Credit card fine print

Credit card companies and issuers are renowned (and reviled) for their fine print, making it essential that you not only read the terms and conditions but also understand any of the jargon before you sign them.

Honesty box

Firstly you should look in the Schumer Box, otherwise known as the honesty box or summary box. This is a vitally important table, introduced in 2004 as part of legislation brought into place to stop people from being mislead by credit card issuers. It includes the following:

  • Annual fees (if applicable)
  • APR for purchases
  • Other APRs for fees such as balance transfers, cash advances etc.
  • Information about the grace period for purchases
  • The finance calculation method (how your interest rate is applied)
  • Other transaction fees (fees charged for late payments, exceeding limits etc.)

Fixed rate

For cards that are described as fixed rate, there will be information in the terms and conditions explaining how the rules of your account change, should you go over your credit limit. One possible consequence is a boost to the interest rate at which you are charged, so you have to inform yourself properly and, most importantly, try not to exceed your credit limit.

Double billing cycle

If the terms and conditions refer to double-billing cycles, then the interest is applied for the balance 2 months prior to the current bill rather than on that monthly balance. This can mean that you can end up paying a lot more in interest or finance charges than you expected.

Additional fees

Any additional fees which are applied to your account can add up easily and quickly, therefore you must be aware of which ones (if any) the credit card has and the potential cost.

Disputes

If the terms and conditions contain something like “Disputes in relation to the account are subject to binding arbitration”, you need to take notice. This means that should you, as the cardholder, have any disputes with the issuer then these are limited to an arbitration hearing. The issuer chooses the arbitrator and your legal options are greatly constrained. Unfortunately, most credit cards offer this. Although it may be impossible to foresee any disputes you may have, this point shows how important it is that you are aware of all the terms and conditions so that you do not receive any surprises further down the line.

APR

Another noteworthy statement is “The introductory APR does not apply to Bank and ATM Cash Advances”. In general, the APR that is charged to these transactions is higher and so, if this is included in the terms and conditions, then be wary of or avoid using these facilities with your credit card.