Credit card offers: what’s the catch?

Credit card providers vying for your attention – and your spending – have sign-up offers aplenty. But not all offers are created equal. Canstar explores credit card offers, as well as what conditions to be aware of before you sign on the dotted line.

When it comes to choosing a credit card, the interest rate is likely to be top of mind, but there’s more to consider than just the rate. For cardholders who aren’t satisfied with their current provider, or for shoppers looking for a new credit card, a little bit of research will go a long way to finding a card that suits. Sign-up offers can be very tempting, sometimes they’ll be well worth it, too, just make sure you watch out for the catch.

Common types of credit card offers and the catches to watch out for

Offering everything from fee savings, interest rate reductions and reward points freebies, there are plenty of credit card deals out there. But it’s important to remember that these incentives are only really a perk if you can exercise self-discipline with your spending and check the fine print. Below, we explore some of the common types of credit card offers, along with the catches to watch out for.

If you already know the type of credit card offer you’re after, you can use Canstar’s credit card search tools to narrow down your search by offer type. Just follow the link, below.

Compare credit card offers with Canstar

What are credit card balance transfer offers?

Credit card balance transfer offers are when you transfer the outstanding balance on your credit card to another card, usually one with a lower promotional credit card interest rate, often as low as 0%.

If you’ve accumulated some debt, a balance transfer can be a really beneficial credit card offer. Credit card balance transfers can also help you to simplify repayments if you need to consolidate debt from multiple bills into one place.

What’s the catch with credit card balance transfer offers?

There are a few key things to look out for with credit card balance transfer offers. If you don’t, you risk ending up in an even worse financial position than when you started. The first is the length of the balance transfer. Balance transfers do not run for an indefinite time period:

  • Check the length of the interest-free or reduced-interest period and pay off as much debt as possible during this time.
  • Check the “revert rate” – this is the interest rate that kicks in once your initial reduced-interest period finishes. Often, it’s significantly higher, so make a note in your diary of when it begins.
  • Check the rate for new purchases. The promotional lower interest rate will only apply to the existing debt that you transfer, not new purchases. If you’re using the card to consolidate your debts at a lower rate, try not to use the card to fund new debt.

Want to know more about the pros and cons of balance transfers? Read Canstar’s balance transfer guide.

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What are introductory purchase rate offers?

These are similar to the introductory rates on balance-transfer credit card offers, but instead of old debt, the credit card provider offers a low introductory interest rate on new purchases.

What’s the catch with introductory purchase rate offers?

As with balance-transfer credit card offers, the devil is in the detail. Make sure you read the fine print, so you know how long the introductory interest rate lasts for and what the rate reverts to once the period ends.

What are introductory fee offers?

Some credit cards will come with an offer to waive the annual credit card fee, or offer a reduced annual credit card fee when you sign up. While there are an increasing number of credit cards that do not have an annual fee, many do, particularly those with rewards programs. Annual fees can add up to hundreds of dollars just for access to a line of credit. So, naturally, a sign-up offer where that fee is waived, or significantly reduced, can feel like money in the bank. But what’s the catch?

What’s the catch with introductory fee offers?

Introductory offers are just that … introductory, and at some point the annual fee will be applied to your account. So before you sign up, ensure you know the exact length of the grace period and the annual fee you’ll be charged once it’s over.

What are reward-scheme offers?

Another common offer with new credit cards is free points for flights or rewards schemes. For example, a flight rewards credit card promotion might offer you a few hundred flight rewards points. These extra points can be tempting, but don’t rush to sign up before checking the small print.

What’s the catch with reward-scheme offers?

Watch out for special conditions attached to rewards offers. For example, to be eligible for the bonus points, you might have to make a minimum monthly spend. If you were going to spend that much anyway, then it can make sense. What doesn’t make sense is spending extra money on the card just to get the rewards points.

Compare rewards credit cards with Canstar

General credit card traps to be aware of:

Regardless of what type of credit card you choose – offer or not – there are some key points to be aware of when using plastic. The point is not to scare you off getting a credit card. In fact, they can be a fantastic tool to help you build a credit history, or to manage your expenses. You just have to make sure you don’t spend more than you can manage, that you meet repayment deadlines and that you get a card that suits your spending personality.

Here are a few spending traps to be aware of:

It’s only a bargain if you would have bought it anyway                                                                                                                                                                 Credit card traps to be aware of If you are talking yourself into credit card offers and credit card rewards schemes – just because of the promotion – it’s probably not for you.
It’s only worthwhile if you can’t get a better deal You will pay interest on purchases if you don’t settle your monthly bill within the defined period. Avoid buying something purely based on an appealing promotion.
Ensure there is no surcharge In the case of credit card loyalty programs, ensure the credit card offer doesn’t result in you paying a surcharge just to earn rewards points!

To compare credit card options on the market, use Canstar’s credit card comparison tools that help you weigh up fees, features and rates.

compare credit cards with Canstar

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