Why Review Your Credit Card?

Credit cards are known for coming with a lot of fine print (their terms and conditions) that the average consumer cannot understand. However, to ensure that you're getting the best deal possible, it's essential that you review your credit card from time to time. Some consumer advocates say that credit card company clauses are unfair and devious, but all are perfectly legal as long as they are outlined in the terms and conditions. Reviewing your credit card can help you decide if it's the right one for you.

A good place to start is the credit card terms' Schumer box, which is a table summarizing fees, penalties and rates. The Schumer Box was created when legislation amended the Truth in Lending Act, which required credit issuers to include the card's costs in all applications and advertisements, displayed in a format that was easy to read. The Schumer Box typically includes the card's annual fee, the APR, APRs for cash advances and balance transfers, grace periods, the method used to determine finance charges, and other fees. The Schumer Box makes it easy to review credit cards and compare their terms.

As helpful as the Schumer Box is, there are many things that aren't included within it, but are equally important. These items are required by law to appear in the credit card's terms and conditions, and knowing what to look for can help you avoid financial trouble. Here are some things to look for when reviewing credit cards:

*Clauses stipulating an APR increase (up to the maximum default APR) if you're delinquent on any other credit account. This is the "universal default clause".

*A clause that states that account disputes are subject to arbitration. This clause is now standard on most credit card offers, and it protects the card issuer from class action suits and lawsuits. If you have a problem or dispute on your account, your only legal recourse is an arbitration hearing, where the arbitrator is hired by the card issuer.

*Clauses on balance transfer fees, such as phrases that state that these fees are added to the purchase balance and are subject to the same APR as your purchases.

*A clause that says that the introductory or "teaser" APR doesn't apply to ATM or bank cash advances. Usually, cash advance balances are subject to a higher APR, and even worse, you can end up with a balance that has two separate APRs. Your payments are applied to the lower APR first, keeping the higher-interest debt around longer.

When reviewing credit cards, avoid those that are designated as "fixed rate"; they contain language in the terms and conditions that say exceeding the credit limit can automatically boost the interest rate. Keep in mind that even "fixed rates" can be changed at any time by the card's issuer, and all they have to give is fifteen days' notice. Some cards use double billing, meaning that interest is computed based on your past two months' balance. That means that you'll pay more interest and finance charges.

Although fees are usually listed in the card's Schumer box, they are still easy to compare from one card to the next. These fees can add up very fast, so it's vital that you review your card to know what fees are associated with it. Reading the fine print may be tedious, but taking the time to do it now can save you a lot of money and frustration later. It's up to you to review your credit cards and be an informed consumer!