Just as the word “free” has taken on a somewhat fishy connotation (i.e. “comes with tons of junk mail”) in this day and age, so too has the meaning of “convenient” been warped. When it comes to offers from your credit card company, the word “convenient” is simply code for “exorbitantly priced and probably useless.” In many cases, the marginal time and effort you save with such conveniences barely outweighs the fee you pay in the end. Here are just a few examples:

Cash Advances and “Super Checks”

Just because your credit card fits into that blinking slot on the ATM doesn’t mean that it’s a debit card. True, if you pop your credit card into an ATM you can make cash come out, but that’s not all your getting. When you use a debit card at an ATM, you are withdrawing your own money. When you use a credit card at an ATM, you are signing up for high interest loan from your card issuer.

It’s called a “cash advance” and it typically comes with a 2 to 4 percent free and higher interest rates than the rest of the balance on your credit card. Not only that, there is no grace period – interest begins accruing instantly. To make matters worse, many card issuers require you to pay down your normal balance before your payments are applied towards your outstanding cash advance. If you’re not able to pay down your entire balance immediately after getting that cash advance, then that $40 of quick cash from the ATM can easily end up costing you exponentially more.

Credit card companies will also occasionally send you some forms that look like checks and work like checks, but in reality are just another way to get a cash advance. These are  sometimes called “super checks” or “convenience checks” and come with the same high fees and caveats as getting a cash advance at the ATM.

Deferred Payments

Department store credit cards loudly advertise deferred payment offers to entice you to sign up. These come in two main varieties: zero interest for x amount of months or no payments for x amount of months. In most cases for the first scenario, the offer is only valid for a certain “promotional period.” If you don’t pay off the purchase by the end of that period, all that interest that would have been accumulated is tacked back on. Many consumers sign up for zero interest financing to justify purchases they can’t afford at the time. Unsurprisingly, they usually still can’t afford the purchase once the promotion period ends – but now, they are stuck.

“No payments for 12 months” schemes work in a similar fashion. Sure, you aren’t obligated to make any payments for the first 12 months. But you still accrue interest. By the time you are required to begin making payments. This lets the interest compound for 12 months without you paying down the principle, which means bigger minimum payments at the end of the promotional period.

Balance Transfers

It seems like an ingenious idea: transfer your balance from one card to another and rack up tons of reward points off the bat as well as get a lower rate. The scheme seems so clever that you almost feel like you’re beating the system by doing it. But beware – balance transfers are rife with catches.  Here are a few ways this foolproof plan can be scuppered:

• The low introductory rate won’t apply to transferred balances or expires and is replaced by a higher rate.
• You can be charged a fee for balance transfers – usually a percentage of the balance (i.e.  5 percent of a $4,000 balance equals a $200 fee – not exactly worth it just to get a few frequent flyer miles).
• After processing your application, it turns out that you don’t qualify for the card you wanted and your balance is transferred to a card with a higher interest rate or lower credit limit (meaning you may sign up for a card that is maxed out right off the bat).
• Transfers can take 2 to 4 weeks to complete, meaning you are still liable for late fees on your old card.

Before going ahead with a balance transfer, be sure to verify that there are no additional fees and read over the fine print several times. Even after your new credit card issuer notifies you that the balance transfer is complete, call your old card company to verify.

Low Minimum Monthly Payments

Allowing you to pay a low minimum monthly payment without racking up late fees is not an act of charity on the part of your credit card company. In fact, they want you to pay the minimum payment – after all, once you pay off your balance, you stop paying them interest. Beware of the suggested monthly payment as oftentimes it will put you into a negative amortization situation – that is, when your payments don’t even cover your monthly interest charges. Try plugging your minimum monthly payment into a credit card calculator to find out when your debts will be paid off – in many cases, the answer is never.

Cards for those with “Poor Credit”

No credit? Bad credit? Bankruptcy? Some lenders will still issue you a credit card. This isn’t an act of trust and forgiveness – oftentimes, it’s a trap. These subprime credit cards are pitched as special cards that will allow you to” rebuild your credit,” but in reality, the issuer uses your shoddy credit history as an excuse to give you lousy terms and charge you extra fees. These cards can come with any of the following:

• Application fees
• Acceptance fees
• Annual fees
• Extremely low credit limits
• Extremely high over-limit fees
• No grace periods

With so many opportunities to be charged high fees, consumers – especially those who aren’t particularly good with their money to begin with – can easily find themselves in over their heads very quickly. It’s somewhat akin to flunking Algebra and then being placed in Calculus I for remediation. A better route to rebuild your credit is to get a co-signer or sign up for a secured credit card.

If you’ve dealt with credit card companies for any length of time, you likely know by know that if something seems too good to be true, then there are probably fees lurking in the shadows. This list of credit card company Trojan horses is hardly inclusive and new “convenient new features” will undoubtedly crop up in the future. Before you sign up, read the terms, ask questions and consider whether or not the convenience is really worth the risk.

What’s been your experience with these kinds of ‘convenient’ services?

Photo by otzberg

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1. 8 Sneaky Credit Card Company Tricks
2. Top Ten Reasons to Pay off Your Credit Card Debt
3. Credit Counseling Services: A Primer
4. 20 Common Credit Card Fees to Watch Out For!
5. The CARD Act: How it Will and Won’t Protect You After February 22