Comparing credit cards can be confusing. In 2010, legislation was enacted to try to help govern credit cards and make them more consumer friendly. Read more about the Credit Card Act here. One of the mandated changes was a standardization of how credit card rates and fees are disclosed.

The good news is, you now have everything you need to compare credit card offers. My last post talked about credit card disclosure. This post is all about credit card statements.

Credit card statements have undergone significant changes. The Payment Information box is the key to understanding the true cost of credit. This box should appear on all of your credit card statements. It’s easy to use as a reference and will tell you what you need to know.

The Payment Information box uses the actual balance at the end of the billing cycle and calculates:

1. How long it will take to pay off the balance making only the minimum payment
2. How much you would have to pay monthly to pay off the balance in three years
3. The savings between the two calculations

Here’s an example:

Click to enlarge.

With a balance of just over $6,400, the minimum monthly payment is $193 and it will take approximately 11 years to pay off the balance (assuming no additional charges are made). Increasing the minimum monthly payment to $210, reduces the payoff by 8 years and nearly $1,500.

This is a powerful tool in helping you evaluate which cards are costing you the most money. If you have several cards with various balances, it might make sense to consolidate your balances to your lowest cost card, or consider a fixed-rate, fixed-payment personal loan which could save you more money and improve your cash flow.

Our friendly loan representatives can answer any questions you may have about your credit card statement or consolidating debt.

You may also be interested in:
The Fine Print of Credit Cards, part one
New Credit Card Legislation
Credit or Debit?
4 Steps to Living Debt Free
Loan Rates

by Kristin, Vice President, Marketing

Comparing credit cards can be confusing. In 2010, legislation was enacted to try to help govern credit cards and make them more consumer friendly. Read more about the Credit Card Act here. One of the mandated changes was a standardization of how credit card rates and fees are disclosed.

The good news is, you now have everything you need to compare credit cards offers. If you have a sample of a disclosure chart, you can follow along there. If not, here are samples for your review. Our disclosure is on the left and the disclosure from Chase Bank is on the right. Click to enlarge.

Click to enlarge.

Let’s browse the first column of the disclosure chart:

APR
The APR or Annual Percentage Rate is the rate you’ll pay to borrow money annually. This is either a fixed rate or a variable rate.

APR for Balance Transfers and Cash Advances
Some issuers charge different, usually higher, rates for balance transfers and cash advances. This is an important feature as you compare the benefits of your existing or new credit cards.

Penalty APR and When it Applies
A Penalty APR is a higher APR that will apply after making a late payment. The rate will automatically increase to the higher rate if you make even one late payment on your account. If the lender raises your rate, however, they also have an obligation to monitor your credit and reduce the rate over time depending on your current credit qualifications. As you can see, Pacific Service CU does not have a penalty APR. Chase’s penalty APR is significantly higher than their purchase rate, at 29.99%.

How to Avoid Paying Interest on Purchases
A grace period is the amount of time between the close of each billing cycle and the due date. Interest does not accrue if the balance is paid in full. As you can see, ours is at least 25 days. Some issuers have a very short grace period, which means you’ll have less time to pay it off before interest is applied.

Annual Fee
If a card has an annual fee, it must be disclosed. If limits apply on the annual fee, they must also be listed here. For example, if you choose a Pacific Service CU Platinum Rewards card, you will be subject to a $25 annual fee; however, that fee is waived the first year or every year thereafter if you have a Relationship Checking account with us.

Transaction Fees
We don’t charge fees to transfer a balance or to take a cash advance as indicated here. Many issuers, however, do charge a fee. Typically, the fee is either a flat fee or a percentage of the balance whichever is greater, as indicated in the Chase disclosure.

Foreign transactions are more expensive for the institution to process, so it is common to see a fee here. Typically the fee is a percentage of each transaction. Our Foreign Transaction Fee is either 0.80% or 1.0%, depending on how the transaction is processed. Chase’s is 3%. That can add up to serious saving for those who travel overseas.

Penalty Fees
The last row lists the fees for returned payments, late payments and if there is a charge for being over your limit.

Below the chart, the issuer explains how they will calculate your rate. Variable credit card rates must be tied to a public consumer index and most issuers use the Prime Rate; however, you should also note the published margin, which is typically added to the consumer index to calculate your rate. In the current market, the consumer index and the margin may not add up to your APR. This is because some issuers have a minimum APR, which would be applicable in today’s unique low-rate environment.

If you’re comparing cards using this chart and definitions, you can easily determine the best value for a new card or which card to use from your wallet. Your Credit Union has worked hard to create substantial value advantages with our Visa cards. If you take the time to compare, we hope that we’ll earn your business.

You may also be interested in:
New Credit Card Legislation
Credit or Debit?
4 Steps to Living Debt Free

by Kristin, Vice President, Marketing

Credit cards can be a convenient way to access your money and manage your spending. Often, however, consumers use credit cards excessively, even creating balances up to the credit limit.

As a responsible user, you should abide by the basic rules of budgeting. Live within your means and only charge what you can pay off in a reasonable amount of time. I’d recommend using a maximum three month pay off period as your guide.

The credit card account minimum payment is calculated as a percentage of your balance, typically 3%. So, how much does revolving credit really cost you?

As you can see, paying only the minimum will cost a significant amount of interest; in some cases nearly as much as your purchase cost. Plus, you’ll be paying for a very long time.

To pay as little interest as possible, you should pay much more than the minimum. By doubling the payment on the vacation, for example, to $600 per month, the term would be cut in more than half, from 16 years to 7 years. For convenience, this calculation is available in the Payment Information section of your credit card statement.

Credit cards are an important part of building credit. However, it’s prudent to try to pay off cards in full each month. With controlled spending and timely repayment, you will raise your credit score and save money in the form of lower interest rates.

You may also be interested in:
Pacific Service CU Platinum Visa, Rewards and Starter cards
Article: 4 Steps to Living Debt Free
Article: Saving Money is the New Black
CNN Money Minimum Payment Calculator

by Jenna, Vice President, Operations

It’s the time of year for reflection on the past year and resolutions for the upcoming year. It’s also the time for top 10 lists!

These are the Top 10 Pacific Service CU blogs of 2011, in order of number of views.

Bank Transfer Day and the Big Bank Alternative

Steps to Living Debit Free

Our Debit Card is Free

4 New Car Buying Myths

Mortgage Refinancing Tricks

Is Leasing a Car a Good Option For Me?

When 0% Isn’t the Best Deal

Tax Refund? Make that Money Work!

Free Car Buying Service is Here

Avoiding Foreclosure

Thank you for your readership. Our goal is to continue to provide educational and informative articles to our membership. If you have a topic you’d like us to address, email us.

We’ve had a good year at Pacific Service CU and we wish you the very best for a prosperous 2012. Happy New Year!

by Kristin, Vice President, Marketing

It’s beginning to look a lot like Christmas everywhere I go. Instead of giving the typical race car set or princess dress for the holidays, consider giving a gift that helps teach the children in your life how to be financially savvy.

There are money gifts for every age range, but here are my six picks:

Piggybank
Everyone needs a piggybank, and now they come in every shape and size imaginable. Fill the piggybank with a small deposit or a bag of coins. I encourage my son to pick up loose change around the house and add it to his bank.

Toy Cash Register
Perfect for kids ages 2-6, “pretend play” with a cash register is an interactive, fun and easy way to introduce children to the concept of money. Most cash registers come stocked with pretend bills and coins and feature a large number display and working cash drawer.

Stock
Start your child on the road to investing with a real stock! Using a service like One Share, you can gift as little as one share in large companies they’ll recognize, like Disney, McDonalds, Mattel and more. Your child will even receive a stock certificate to hang on their wall.

Monopoly
Family game night wouldn’t be the same without the tradition of Monopoly. Teach your child valuable money and math skills as they add, subtract, multiple and divide to earn revenue. Choose a version most suited to the ages of your family, for example, Monopoly Junior is geared to ages 5-8.

Coverdell Education Savings Account (ESA)
A Coverdell Education Savings Account (ESA) may be a smart investment for you. An ESA lets your child or grandchild save for education on a tax-favored basis. We know parents and grandparents are often the central source of financial assistance for education. Scheduling automatic deposits from your account helps their funds grow effortlessly. We recommend that you speak with your tax advisor for details.

Credit Union Membership
If your child or grandchild isn’t already a Pacific Service CU member, it’s the perfect holiday gift! We offer special programs for young adults; including first-time certificate, checking, auto and credit card products to start them off on the road to a bright financial future.

Have a merry and safe holiday season!

You may also be interested in:
Life 101: Financial Services for Young Adults
Pacific Service CU ESA products
Is it Time for an Allowance?
Top 10 Ways to Save Money

by Kristin, Vice President, Marketing