| Reading the credit card fine print | | |
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Notice of reaffirmed debts: If you have ever
defaulted on a debt, be very careful that your solicitations for
"new" cards don't mention your old debts.
Some credit card issuers buy old debts from other
companies and then offer "new" cards to the people in
debt, only to shock the cardholder on his first statement with the
old debt. If a company mentions their right to do this in writing
at any time, then it's legal, and you're responsible.
You're approved up to $25,000!: This one's
not actually in the fine print, it's right there on the front, but
people misunderstand it. The words "up to" are there for
a reason.
Someone will apply for a card because they think he'll
have $25,000 in credit, only to find a substantially lower limit
once he's approved. Credit card companies will set your limit based
on your credit history, and the large number on the offer is an
enticement that probably will not be your ultimate credit amount.
Double-billing cycle: Robert D. Manning, a
professor of finance at the Rochester Institute of Technology, reports
that some companies employ a double-billing cycle, which means that
while the due date on your statement refers to your minimum payment,
the due date to pay off your entire balance is different.
If that due date is two weeks earlier, and you pay
off your entire card by the due date stated on your bill, then the
company could still charge you interest for the two-week interim
period.
The fine print will warn you if the company plans
to apply a double-billing cycle.
Fee for overdraft protection: Many credit card
companies offer overdraft protection on your checking accounts.
That doesn't come for free. As with anything else, there may be
extra fees on this, possibly nullifying their benefit.
Arbitration: Some card companies note in the
fine print that if there's a dispute, you agree to go to arbitration.
"If you accept a card with arbitration, that's
a big red sign that says, 'Kick me,'" says Manning. "That
means that if you have a complaint with a card company, you have
to pay for arbitration."
Balance transfer terms: Lots of people dispute
charges, but if you transfer balances, you may lose that right.
Gift card terms: If you buy something with
a gift card, you may not have the same rights, like purchase protection,
that you would otherwise have on the card.
Leslie Hunt contributed to this story.
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