“Black Friday” Spending Can Lead to Blue New Year
Consumer advocates say loose regulations, not a tight economy, can make for some outlandish credit card offers. Photo by KUT News.Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.
Some Central Texans have already been hard at work since Thanksgiving evening taking advantage of “Black Friday” holiday shopping deals. And for many of them, that means whipping out the credit cards over, and over, and over again.
Many shoppers don’t know the details of their credit card agreements. But we all know those deals that seem too good to be true.
Some promise zero percent interest or thousands of rewards points, but with a catch buried in the fine print. CardHub.com compares credit cards offers. It has compiled a list of what it calls the “scariest” offers of 2012.
Cardhub C-E-O Odysseas Papadimitriou says some of those involve high fees – such as the rewards card with a $495.00 annual payment.
The worst of the bunch? Papadimitriou gives that honor to a card for people trying to rebuild their credit that charges hundreds of dollars in unnecessary fees. Except for some state-level usury laws, and despite efforts Congress made to control it, the credit card market’s pretty loosely regulated.
“But most credit card companies operate at the federal level, and at the federal level there are no usury laws,” says Papadimitriou. ”And therefore the interest rates can be as high, or the fees can be as high as they want, as long as the fees are not more than 25% of the credit line. That’s the only kind of requirement that was instituted recently.”
Papadimitriou says a little financial soul-searching can help shoppers avoid bad getting trapped in bad credit card deals.
“Are you looking to build credit? If yes, you are looking for a secured credit card,” he says. “If you’re not looking to build credit, then the next question is, are you going to be paying your balance in full every single month. If the answer is yes, you want to find the best rewards credit card and you don’t care about the interest rate. If the answer is no, you should only be focused on getting the lowest interest rate, and don’t worry about rewards, because that is the way you are going to save the most money.”
Holiday shoppers this year should look out for deferred interest offers on credit cards. If the full balance isn’t paid off by the end of the introductory period, interest is charged on that original, total balance, not what’s left. And that, Papadimitriou says, could make for a pretty unhappy New Year.
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