Credit card special offers and introductory rates can be a great way to reduce your debt. However, credit card applications remain confusing. Knowing the terms and conditions of your new card before you use it is the only way to protect yourself and ensure you’re getting the credit card offer you applied for.
Even with debt default rates rising, credit card companies are still seeking new customers, and the ways they attract new business haven’t changed very much. Appealing offers of low or 0% introductory rates are still showing up in mailboxes every week, and online credit card offers can be found everywhere you look. So, has anything really changed when it comes to credit card applications? In a word, yes.
Since the introduction of the 0% interest rate in the 1980’s, credit card companies have sought to create a balance between the acquisition of new customers and the lending of free money. To do this profitably, they put rules in place to limit the accessibility of this 0% rate.
A few years ago, new rules about how application information were imposed on credit card companies by Congress. A standardized disclosure box which lists specific terms and conditions, is now mandated by law for every credit card application. This disclosure, called the Schumer Box after then-chairman of the Senate banking committee Charles Schumer, provides a starting place for consumers to educate themselves on their card’s terms and conditions.
While the introduction of the Schumer Box was a step forward in consumer education, it is not a complete listing of the credit card agreement that card holders are bound by. To fully understand all of the terms and conditions of a particular credit card application, nothing can take the place of reading the entire cardholder agreement. Such a thorough examination is the only way to identify clauses and hidden fees that may make your 0% credit card not quite as attractive. Some of the things to look for are:
1.) Wording that states “your interest rate may be as low as 0%”. This terminology allows card issuers to adjust the rate higher than the advertised rate, based on a borrower’s credit score.
2.) A clause that indicates the introductory rate “is effective for up to one year”. Again, this introductory period may be far less if the applicant’s credit score is below a minimum standard for that particular issuer. You may find your introductory period is only good for only 6 months.
Finding a low interest rate card can be a useful and beneficial tool in keeping control of your finances. A full year free of interest payments can make quite a dent in your debt. Just make sure you know ahead of time the exact terms that you may get by closely reviewing the online credit card application as well as the credit card offer details when your card arrives in the mail. Knowing this can save you money and big headaches down the road. Oh and as always, use your credit widely.
