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Credit Card Costs Hidden in Fine Print                    

Have you read the fine print in credit card terms you’ve been receiving in the mail lately?  You may be shopping for a new account or you may just receive new terms for accounts you already own.  Did you know that a late payment on one account can affect the interest rates and credit contract terms on other accounts?  What you don’t know can hurt you!  Take the time to read what is hidden in those new terms carefully, keeping in mind that, “The large print giveth and the fine print taketh away.”

The large print on a credit card offer may say, “0%  INTEREST, NO Annual Fee, Interest-free grace period.”  Not bad, but don’t forget to read the fine print in the notes and explanations.

Here is a sample the fine print you may find in new credit card terms.

“ O% interest rate is for the for the first 6 months only. After that the rate may vary up to 20%. We reserve the right to change the terms (including APRs) at any time for any reason.

Default rate is 29.99%. Late payment fee is $39. Over-the-credit-limit fee is $35. Your APR may increase if you default under an agreement with us for any of the following reasons:

  1. We do not receive a payment that is owed on this account or any other account with us,
  2. At least the minimum payment due is paid by the date and time due;
  3. You fail to make a payment to another creditor when due;
  4. You make a payment to us that is not honored by your bank; or,
  5. If at any time after your account is closed, we demand immediate payment of your outstanding balance and we do not receive payment within the time we specify.”

What exactly does this mean?  For this card, it means that your introductory interest rate of 0% annual percentage rate (APR) will increase to 29.9% APR if you fail to pay the full mininum payment on ANY account you have by the due date. In addition, late fees of up to $39 per month may be charged.  Even if you always pay on-time, your interest rate will go up after 6 months. If you charge over the limit, you will pay an extra $35 fee each month until you get back under your limit. The creditor reserves the right to cancel your card if you default on your agreement. Then you will be asked to pay the entire balance in full.

What can consumers do to avoid costly fees and rate increases?  Always pay more than the minimum payment with plenty of time for the mail to arrive before the due date. Keep balances low, preferably zero.  When you pay your bill in full each month, you may pay no interest at all. Never charge anywhere near the credit limit.  If you must leave a balance, keep it to about one-third of the limit.  Your credit score will begin going down as you approach even half of your limit. If your payment is late and you do not make a habit of it, call the creditor to ask that the fee be removed.  You can also ask for a lower interest rate if yours has increased. Understand that what you do on one account may affect others, so pay bills on time and use credit responsibly.