Credit card issuance is an extraordinarily competitive business, with thousands of banks in the United States offering cards to consumers of wildly divergent creditworthiness. This practice makes sense - the woman who makes $2 million a year and carries no debt has proved that she is more capable of handling credit than the entry-level wage earner with a five-digit card balance and no payments beyond the monthly minimum.

With the number of credit cards in circulation exceeding the nation's population, card issuers have developed various ways of sweetening the deal. Why apply for Card X when Card Y offers a lower interest rate, accelerated rewards and no annual fee? However, these competitive offers sometimes contain fine print that trips up unsuspecting consumers. Let's examine some of the most common credit card offers, whether you should take advantage of them and what to look out for.

Credit Card Regulations to Protect Consumers
In 2009, when the recession reached what was then its zenith, a number of overextended and indebted consumers were unable to pay their bills. Many were left with dilemmas, such as paying their mortgage versus paying their credit card bill. Because credit card issuers normally charge interest rates that dwarf those of a typical mortgage or a car loan, card issuers became a politically expedient target for the iron hammer of government.

Congress passed the Credit CARD Act, the latest in a series of regulations to go from bill into law. CARD stands for Card Accountability Responsibility and Disclosure, implying that up until the law's passage, credit card issuers were unaccountable, irresponsible and left crucial information undisclosed. The bill mandated such measures as prohibiting issuers from marketing to children and forcing issuers to post their terms and conditions online. The CARD Act also forbade issuers from raising rates on delinquent borrowers.

Low Introductory Interest Rates
The primary benefit offered by credit card issuers eager for your business is the low introductory interest rate. A 0% APR (annual percentage rate) is the typical eye-catching rate meant to entice you. The higher standard rate then kicks in several months or a year later.

An extended offer of no interest may appear to be a godsend for consumers who carry debt. However, for the average household carrying revolving consumer debt of $16,000 on credit cards, the eventual jump in the interest rate makes an already abysmal situation worse.

Annual Fees
Some cards come with no annual fee. Others come with no annual fee for only the first year, or make the absence of an annual fee conditional on how often you use the card. All things being equal, paying nothing to carry a card is better than paying something. However, what about a card that promises accelerated cash back if you pay an annual fee? Are these cards worth the fee? Like most things in life, the answer is, "It depends."

Only pay for a card if you can recoup the benefits.

Balance Transfers
Balance transfers? See above. Are you excited by the idea of moving your balance that's currently earning 19.99% for your card issuer to a card that will pay a different issuer "only" 15.99%? Again, you wouldn't believe how much easier (and lucrative) life gets when you pay the balance in full every month.

The Bottom Line
If you pay your balance in full and on time, any offer that comes with a credit card - double points or cash back - is a no-strings-attached gift.

Related Articles
  1. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  2. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  3. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  4. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  5. Investing

    Amazon Financing Now in the U.K.: Is America Next?

    Amazon has unveiled a great credit product in the U.K. Will America be the next country to have access to this financing option?
  6. Credit & Loans

    Why You Should Use Your Credit Card For Purchases

    Responsible credit card users who always pay off their monthly balances should use their cards to buy everything.
  7. Credit & Loans

    The Fed's Interest Rate Rise & Your Credit Cards

    The U.S. Federal Reserve recently raised the lending rate from 0% to 0.25% – the first time since 2006. How does that affect your credit card payments?
  8. Investing News

    Warren Buffett: Be Fearful When Others are Greedy

    It is prudent for the investor to understand when the party has gone on long enough and the clock is about to strike midnight. Be fearful when others are greedy.
  9. Savings

    Building an Emergency Fund

    Do you have enough savings to cover the costs of unforeseen crises? We show you how to plan ahead.
  10. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  1. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  2. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  3. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  4. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  5. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  6. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
Trading Center