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Whenever you sign a financial agreement, you need to have a good understanding of what you’re agreeing to. The contracts may seem too detailed and boring to you, but they contain important information that you need to know. Don’t depend on the lender to fill you in on the important points of an agreement. It’s up to you to read the paperwork and ask questions about topics you don’t understand.
My husband and I ended up in a terrible financial mess because we didn’t take the time to read a credit card agreement. This was a credit card with a special introductory offer of 1.99% on balance transfers and purchases for one year. We transferred a balance from another credit card to take advantage of the low interest rate. Our plan was to continue making the same payments we had made on the first credit card, but we would be able to pay the balance off sooner because of the lower interest rate.
For six months, we did a great job of keeping up with the payments and were even able to apply a little extra money to the balance every once in awhile. My husband came home one day and announced that two of our friends wanted to go on a discounted cruise, but they needed a group of forty people in order to get the low price. It had been two years since our last vacation, and this seemed like the perfect way to reward ourselves for all of our hard work. We decided that this deal was too good to pass up.
We needed to make a deposit on the cruise within five days. All our bills had been paid for the month, and we didn’t have much money left in our checking account. Our savings account was still small, and we didn’t want to use that. We thought it would be a great idea to use our 1.99% credit card to get the cash we needed for the deposit. After talking about the situation some more, we decided to get enough cash to pay for the entire trip plus enough to spend while we were on the trip. This was a huge mistake.
We found out when the next credit card bill came that cash advances carried an interest rate of 24.9%. Most of our monthly payment was eaten up by the finances charges we had to pay. I found the paperwork that came when we first got the credit card, and it plainly stated the interest rate for cash advances. All we were concerned about at the time we applied for the card was the 1.99% rate.
It ended up taking us longer than a year to pay off the credit card, and it took much more money to pay off the balance than we had planned. Besides paying the outrageous 24.9% on our cash advance for a cruise that wasn’t as much fun as we had hoped, we were paying 14.99% on the remaining transferred balance when the introductory offer ended. We said that we wished we had never applied for the credit card, but the credit card wasn’t the problem. We were.
My suggestion for you:
Read through any financial agreement you decide to sign. There might be hidden fees or conditions that you need to know about before it’s too late.
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