credit cards

Read the fine print

Over-limit fees, Late fees, Grace periods: If the grace period for making payments is stated at 28 days on the initial offer, then you know when to pay your bill to avoid a late fee.

But the fine print probably will warn you that the company can change the grace period. Card issuers can change the grace period from 28 days to 20 days, let's say, and as long as it was in the fine print, it's legal.

Also, David Bach, CEO of Finish Rich Inc. and author of "The Finish Rich Workbook," reports that some companies have a specific time on the due date that the bill is actually due. Look for that, too.

"That's a huge trick," says Bach. "If a bill is due at noon, and someone gets their payment in on the last day in the afternoon, they're hit with a late fee."

Default purchase rate: If you default on your account, your card issuer may sell your debt to another company or collection agency. If that happens, you could be responsible for a different, and higher, rate. Look for it.

Transaction fees: Fees for various transactions, like using your card for cash advances. Make sure you consider that and what sorts of transactions you're most likely to make in selecting a card.

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 card holder on their 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 they'll have $25,000 in credit, only to find a substantially lower limit once they're 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: Virtually every credit card company in the country has a binding arbitration clause in its customer agreement, so if you want a credit card, you must agree to its terms. To learn more about your rights under binding arbitration, read our story " Arbitration clauses: a rights giveaway."

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.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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