This isn’t an article about how having a bad credit score can impact your lifestyle as I’m thinking you probably already know that. So instead of another article touting the benefits of a great credit score or telling you how to improve a low score, I want to cover a few of the most common habits I have seen that don’t necessarily negatively affect your credit report but they could be costing you money. This is money you could be using to pay down debt instead of adding to it. Below are just a few of the worst offenders;
Free Trials
It’s nice to ‘try before you buy’ but what happens when the free trial period is over? If you have signed up for any free trials and did not provide credit card info you probably just have some annoying spam mail to look forward to for the rest of your life. Alternatively, if you had to hand over your credit card details in order to start the free trial, take the time to read the terms of the agreement very carefully sooner than later, and ideally before you make any commitments.
I have recently heard this saying and I really think it applies to this type of marketing strategy, “If it’s free, you’re not the customer, you’re the product.” What that means to me is a company can collect all the information you’re willing to give them and do what they want with it until someone tells them not to. That may mean charging your credit card for the full cost of the product on the day your free trial ends without notifying you! If you didn’t read the terms of the agreement before you accepted them, you could have given the company permission to do just that. And what if the charge went on a credit card account you don’t often use so you don’t even open any mail from them thinking it is just solicitation?
Not only is your money at stake when it comes to free trials, so is your personal and confidential information as well as your credit rating if you miss making a payment that you didn’t know about for a couple of months. Or if that payment throws you over your credit limit, it could also negatively impact your credit score. Moral of the story, beware of the word “free” accompanied by a request for personal and/or credit information as it very well could be a money-wasting trap.
Buy Now, Pay Later
Also known as the “don’t pay for a year” offers. These are great if you pay them off within the designated time period. If not, with some of these types of loans, be prepared to pay for retroactive interest charged on the balance still owing. That means you not only owe the original balance outstanding but also a big chunk of interest you were told you didn’t have to pay. The only way to prevent paying interest costs on these types of loans is to pay off the loan in full before the due date. That means the company has to negotiate your cheque on or before that exact due date. So get it to them well before the last day. Keep in mind too, that if you’re trying to qualify for any other purchases while you still owe a balance on this type of loan, it will be factored into your debt ratios and could reduce your approved limit. My advice is if you’re going to take advantage of the don’t pay for a year deal, don’t actually “not” pay for year.
Browsing the Fine Print
Maintenance fees, NSF fees, missed payment dates all could result in an increased interest rate, annual fees, late payment fee or an over limit fee. Those are just a few of the extra costs contained in the fine print. Don’t get pressured into just “browsing” the fine print, protect your wallet by cautiously reading the terms and conditions before you agree to any type of new credit product. Including, but not limited to; credit cards connected to a specific store or chain, free trials, lines of credit and cell phone contracts. The terms are usually not negotiable and it may make more sense to borrow from a reputable lending institution that offers assorted varieties of credit products with varied terms, rewards, and benefits. Find one that suits your needs while keeping fees to a minimum so your money stays in your pocket instead of going into someone else’s. There’s now numerous websites that compare the fine print and benefits of different credit cards so there are tools available for you to do some research.
If you only take away one thing from this article, it should be to carefully read the fine print before you sign anything. The devil is in the details and that is where the occasional lapse in judgment can cost you extra money. A good credit score can grant you access to low interest rates, better product offerings and higher credit limits; so don’t be lured into costly commitments that potentially could undermine all the hard work you’ve put into maintaining a good credit record. It is your responsibility to protect your money by staying diligent when it comes to managing the health of your finances. Don’t make assumptions or feel pressured into signing a document before you’re aware of ALL the details.
If you have mortgage or credit questions, contact the Mortgagegirl at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop on Twitter by following @mortgagegirlca.
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