The shredder at my house is busy these days, destroying the constant stream of credit card offers. The offers promise zero percent balance transfers. Waived annual fees. 40,000 bonus miles. Convenience checks for whatever I desire. The offers are tempting, but there’s usually a catch. A balance transfer fee. An annual fee that kicks in after the first year. You get the picture.
Credit experts say card offers are hitting the mailbox at rates not seen in a long while. Some offers are so-called “preapproved” card offers designed to net new customers. Others are rich balance transfer offers intended to convince existing cardholders to pick that card for the next purchase. “Issuers are finding some better times out there,” said Bill Hardekopf of Lowcards.com, citing lower delinquency rates and overall credit card balances as two reasons for the improved environment. Plus, with fewer consumers carrying a credit card balance, issuers have to make up lost profit in the form of fees. In other words, they need to figure out ways to get consumers to use their credit cards more.
I tend to ignore all credit card offers. We have plenty of revolving credit. But the offer from USAA, our main bank, offering zero percent interest for 15 months without any fees or glaring catches was too good to pass up. With it we accelerated our kitchen remodeling project and will soon have cabinets that actually close and a new sink to replace the one that literally was designed for an RV.
Before we borrowed the money, I read every last bit of fine print not once but twice. We called to make sure we weren’t missing any terms or conditions that would cost us in the long run. We looked at our overall financial picture to make sure we could realistically pay the money back in time. And we developed a plan to pay off the debt a month before the zero percent interest offer expired.
Paranoid? Not at all. The Consumer Financial Protection Bureau (CFPB) put out a bulletin earlier this month warning credit issuers to be more transparent when marketing promotional APR credit card offers: “The bureau has observed that certain solicitations for these types of offers risk being deceptive.”
The bulletin said offers don’t always state clearly that continuing to use the card after initiating a zero-percent offer could mean paying interest on any new purchases until the entire balance is paid in full. “Consumers may incur charges that they do not anticipate — and fail to save the money that they expect,” the CFPB bulletin said. Bottom line: Be vigilant if you’re planning to take advantage of credit card offers or risk being victim to gotchas.
Free credit scores (really)
I can look up my credit score every day if I want to. No strings attached. A growing number of people have that option as more credit card companies are offering free credit scores to cardholders. So far, Barclaycard, Discover and First Bankcard offer free FICO scores. Capital One offers a TransUnion credit score and a tool that simulates how different actions would affect your score. U.S. Bank provides an Experian credit score.
Free credit reports have been available to consumers for years. But not free credit scores, which are used by lenders to assess creditworthiness. Without access to a free score from a financial institution, a score will cost you nearly $20.
Having access to credit scores is especially important in an era when security breaches are the norm. “Consumers will become more educated and notice fluctuations in credit scores faster,” said Gerri Detweiler, director of consumer education for Credit.com. Fluctuations could be a sign that your credit has been compromised. Maybe credit accounts are being opened or balances are being racked up in your name. A drop in a credit score should prompt a check of your credit report at annualcreditreport.com.
Credit scores also come in handy to assess credit health in advance of applying for a mortgage or any other type of consumer loan. Just be sure you know which credit score your lender plans to use since scores are all calculated in slightly different ways.
Chip, pins and security breaches
High profile security breaches at big-box retailers appear to be the norm. If you aren’t interested in switching to cash, never fear. You will never be liable for more than $50; most banks won’t charge you a penny if your card’s been stolen. My cards have potentially been compromised too many times to count.
It’s disconcerting, but fortunately these incidents have not had any major effect on my life. The good news is that security breaches have prompted some card issuers to adopt more secure credit card features on a swift schedule. Expect to see chip and PIN cards replacing your plain old magnetic stripe cards by 2015. I received my first chip and PIN card this summer. Apple Pay, the new payment service that comes with the newly announced iPhone 6, also includes features that make it more difficult for hackers to get away with your credit card number.
What’s on your mind about credit? Tell Kara: Kara@KaraMcGuire.com
Kara McGuire is a consumer strategist for CEB and author of “The Teen Money Manual.”