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Credit Card Offers Come Back, But They're Hiding Traps

Credit card issuers are courting you again, though you probably know that if you've checked your mail box recently.

Issuers mailed 481.3 million card offers in the first quarter of 2010; that's up 29 percent over the first three months in 2009, says a new report from Synovate. And the offers are going to keep on coming, says Anuj Shahani, director of Synovate Financial Service's competitive tracking services.

"This is a massive commitment in terms of expenditure for the issuers as direct mail is one of the most expensive channels to acquire new cardholders. This tells us that the issuers are not just dipping their toes in the water, they are diving in head first," he said.

Don't forget that card issuers are diving in because they make money off of you. The best credit card deals disappeared in the credit crunch that started at the end of 2008 and remained tight as the CARD act went into effect, toughening the rules issuers have to follow. But the plastics business is still a very competitive one, so new economic times mean new credit card deals. And some of these new deals look very good, judging from the hype on the envelopes.

Danger! Will Robinson. There are new traps buried in the teeny tiny print carried inside those envelopes. Here's what to look at more closely now:

  • Cash advance offers. Card companies are offering new deals for 0 percent interest on cash advances, both on new cards and in those convenience checks that come with the cards you've already got. But here are the traps: (1) the 0 percent period is shorter than it used to be (typically five or six months vs. a full year or more previously); and (2) they carry automatic cash advance fees that are getting higher and higher. Those fees used to be 3 percent of the balance transferred, capped at something like $60 or $75. Now they can be 4 percent or even 5 percent of the balance transferred and there's no cap. Spending 4 percent up front to borrow money for three to six months is still a pretty high interest rate, isn't it?
  • Small business cards. You may be surprised to be getting so many offers for business credit cards. After all, your "small business" might consist of the occasional eBay sale of grandma's old stuff. But here's the small print on that one: Small business cards were exempt from many of the regulatory provisions of the CARD Act. So, sure, the banks would like to snag you with one, since those tough billing restrictions don't apply.
  • Good deals. Because the credit card landscape has been shifting so much, the cards in your wallet may not be the best cards for you now. Deals disappeared, new fees were added, and so it's time to review your choices. So read all of that mail and look for the card that will get you no annual fee, a low interest rate (if you're still carrying a balance, tsk tsk), and a rewards program that fits your spending pattern. Then read all the tiny print, and proceed with caution.
Photo by uzvards on Flickr.
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