The use of a credit card can be a double edged sword. You can either use it optimally to build your credit rating, or you could do things that you shouldn't do with it and live with the consequences for years. Before you apply for acredit card offers, read this story to see what you're going into.
Take for instance a mother of three who used to work as an accounts manager in a prominent marketing firm in New York City. For privacy purposes let's just call her Gina.
In 2004, Gina joined the company and was tasked with handling the campaigns for their new clients. The first account that she handled was a raving success and her pay grade was suddenly bumped up to a very significant degree.
How significant?
Well, let's just say that one of the perks that she got was a new Toyota Prius, courtesy of the company.
She already had a credit card and decided that she needed an upgrade to increase her buying power as well as to make it easier for her to buy more. After all she's a big shot now, in charge of managing the advertising and marketing portfolios of several Fortune 500 companies.
Over time, she was able to rack up over $100,000 dollars in revolving debt. That's not a problem since the income from her job helped her meet the monthly payments. While she was doing this, she was also in the habit of maxing out her new credit card. Her husband was getting worried, but she always kept on promising him that her new accounts would pay for the debt.
Best Credit Card Offers
Now one question that could be bothering you is why Gina got another credit card in the first place.
The answer lies with the advertising that barraged her, offering the "best credit card offers".
Experienced holders of credit cards know that credit card companies lure customers by means of these special offers. When you apply for a credit card, some of these could include:
Low interest rates
Low monthly APRs
No annual fees
Fraud Protection
Travel Accident Insurance
To be sure, there are many variations of these so called "best credit card offers". There's nothing inherently wrong with them if you look at them. The thing that gets most customers unaware is the finer print and the exclusions.
For Gina, it was the low introductory APR that got her. She didn't know exactly when that introductory offer would expire and frankly she didn't care that much.
But then it expired. The bank then charged her astronomical rates. By the time the adjusted rates got to her, she was in disbelief. She called the bank and told them that they've made a mistake. But then she was appalled by their response which came out to the tune of, "There was no mistake, please take a look at your loan terms in section so and so."
Be Careful What You Sign
Affixing your signature in a very long legal document contains many implications. At the end of the day, it won't matter what the bank advertised about their "best credit card offers". When you apply for a credit card, always, and this point needs to be emphasized clearly - always look at the exclusions and special clauses governing the agreement. When you sign these documents, you are practically saying "yes", to everything that the banks say in it.
There is no legal recourse and you can't claim ignorance if a particular clause you didn't understand plays out to the advantage of the bank. You need to be extra careful and treat the documents that you sign with the utmost care and understanding.
Going back to Gina, by 2009, it all went down in flames. The company that Gina worked for was severely affected by the economic crash. Practically everyone had to go and find a new job. Gina was shocked at the seeming inopportune timing for such an event.
"When it rains, it pours."
There was no choice for Gina. No amount of haggling and negotiating ever got her anywhere. Her anger turned to sadness, and her sadness turned to despair. Not only did she have to sell the Prius, but she had to sell it at less than half its fair market value. She then had to work two jobs in one day just to pay for the credit card bills. She's fortunate that her husband still has his job.