April 7,2009
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News: The Promo Surprise.
Most of us have seen the promo enticement. Very low interest rate credit cards for either new purchases or balance transfers (rarely both at the same time anymore). So, what does it all mean? Since it's called a promo, it generally means that the credit card lender plans to get all the moneys back (with huge interest) on the back end. That credit card lender is gambling that the consumer will either run up high debt that can't be easily paid off or else, will slip up by cashing one of the hundred ‘check offers' they will receive in the mail from that point on.
How does all that work. Simple, many credit card consumers will just go with the flow. Low interest is so comfortable that, like the frog in the water kettle, the general comfort zone provides the ease to just keep charging things. Many will fall into the vice of spending faster than earning because it feels good to have a little more then we could have otherwise by just using the low-interest credit card. There is no ‘bean counter' around to pester us with warning that we're getting in over our heads.
The next most-common way the credit card lender gets us is with constant mailings of ‘attractive-looking' convenience checks (funny choice of words). With all the marketing glitz, the only time we don't feel as good about them is when we go to sign them. Just like on the cigarette packages, there is a little ominous warning that there are ‘minow strings' attached. It's made difficult to read and especially boring to we prefer to believe that the shrouded disclaimer is just another nuisance to use up our time. Even if you do decide to read it, what you won't see is that little clause footnoted on the original marketing flier that first attracted you to open the account in the first place but has now been lost. That was your last chance to catch it but was the last thing on your mind at the time.
It stated that any other transaction you perform will be at five times the interest rate and, further, can never be paid off until all lower interest rates have been completely paid off. How much does that matter? Depends on how much is charged. Suffice to say that the higher interest rate charges will rise exponentially compared to the low interest charges. But, you're not allowed to pay on those higher interest rate charges, as they build up quite quickly. Not until you've paid all of the lower rate balances off completely.