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Credit Card Disclosures
Fair Credit and Charge Card Disclosure Act
Simply put, this Act requires card issuers to disclose certain specifics of their offer in a table, in a reasonably consistent manner. Theoretically, this will help consumers to more easily compare different offers, and understand the true costs of credit. Here's an example:
| Required Disclosure | Example | What to Look for |
|---|---|---|
| Annual Percentage Rate for Purchases | The APR for Purchases and Balance Transfers currently is 2.99% for the first three billing cycles. Thereafter, a fixed rate of 9.99% applies, or 17.49% for Delinquent Accounts. | Review the disclosure regarding any intro or "teaser" rates. Also be aware of terms that let the issuer increase your rate if you are late with a payment, etc. |
| Variable Rate Information | The APR may vary if your account becomes delinquent. The variable rate is determined by taking the highest Prime Rate published in the Wall Street Journal on the 1st business day of the calendar month in which the billing cycle begins and adding 7.99% for Delinquent Accounts. | Understand the index used (e.g. Prime Rate), and what amount is added to that index. Avoid using variable rate cards during periods of rising interest rates. |
| Grace Period for Purchases | Provided that you have paid your previous balance in full by the due date, you will have no less than 25 days to repay your balance for purchases before a Finance Charge will be imposed. | Cards that have a 20-25 day grace period for purchases. Few if any will have a grace period for cash advances. |
| Annual Fee | No annual fee. | No annual fee, unless you carry balances from month to month, and a fee gets you a significantly lower interest rate. |
| Method of computing the balance for purchases | Average Daily Balance (including new purchases). | It would be better to find a card that excludes new purchases, but they are rare. |
| Minimum Finance Charge (MFC) | $0.50 in any month that a Finance Charge is payable. | This is standard, but the impact is to increase the effective interest rate for users who carry small balances. Check it out: Take the MFC and multiply it by 12. Divide it by your balance. That's roughly your interest rate should this MFC take precedence. |
Examples of Other Disclosures that are Below the Disclosure Table:
- Your Account is Delinquent if payment is received late or the Account goes over limit.
- A Late Payment Fee in the amount of $29 will be charged to your Account if payment is not received by the payment due date.
- An Over Limit Fee in the amount of $29 will be charged to your Account if your account balance exceeds your credit limit.
- A Transaction Fee for Cash Advances of 3% of the cash advance (minimum $5) will be charged to your Account.