Credit Card Agreement – How to dissect it.
If you’re planning on opening up a new credit card account anytime soon, make sure you’re ready to read every last bit of fine print in the agreement before you sign. Furthermore, you need to make sure you understand all of the terms used in the document to avoid signing up for more than you bargained for. Once you have a firm grasp on the industry terms, you can easily pick through the credit card options to find the best one for your needs.
Annual Percentage Rate
Each type of credit card Credit Card Agreement has an annual percentage rate, or APR, attached to the account. The assigned APR applies to totals that carry over month-to-month and balance transfers from other accounts. Some credit card companies even occasionally adjust the assigned rate according to the transaction type or for promotional periods.
Credit cards may offer either a variable or non-variable APR, depending on your account type. You can expect variable rates to raise or lower on a monthly, quarterly or yearly basis, based on changes to the market. The non-variable rate stays at a stable percentage, despite market changes, unless it is temporarily lowered as an incentive.
You can find the actual APR usually listed in bold right in the fine print, but it’s important to read the surrounding information to find out interest charge details.
When you open a credit card, there are several limits placed on your account. The information should include exact numbers for the upper limit on spending totals and daily cash advance amounts. Although most accounts will decline purchases above the limit, some just charge a higher fee for exceeding the listed amount. The process for raising the credit limit is also detailed in the agreement paperwork. Therefore, it’s important to initially read the fine print closely, and then store the document in a safe place for later review.
Monthly and Annual Fees
In addition to charging a percentage of the balance as interest, credit cards may have a monthly or annual fee. These fees are often wrapped into the total owed on the account at the end of the indicated billing period. However, you may find that the paperwork tells you how to avoid paying interest on that charge, which could save you hundreds of dollars over the years.
You can usually avoid these additional fees by obtaining a credit card through your bank rather than a standalone finance company. Alternatively, if you keep your account in good standing, you can request to have the fee waived by calling customer service at the beginning of each calendar year.
The main benefit of using credit cards for purchases is the satisfaction guarantee placed on each transaction. Credit card companies act as a layer of protection between buyers and sellers. If you purchase a product or service that doesn’t live up to your expectations, and the vendor will not work with you, you can have the charges reversed by the credit card company. In some cases, credit card transactions extend the warranty on the purchased item.
As you carefully read the fine print, keep an eye out for unnecessary charges or unfair terms. Make sure to compare several credit card company’s usage terms and fees to weed out predatory lending institutions. Once you pin down the best option, keep the agreement terms in mind while using your account for payments or purchases to protect your pocketbook, and credit score, from harm.
For additional information, feel free to contact our office at 617-265-7900, or schedule a free consultation below.