Credit cards are remarkably transparent financial products as Federal regulations require that card issuers disclose almost all rates and fees before cardholders begin to fill out their application. Nevertheless, there is enough grey areas in those regulations that banks can determine many of the terms and conditions only after they have approved applicants and opened an account. Here are the three things that credit card users may not learn until they receive their cards.
- The Standard Interest Rates. Although banks are required to disclose the standard APR that applies to each of their products, they have found a way to conceal the rate that will be given to individual cardholders. For example, many cards will be advertised with a range of rates with specific terms being granted to individual cardholders based on their credit worthiness, but only upon approval. Often, the range of interest rates offered can vary by as much as ten percentage points. In general, the lower the range, the lower the rate that a particular customer is likely to receive. At the same time, there is no guarantee that anyone will actually receive the lowest possible rate.
- The Cardholder’s Credit Limit. Here there is no grey area. Banks are not required to disclose the credit limits of its individual products, or even if there is one. Some banks have been known to approve applicants while granting a credit limit far smaller than the spending requirement to receive a sign up bonus. Other issuers offer cards with “no preset spending limit.” Rest assured that the limit exists, but it is not disclosed to the customer even after the card is received.
- The Terms of a Balance Transfer Offer. Like the standard interest rate, banks do have some requirement to disclose the outlines of their balance transfer offers. Yet in some cases, they can present a range of different offers to applicants. Again, the cardholder must wait until the card is approved and received before learning which offer he or she qualified for. Issuers have been known to offer products with multiple different pricing plans, each corresponding to promotional financing periods of different lengths. Once a cardholder is approved, they are informed whether or not they qualified for the longer “preferred” or the shorter “standard” promotion.
Credit cards exist in a highly regulated market, but issuers still have some room to vary their products based on applicant’s credit scores. By understanding how the terms of the card can be determined only after applying, consumers can set appropriate expectations before their cards arrive in the mail.