Beware: You have a credit-card offer
More than 6 billion credit-card offers were mailed to Americans last year. With so much competition for your attention, credit-card companies are coming up with new come-ons to entice you toward their piece of plastic.
But don’t get distracted by those goodies. Instead, if you need a new card, focus on the fine print and on the prominent “disclosure box” that— by law — must accompany every offer. For example:
The annual percentage rate
The APR that applies to purchases is listed at the top of the disclosure box, but that’s not the only applicable rate. You also should note the rates you’ll be charged for cash advances, balance transfers and other transactions. Because payments often are allocated to pay off lowest-rate balances first, teaser rates that apply to both balance transactions and new purchases are the best deals. Don’t overlook the default APR, which can kick in if you make late payments (even to other lenders), exceed your credit limit or if your credit score drops based on your relationship with other lenders.
Fees for all occasions
For balance transfers, you usually pay a 3 percent fee up to a specified cap — in our Chase offer, $75. Yet a few major issuers are eliminating caps for some cards, meaning that a $10,000 transfer, for instance, would cost you $300.
The grace period
This is the number of days you have to pay your bill from the end of the last billing cycle until interest charges accrue. Our Chase offer granted a vague “at least 20 days.” You should look for a card stipulating 25 days.
The red flag on finance charges
Issuers these days usually calculate finance charges based on the average daily balance. That’s of no concern if you pay your debt off every month. But consumers who alternate between paying card bills in full and carrying a balance should avoid the two-cycle average-daily balance method of computing interest.
Bottom line: You shouldn’t limit yourself to offers that arrive in your mailbox. Even though you may be inundated with applications from a handful of big banks that dominate the market, you’ll likely find more consumer-friendly deals at a credit union.
- Source: The Courier News, July 18, 2006
