Comparing credit cards can be confusing. In 2010, legislation was enacted to try to help govern credit cards and make them more consumer friendly. 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:
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.
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.
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.
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.
by Kristin, Vice President, Marketing