This is the third article in our series, Money Matters.
When it comes to choosing a credit card, it’s easy to think you should go with the one that has the lowest interest rate, right?
“That’s what everyone leads with,” said Jeff Bentley, president and CEO of Northwest Federal Credit Union.
But Bentley warned that it’s important to read the fine print because often those rates are only temporary. “They’re only good for the first 10 or 12 months, so you have to be careful,” he said.
And here are a couple of other items to watch out for too:
- Hidden fees: Often credit cards classified in the banking industry as “low rate” include additional service fees, Bentley said.
- Reward caps: Sometimes, a rewards card offering 2% or 3% on gas, groceries and the like has a maximum reward level or cap.
“Maybe any purchase over $1,000, then you’re back to earning less than 1%,” he said. “Travel cards are notorious for that. Sometimes they’re only for certain airlines, and if you mix it up and you travel a lot, then that could come back and bite you as well.”
Start smart on your credit journey
Keeping with his mission to help people, Bentley said Northwest Federal offers a credit card that is helpful for young consumers just starting out. It has a competitive rate and no annual fee*. Plus, it includes a 2% unlimited cashback reward on purchases*.
Bentley encouraged young adults to be careful as they start their credit journeys. “How the credit card companies really make a fortune is they get young people hooked who don’t understand the dangers of having that credit line,” he said. “They run their credit card up, and now they’re barely able to just pay the interest on it. It’s a bill that just goes on and on and on, and they can never get out from under it.”
Northwest Federal is sensitive to not getting young people started out that way Bentley said. The credit union offers cards with credit lines structured to help people avoid becoming buried under a debt load.
Use that 0% balance transfer wisely
The 0% balance transfer, with a limited payback period, is another popular offer from credit card companies. “That’s actually not bad if you can use it wisely. It’s kind of your ‘Get Out of Jail Free’ card,” he said. “We also do that. It’s a good way for you to get … yourself debt free.”
No matter the type of card chosen make sure that you trust the financial institution offering in, Bentley advised.
For younger people, credit cards are often their entrance into the financial world, he said. It’s important to use the card smartly and to learn how to control and manage the spending — and to establish a relationship with the provider, he said.
That way, people can find a financial partner that will be willing to work with them when they need auto loans or a mortgage, for instance.
“If you’re searching for a financial institution that will solve your financial problems or challenges,” Bentley said. “Stop searching, go Northwest.”
To read more articles and listen to the full discussions in the WTOP Money Matters series, click here.
*For credit card disclosures and rewards details, visit: https://www.nwfcu.org/credit-cards#now-rewards
