Lost in Credit Card’s Terms and Conditions – Ask the Issuer Questions

Friday, May 31st, 2013

All these zero percent introductory rates, rewards programs and sign-up bonuses sound great. But most close with bitter and cold words: “terms and conditions apply”.

Absorbing the high volume of information contained in a credit card offer is a headache for many people, not speaking it takes a lot of time. Fortunately, credit card issuers must include a Schumer box in the terms and conditions, which contains basic information, including the card’s annual percentage rate (APR). The Credit Card Accountability Responsibility and Disclosure Act of 2009 also protects credit card users from unfair practices. For instance, issuers cannot raise the interest rate for the first 12 months after opening the account. They can do it only if the cardholder is more than 60 days late on a minimum payment.

Rare consumer takes time to read and fully understand the terms and conditions with all protections and long disclosures because they can be overwhelming and can confuse the average consumer.

If for some reasons you do not want to read the fine print, you can ask issuer the right questions:

What is considered a late payment? Even if you are not planning to miss a payment, accidents happen, so it is best to find out how late the fees are assessed. Ask what triggers a late fee, how much the fee is and whether a late payment will affect your APR.

What are the overlimit fees? Some credit card users do not understand how overlimit fees work. Unless you are enrolled in a program that allows the transaction that will put you over your credit limit, you can’t exceed your credit limit. But if you are enrolled, it put you at risk of getting hit with hefty fees. Besides you could start a habit of spending beyond your means.

What makes up a foreign transaction fee? If you travel internationally a lot, you may want a credit card that has no foreign transaction fees. However, when you look at cards that include such fees, you should know how much the charges are and how issuer defines a foreign transaction. Many issuers may charge you a foreign transaction fee even if you make online purchases from a foreign store while sitting in your living room.

What are the cash advance terms? Some consumers use credit cards for cash advances, which is not recommended. The interest rates on cash advances are frequently higher than a card’s standard APR, and there is no grace period. You will pay the interest on cash advances right away.

Additionally, taking out a cash advance can make issuer think you’re a risky cardholder, which may lead to an increase in your APR.

What will the balance transfer cost you?  Most issuers charge a percentage of total amount you transfer, but there may be some additional charges. Ask the issuer if there are any. If the card offers a low introductory rate, find out whether the rate applies to all balance transfers or only good up to a certain amount.

How secure is a secured card? Consumers may build or improve credit with a secured credit card, which has a fixed credit limit based on the size of initial deposit. However, secured cards may charge additional fees, like an application fee, an annual fee, a monthly maintenance fee, a fee for ATM cash withdrawals. Don’t forget to make sure the issuer reports to the three major credit bureaus (TransUnion, Equifax, and Experian), otherwise your good credit behaviour won’t affect your credit score.

What are rewards’ terms for the credit card? If it is an airline miles credit card, check if miles expire and if there are blackout dates. Some issuers annihilate your rewards if you do not pay the minimum payment for more than 60 days.

If you apply for a card with rotating rewards plan, see if you have to enroll each quarter. Don’t hesitate to ask what each category includes, if it is not clear for you. Also, ask how much you should spend to earn rewards.

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