DFI: Choosing a Credit Card: Read the Fine Print

Contact: Gail Gawenda


The following is one in a series of consumer tips articles from the Wisconsin Department of Financial Institutions:

When you’re considering a credit card offer, you obviously want to save as much money as you can and avoid some nasty surprises that could unexpectedly drive up the charges on your monthly bills. You’ll need to weigh issues such as interest rate, annual fee, and grace periods, and each should be considered based on how you plan to use the card.

Interest rate—If you plan to carry a balance from month to month, shop for the card with the lowest rate. As a tradeoff, however, you may have to pay a higher annual fee. But keep in mind that credit card issuers reserve the right to change your interest rate for any reason whatsoever. This can be a nasty surprise. A super-low rate for six months may be advertised in bold, colorful print. But you have to put your glasses on to find out this “teaser” rate takes a hard upward turn when the introductory period is over, or that the low rate applies only to balances you have transferred from other cards. Even a rate advertised as “fixed” can be increased.

Some cards use a variable rate system. With these cards your interest rate can change from month to month with no advance notice. The small print will also tell you how your interest is calculated. The “average daily balance” approach is the most common.

Annual fee—If you pay your entire balance every month, look for a plan with a low or no annual fee. In this case, the interest rate is not a factor because your account won’t accrue interest.

Grace period—While many credit cards give you 25 days to pay any new balance without incurring interest, some do not. This means you will be charged interest from the moment of purchase.

Miscellaneous fees
Be aware, however, that card companies are actively raising fees, imposing them more aggressively and inventing new ones. You could be charged $29 for being one day late with a payment, for example. You should study the fine print for late payment and overlimit terms, and look for other surprises such as “inactivity” fees for not using a card much, annual fees, and penalties for paying off a balance.

Another thing to watch out for: customers who carry their cards overseas need to watch out for
add-ons of up to 3 percent on foreign purchases.

There are many other factors involved in choosing a credit card. Some cards offer annual cash back programs, free insurance on rental vehicles, or some other incentive for you to use their card. Examine the offer carefully and choose the program tailored to most closely fit your needs.

Unwanted credit card solicitations–Do you want to stop receiving credit card applications in the mail? Credit card companies commonly purchase pre-screened lists of consumers from credit bureaus for mass mailing of credit card applications. The lists contain the names and addresses of consumers, and other general information.

You have the right to keep your name off these lists, and by doing so you will greatly reduce the number of credit card offers you receive. To exercise this so-called “opt-out” right, you can call 1-888-567-8688 to contact a service jointly operated by the three major credit bureaus, Trans Union, Equifax, and Experian.

To remove your name from telephone solicitation lists, write to:
Telephone Preference Service
P.O. Box 9014
Farmingdale, NY 11735-9014

For information about Wisconsin’s No Call List, go to https://nocall.wisconsin.gov/web/home.asp or call 1-866-966-2255.

For more information about credit cards and other consumer tips, please visit the DFI website at http://www.wdfi.org/.