First, if you're considering transferring your balance to a new card in order to get a lower interest rate, beware of transfer fees. "In the old days, the fee was 10, 15, 20 dollars... Now they're charging a percentage of the money," says Hennessey. So if you have a high balance, you may end up paying $300.00 in transfer fees. It's important to be aware of any transfer fees that may apply to your current balance. Sometimes, you can even call your credit card company and get them to lower the rate on your current card.
Some credit card companies are also getting rid of their rewards programs. So what may have enticed you to sign up for the card in the first place may soon disappear. "I think in '07, you're going to see more and more companies get rid of [the incentives]," says Hennessey. He advises that you should cash in on your rewards as soon as possible, or find a card that will still offer rewards in 2007.
Finally, beware of teaching your kids about responsible spending by using credit card alternatives like mall gift cards or debit cards. Even though they're not true credit cards, these cards can have drawbacks too. Some cards have fees attached, which can add up over time. "I believe kids shouldn't have plastic," says Hennessey. "It's bad enough how aggressively they're marketing people in college... If you're starting even younger, and learning that instead of saving up your money you can just swipe plastic, it's a dangerous precedent to set." You may be setting your child up for credit card debt later on in life.
For more information on hidden downsides to your credit card, click here.
by Erin Petrun