Sometimes credit card companies will offer “free” rewards to get you to charge more. However, when it comes to credit cards, you should be on your guard when something free comes your way. Your best bet is to stay far away from the following offers:
Payment holidays: The option of not paying on your credit card bill for a month might sound great, but there’s a catch. The balance on your credit card will continue to rise during that month, even if you don’t buy anything. This is because the card continues to accrue interest.
Free checks: These are also known as convenience checks. A convenience check is simply a cash advance that doesn’t require a trip to the ATM. You’re paying for the convenience of having cash readily available. If you get an envelope full of blank checks from your credit card company, toss them in the shredder.Â If you use these checks, it’s more than likely you’ll have to pay a transaction fee of 3% to 5% of the purchase amount in addition to interest rates as high as 30%.
Frequent credit line increases: Be careful when it comes to accepting several increases to your credit line. Creditors like to reward good credit management with a line increase, but it can have disadvantages. When it comes to your credit report, lenders view too much available credit as potential debt. More importantly, if additional credit will tempt you to go on a major shopping spree, do yourself a favor and don’t accept another increase.