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

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  2. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  3. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  4. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  5. Credit & Loans

    These Are The Best Credit Cards For Making Balance Transfers

    Handled correctly – and very carefully – a promotional credit card balance transfer offer can save you money. Here are some of the best deals around now.
  6. Investing

    How to Raise Your Credit Score Quickly

    Here are the best tips for raising your credit score quickly.
  7. Credit & Loans

    Getting Your Name Off A Cosigned Loan

    If you want to remove your name from someone else’s loan, there are four key ways to do it.
  8. Credit & Loans

    How Credit Card Delinquency Works

    When you pay less than the minimum monthly payment on your credit cards, you become delinquent.
  9. Credit & Loans

    5 Bad Moves That Will Torpedo Your Credit Score

    Your credit score can change if you aren't careful. From missing payments to carrying high balances, there are many ways to torpedo your credit score.
  10. Credit & Loans

    5 Common Misconceptions About Your Credit Report

    Your credit report is one of the most important factors in determining your ability to get loans and new credit and has a major influence on your rates.
  1. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reducing the number of times shoppers and buyers have to pay for ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. Can the Best Buy credit card be used anywhere?

    The Best Buy credit card can only be used in Best Buy stores and when making purchases online through the Best Buy website. ... Read Full Answer >>

You May Also Like

Trading Center