that valuable. In fact, most department store credit cards have an extremely high interest rate – eliminating any savings you could have received. For example, according to Forbes magazine, the Macy’s credit card has a 24.50% interest rate! Also, the more random credit cards you open, the harder it will be to track your payments. Falling delinquent on these payments can put you at risk – so it’s simply not worth it.
“Zero percent financing.” While some companies may promise no interest, many don’t specify for how long. Sometimes zero percent financing actually means zero percent “for now,” but the interest will resume later. This is called deferred interest, meaning if you don’t pay the entire card balance – you’ll end up paying the interest for the full period anyways. Delayed interest deals aren’t really deals at all! These “bargains” are deceptive, and while it may seem easier to put your purchases on the plastic, paying for them up front is a better way to go.
The more you spend, the more you save. Holiday marketing gurus are experts at the psychology of consumer spending. Many deals offer you more discounts the more you spend – but do you really need ten pairs of socks, just for the deal? Don’t be fooled into buying more, just because it appears that you’re saving a lot of money. It’s not really saving anything in the long run, and then you’ve spent more than you had originally budgeted for.
At Richard Banks & Associates, we want to protect you from popular credit card traps, so that you can enjoy a budget-friendly shopping experience this holiday season. Enjoy your shopping, keep an eye out for traps, and have a safe and wonderful week!