There are two types of card offers -
Pre-approved and Invitations to apply.
- Pre-approved
offers - Made based on your
credit history. Federal law requires
that these contain a firm offer of
credit. The only exception is if you
have experienced a serious decline
in creditworthiness since the offer
was made.
- Invitations
to apply - Ask you to apply
for a card. This does not require
a firm offer of credit.
You can compare
basic terms on card offers by looking
for a box listing the disclosures and/or
summary of terms. This information is
required by law (Truth in Lending Act)
and will always list the interest rates,
the grace period and annual fee, as
well as any other important information.
Be aware
of the following......
*
Not all terms are included in the initial
offer. Important information
can be found only in the "cardholder
agreement" that will be sent with your
new card. You may not qualify for some
offers you receive. Once you apply,
you may be offered less favorable credit
terms. Don't assume that the terms will
be the same as the initial disclosure.
Read the information that comes with
the actual card.
*
Card offers often state: "You
have been approved for a credit line
of up to $50,000." The key words are "up to." When you
apply, you won't know how much credit
you will receive. The company can, and
often will, give you a lower credit
limit.
* "No annual fee" offers
may require you to make a minimum number
of purchases within a certain time frame
or you will be charged an "inactivity
fee," which can exceed the amount of
an annual fee.
* A "fixed introductory rate" is fixed only for the introductory period.
The rate will usually go up to a much
higher rate after that time, and may
become a variable rate, which changes
according to certain criteria.
* Fixed interest rates can change at any time after a 15-day
change-in-terms notice. Fixed rates
can also change if you pay late or violate
any of the strict terms or conditions.
Even being a day late can cause a significant
increase in your rate or possible change
to a variable rate.
* Sometimes cards have low introductory
rates that are good for balance
transfers or purchases or both. In this
case, your payments are almost always
allocated first to the balances with
lower APRs. Higher interest balances
are paid down only after balances with
lower APRs. Sometimes the low balance
transfer rate comes with a requirement
that you must make a minimum number
of new purchases each month.
* Offers often include an opportunity to transfer a balance without paying
a fee. Try to wait until you get the
card to transfer a balance. If the balance
you want to transfer is higher than
the credit limit on your new card, the
company will only transfer a portion
of your balance, leaving you with a
balance on the old card.
* If you have any questions
about a credit card offer,
check the company's website for more
information or call the company's toll-free
number before you apply.
Card
Terms and Conditions |
When
you receive your new card, you will
also receive a "cardholder agreement,"
a legal contract between you and the
card issuer. By using your new card,
you agree to honor the terms and conditions
in the agreement. Terms and conditions
in the cardholder agreement can change
at any time. Changes are usually sent
to you by mail. When you use your card
after receiving the notice of changes,
this means you have accepted the changes,
even if you didn't read the notice.
Read everything your card issuer sends.
Save your cardholder agreement in a
file that is easily accessible, so you
can refer to it when you have questions.
Annual percentage
rate (APR): A card's interest
charge, expressed as a yearly rate.
Variable
rates: Interest rates that
change according to a set formula, such
as Prime Rate + 3%. If your card has
a variable rate, the APR changes when
interest rates change.
Fixed interest
rates: The set APR on your
card, which can change only when you
receive 15 days notice.
Default
or penalty rate: A higher interest
rate charged if you pay late, bounce
a check or your credit gets worse. Also
charged by some card issuers if you
pay late on credit cards or loans with
other banks.
Cash advance
APR: The interest rate you
pay when you use your card to get cash.
Most cards charge a higher interest
rate for cash advances than for purchases.
Daily periodic
rate: Your APR divided by 365
days.
Arbitration:
A form of dispute resolution that is
often binding with no right to appeal.
Arbitration provisions may prevent you
from suing the company in court or participating
in class action lawsuits. However, some
companies allow you to take your case
to small claims court if the amount
you are disputing is within the small
claims limit.
Balance
transfers: The ability to transfer
the balance from one card to another.
If applicable, interest on balance transfers
begins to accrue immediately.
Convenience
checks: Checks linked to your
credit card account. They can be used
to transfer a balance from another card
or to make purchases or payments.
Double-cycle
billing: The calculation of
your interest considering your average
daily balance over a two month period,
which may result in additional finance
charges.
Grace period:
Period in which finance charges do not
accrue if you are not carrying a balance.
Minimum
monthly payment: The lowest
amount that you are required to pay
the credit card company each month.
Payment
due date: The last day that
payment can be accepted without penalty.
Your payment may be required to arrive
by a deadline on the due date, such
as 1 p.m.
Prime Rate: The "index" most commonly
used to determine variable interest
rates. It can be found in the business
section of your newspaper or online.
Credit
Card Fees and Helpful Tips to
Avoid Them |
You can
avoid fees by carefully managing your
account.
Below we have listed some common fees
and tips on how to avoid them.
Annual or
monthly fee: Common on charge
cards, rewards and airline miles credit
cards and on secured and sub-prime cards,
sometimes applied if you don't use your
card at least a few times during the
year.
TIP : Consider the
overall value when comparing fee and
no-fee cards. If you are thinking about
getting a rewards or airlines miles
card, make sure the card's benefits
are worth the cost of an annual fee.
Application
processing fee: Charged on
many sub-prime cards and some secured
cards when an account is opened.
TIP : Secured credit
cards are generally much better deals
than sub-prime credit cards, and you
can find secured credit cards that don't
charge application fees.
Account
reopening fee: Charged if your
account is closed or cancelled by the
issuer and you ask to have it reopened.
TIP : Pay your bills
on time to avoid card cancellation and
an account reopening fee.
Balance
transfer fee: Charged for transferring
a balance from one card to another,
this fee is commonly assessed as a percentage
of the balance transferred.
TIP : When you apply
for a new card, ask about balance transfer
fees. Most companies don't charge these
fees to new cardholders for the first
month or two.
Bounced
check or returned item fee:
Charged if your check bounces.
TIP : Make sure you have sufficient funds
in your bank account to cover your check.
Cash advance
fee: Charged as a percentage
of the cash advance, with minimum charges
common.
TIP : Cash advances are an expensive way
to get cash. Not only do you pay a fee,
but interest on cash advance balances
begins to accrue immediately. Instead,
use your ATM or debit card to withdraw
cash from your checking or savings account
at ATMs.
Foreign
currency conversion fee: Charged
when you make purchases overseas and
the charges have to be converted to
U.S. dollars.
TIP : If you plan to use a card while traveling
outside of the U.S., shop around to
find a card with a currency conversion
method that is favorable to you.
Late fee:
Charged if your payment is late, sometimes
even if it is received on the due date
after a certain hour.
TIP : Always pay your bill on time. If you
send your payment by mail, allow at
least seven days for the payment to
reach your issuer. Consider other payment
methods, such as online bill pay, pay-by-phone
or automatic payments. Ask if your issuer
offers e-mail reminders. Ask the issuer
to waive the fee, usually they will
as a one time courtesy
Pay-by-phone
or computer fees: Charged by
some companies to pay your bill by phone
or computer.
TIP : Avoid last minute, fee-based payment
methods. Look for online bill pay, pay-by-phone
or automatic payments that do not carry
a fee.
Over-the-credit-limit
fee: Charged if you go over
your credit limit.
TIP : Know your credit limit. Call your
card issuer in advance if you need an
increase. Ask your issuer if it has
free e-mail services that alert you
when you are approaching your credit
limit.
Statement
copy fee: Charged for extra
copies of monthly statements.
TIP : File statements for the past three
years in a secure location. If you sign
up for online access to your accounts,
you can download your statements and
keep them in your computer.
Stop payment
fee: Charged when you stop
payment on a credit card convenience
check.
TIP : Be careful when using convenience
checks. If you endorse one and it's
lost, you may not be able to avoid this
fee.
Wire transfer
fee: Charged when you use your
card to transfer money or when you buy
money orders, lottery tickets or casino
gaming chips.
TIP : Pay for these
services with a personal check or cash
