You: 5, Credit Card Company: 0

Credit card providers aren’t fools. They are doing business and they have their ways to hoodwink you. So, before you decide to deal with them and stuff you wallet with a couple of gold cards, you need to know some secrets.

They promise lower interest rates or a free balance transfer and fall for such pranks immediately without reading the fine print. They set palpable traps and you easily become their prey.

Here are 5 common traps used by credit cards, and plans to evade them:

Trap #1: “APR just 9.99%”

You see this and instantaneously purchase a new card. Did you check the fine print? No? It says the interest rate can go up to 21% any day.

The Plan: As soon as you receive the credit card, read the welcome letter or any other letter that mentions that they approve your request to offer you credit with lending details behind it. In most cases, you will realize that this 9.99% rate is temporary, maybe some introductory or promotional offer. Generally, this piece of information is provided under the title “Schumer Box.” Read the letter very carefully before using the service.

Go for companies that offer a flat interest rate and asks you to take it or leave it. No traps, no hidden charges.

Trap #2: “Cash Back”

Getting certain percentage of ‘cash back’ after shopping sounds great. Now, there are card companies that provide “upto 5% cash back”. You buy the card because you noticed the “5%” figure, but not “Upto”. The fine print mentions that you are eligible to receive a 5% rebate only if you shop more than $2000 per month. Or sometimes you receive 5% rebate for the initial $200, then it drops to $1 thereon.

The Plan: Do not buy any card that mentions “upto x%”. Instead, go for a company that says “flat 5% cash back” or “full 4% rebate”. However, don’t forget to read the terms and conditions applied.

Trap #3: “Transfer balance at zero percent APR for a year”

Nothing comes for free. They charge you 3% of the total amount to be transferred. It is almost unworkable for them to offer you a balance transfer without charging any amount. If you decide to transfer $500, you will be charged $15 even before you think of paying off the balance.

Here is another sub-trap. You transfer you balance at 0%. However, as soon as you spend some and repay the balance, you are charged higher. For instance, if you transfer $600 to another card at 0%. However, the interest rate on new purchase is 12%. Next day, you go shopping and spend $200 using your card, and you pay it off as soon as the bill arrives. So, do you think you still have $600 at 0%? Kidding right? You now have $300 balance at 0% and other $300 at 12%.

The Plan: A difficult but helpful way is to promise yourself not to use the credit card for purchases until you have paid off the balance in full. It becomes quite tough for you to purchase new items. So, what do you do now? You can get a new card that offers zero percent interest rate on all the new purchases for a year. So shop with this card and keep repaying the balance of previous card.

I guess you are getting the message here. I have shown a way quite similar to a “0% balance transfer” scheme that will help you to save the hidden 12%

Trap #4: “Credit limit on your card is $5000”

Credit limit literally means you cannot withdraw beyond a limit, $5000 in this case. However, the fact is you can spend much beyond the limit. Okay, this isn’t an additional service they are providing. They straight away charge $39 overdraft fees.

The Plan: It’s a credit card company, not a parent that will restrict you from spending more. These card providers want you to spend more. They set these limits just to earn money from overdraft fees. You should keep track of your expenses and how close you are to the limit. However, it is suggested that you shouldn’t get much close to the limit because it impacts your credit score adversely.

Trap #5: “No reason, No time”

Along with the signing the card agreement, you also give them the authority to alter the APR at any time without any reason. According to the rule, the will serve you a fifteen days notice, to save your …

The Plan: The best solution is to always have an additional credit card. You don’t necessarily have to use it; it’s just for your safety.

I guess you are a bit more informed consumer now. Remember these key traps before you buy a card and fall for them.