5 Things To Learn From the Credit Card Disclosures

Thanks to the Credit CARD Act of 2009 credit card disclosures are much easier to understand. Credit card issuers mail these disclosures with every credit card offer and the document contains a wealth of information about the credit card pricing. If you’re deciding whether you should take a credit card offer, the credit card disclosure will include much of what you need to know to make a good decision.

1. All the interest rates that apply to your credit card. Credit cards have several interest rates for purchases, balance transfers, cash advances, and a penalty rate if you fall behind on credit card terms. To make matters more complex, your card may have a promotional rate for purchases and balance transfers.

2. Minimum amount of interest you’ll be charged. Each month you carry a balance beyond the grace period (also listed on the disclosure) you’ll be charged interest. Most credit cards has a minimum finance charge they’ll assess. For example, if your calculated finance charge is $.25, but your card comes with a minimum interest of $.50, then your finance charge for that month will be $.50.

3. A list of fees for your credit card. Common fees include balance transfer fee, cash advance fee, late payment fee, a fee for exceeding your credit limit, and a foreign transaction fee. No matter which fees your credit card has, law requires them all to be listed on the credit card disclosure. This will give you an idea of how you can keep your credit card cost at a minimum.

4. Grace period for avoiding interest. Most credit cards have a grace period during which you can pay your full balance and avoid interest. The credit card disclosure may not necessarily call it a grace period, but instead state that there’s no interest due if you pay the balance within the time frame.

5. Balance calculation method for computing finance charges. Your credit card disclosure will describe how the credit card issuer calculates the balance that’s used to compute your finance charge. A common method is the average daily balance method where the interest rate is multiplied by your average balance for that billing cycle. This section of the credit card disclosure will also tell you whether interest is added to new purchases.

Another good thing about the rules for credit card disclosures – no more fine print. Fees and APRs are required to be printed in bold text in 16-point font. The government may have made big changes to credit card disclosures, but you still have to read them to get the good details.