“No fee if you transfer your balance now!” screams one. “Low fixed rate!” promises another. “Zero percent APR until next year!” beckons the third. These are the musings of your latest credit card offers. Each is charming in its own way; but few come through with what you really need. To get to that, you’ll have to pick the language from the lingo.
It’s (Almost) Plain English
Credit card offers and provisions are not exactly written in the jargon of high finance. It’s basic marketing on the front end, plain English on the back (even if it is in small print).
Here are the most important terms to look out for:
- Annual percentage rate (APR) is the actual cost of credit as indicated by a yearly (fixed or variable) interest rate.
- Balance computation method is the formula used by credit card companies to determine the outstanding balance on which you’ll be charged interest during the billing period.
- Finance charge is the cost of credit for a particular billing cycle. It’s determined by multiplying the outstanding balance by the periodic rate.
- Fees are miscellaneous charges levied against your account. Some examples include: annual fees; cash advance fees; balance transfer fees; late payment fees; and over-the-limit fees.
- Grace period is the amount of time you have to pay off your balance without incurring finance charges.
Talk Your Way Into the Best Deal
Credit cards will almost always cost you something. Some are just more costly than others. Before you even think of applying, call your potential creditor and ask these key questions:
- What's the interest rate?
- Is it fixed or variable?
- If variable, how is it calculated?
- Will I be charged different interest rates for purchases, balance transfers, and cash advances?
- What method determines the outstanding balance used to calculate the finance charge?
- Is there an annual fee, and what else may be charged?
- What's the length of the grace period (if any)?
Establish a Usage Plan
How do you plan on using your future card? If you intend to pay it off each month, the card declaring a “low interest rate” will be less appealing than the one offering “no annual fee!”
Before You “Transfer Your Balance!”
Credit card companies commonly lure you to their balance sheets with balance transfers offered at low introductory “teaser” rates of interest. This basically means “surfing” your debt from one creditor to another, in the hopes of eliminating high finance charges. That’s all fine and dandy, until you discover:
- A higher interest rate on new purchases
- A low introductory interest rate that only applies for an abbreviated period of time
- Balance transfer fees
- Termination fees and retroactive interest charges when you “surf” your debt somewhere else
If You’re Denied
Don’t take it personally. The issuer is required to inform you specifically why you were turned down, or direct you to further information. You’ll also be entitled to a free copy of your credit report.
Speak Up for Your Rights
- The Fair Credit Reporting Act (FCRA) protects your right to know what’s in your credit file. Not only that, there are procedures in place to make sure that the information being shared about you is fair and correct.
- The Equal Credit Opportunity Act (ECOA) ensures that when you apply for credit, you won't be discriminated against because of gender, race, marital status, or age.
- The Fair Credit Billing Act (FCBA) offers protection against billing errors.
- The Fair Debt Collection Practices Act (FDCPA) limits practices collection agents may and may not use to collect a debt.
If you feel your rights have been violated and you can't resolve the issue with your creditor, file a complaint Federal Trade Commission (FTC) or contact your state’s attorney general.