Most of us who receive our new credit card in the mail do the same thing; call the activation number and peel off the sticker. Ready for use, right? Well, not if you want to risk activating a credit card that might not be what you applied for.
A credit card’s terms and conditions, part of the cardholder agreement, is a legal document that you are bound to as soon as you use your new card. Have you read the fine print and legal jargon contained in this contract? If you are like most Americans, you haven’t. Knowing your rights and obligations under this agreement is the only way to protect your money and your credit from harm.
The first thing to look at when you receive your new card is the interest rate, or APR. Is it the same as the offer you accepted? Many credit card offers state the offered interest rate “can be as low as” the rate you expected. However, when your card arrives, it may come with a higher APR because your credit score did not qualify you for the lower rate. Also, look for the terms “promotional offer”. This may indicate that the rate on your card will increase after an introductory period.
One big improvement in credit card consumer protection came with the passing of legislation in 2004 that mandated a section on every credit card offer include a clear listing of the important terms for that card. This section, called the “Schumer box” lists the APR, credit limit and other important pricing information that consumers need to know about the credit card. Unfortunately, not all of the details of the terms and conditions are listed in this box. You still need to read the entire agreement to know your obligations, as well as the changes a credit card company can impose on you.
Credit card companies frequently send notifications of a change in the terms of the credit card agreements to their customers. How many of us read these changes thoroughly? The credit card industry, more than any other, has the ability to legally alter the terms of the contract we sign with them at any time. With a simple notification in the mail, our previous agreement is void and the new terms are in place. Pay close attention to these changes, and you can avoid a costly surprise.
For better or worse, we live in a credit card economy. It’s in the best interest of all of us to know the details of our card agreements. We are legally bound to abide by the contract we sign when we get a credit card, whether we read it or not. Make the informed decision to know what you’re getting into before you use your new card.
-Jennifer Davide
Editor’s Note: Checking credit card fine print is especially important when you apply for a balance transfer credit card. For example, if you apply for a card that a card that advertises a 0% APR for up to 1 year, you might discover that your rate only last six months. This can make a huge difference in the amount you save. So before you call the number on the back of your card to activate it, make sure you the card in your hand has the terms you desired when you applied for it.
For more information or to apply for a 0% APR balance transfer credit card, please see the main section of Smart Balance Transfers.
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