How to read a Schumer box

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If you’ve ever shopped credit cards, you’ve probably heard of the “Schumer box.” Think of it as the CliffsNotes version of a credit card’s terms and conditions.

At a glance, the Schumer Box bullet-points a card’s most important charges and fees. And because the format is standardized—the same for every card—it makes comparing card terms a lot easier.

The chart gets its name from Sen. Charles E. “Chuck” Schumer, D-N.Y., who, as a congressman, led the push for the 1988 legislation that required the plain-language disclosures to accompany all credit card offers and solicitations.

If you’re scanning Schumer boxes, here’s what you’ll see and what it means.

Interest rates and charges

This is the first heading on the chart, and it details what interest you could pay, as well as how to avoid it. It includes:

APR

Even if you never carry a balance, it’s smart to at least compare rates.

This box tells you your annual percentage rate. Since most credit card APRs are variable and change with the prime rate, it also details how the company sets the rate (for example, your purchase APR is the prime rate plus 11.99 percent). And if you have one of those low or 0 percent introductory rates, this is where you’ll get details on how long it will last.

Balance transfer APR

Thinking of transferring a balance? This is the interest rate it will carry, along with the formula for setting that rate. Have a no- or low-interest introductory rate? This is also where you’ll find out if it applies to balance transfers, how long that introductory rate will last and exactly how long you have after opening the account to transfer a balance and snag that low APR.

Cash advance APR

This is one you never want to use. And the interest rate in this box is the reason why. It usually kicks in immediately (no grace period), and is often paired with a cash advance fee.

Penalty APR and when it applies

Commit one of the credit card “sins” (like paying late or going over your credit limit), and you could get hit with a higher APR as punishment. This section tells you what that penalty rate is, what types of behavior will trigger it and how long it lasts.

Paying interest—How to avoid paying interest on purchases

This line gives you your grace period—the number of days between the date your billing cycle closes and the date your payment is due. Pay off your balance within this time period, and you won’t incur any interest.

Minimum interest charge

Some cards set minimums on interest charges. If a card does, they’ll disclose that here. (It will say something like “If you are charged interest, it will be no less than $2.”)

Fees

Next, you’ll notice boxes that detail the various fees associated with the card. These will include:

Annual fee

This tells you how much it costs just to carry the card for a year and under what circumstances the company waives that fee (for example, for the first year).

Transaction fees

There are lots of potential fees here, including:

  • Balance transfer: This is a one-time fee levied on balances transferred from other accounts. Depending on the card, this could also come with a higher APR, too.
  • Cash advances: This is the one-time fee you’d pay for making a cash advance and it is often combined with a higher APR.
  • Foreign transactions: Does your card levy a foreign transaction fee? This is where the issuer spells out whether it does and how much. (For example, 3 percent of the transaction amount.) One point to remember: You can end up paying this fee if you purchase goods or services online from vendors based abroad—even if you never leave your sofa.

Penalty fees

This is the category of fees you really want to avoid. They include:

  • Late payment: This is what it will cost if you don’t pay by the due date (or your payment isn’t processed by the due date).
  • Over-limit: Did you exceed your credit limit but the charges were accepted? This is how much the company will add to that bill. (Not to mention the damage that being at 100-percent-plus of your limit is doing to your credit.)
  • Return payment: If your payment is rejected, this is the fee the card issuer will charge. (Depending on your history and the card, you could also get hit with the penalty rate.)
  • Return check: Bounce a check to the card issuer? This is its fee. (Your bank will likely levy a fee of its own, too.)

Other fees

Check out the miscellaneous fees an issuer levies. Is the card issuer charging just a few fees for things that seem reasonable, with prices that are comparable to other cards?

Or is it billing for things that others cards don’t (like checking your balance, activating your account, insuring your account or receiving a bill)? If so, you can likely find less costly options.

Bottom line

If you pay your credit card balance in full each billing cycle, you can avoid interest charges and most credit card fees. But even if you use your credit card responsibly, it’s a good idea to review the Schumer box and all other terms and conditions so you’ll be fully aware of its potential costs.