Compare Credit Card Terms
Discover How To Compare Credit Card Terms And Save Money
You really need to compare credit card terms when choosing the best credit card. But, if you are like most people who've used a credit card, you have never read your cardholder agreement. And I can't fault you for that. Cardholder agreements feature paragraphs of confusing legalese squeezed together in small, hard-to-read print. I find I have to force myself to read them.
Do you know why there's so much fine print? Most credit card companies do NOT want you to read the cardholder agreement, let alone understand it. It's true! They want you kept in the dark so they can charge you more interest and fees in the long run.
However, it is important that you know the significant terms of your agreement, so you are aware what can trigger increases in interest rates and fees, and avoid unnecessary expense.
By reading the card company's agreement with a basic understanding of what the terms mean, you will be able to compare credit card terms and know when to switch to a new credit card, or how to choose the best credit card. By understanding how the system works, you might be able to save money.
Here are several key terms that you will find in most credit card agreements and their meaning:
PreapprovedChances are, you have received a personalized credit card offer in the mail that says you've been "preapproved" to receive a credit card. Being offered a preapproved credit card sounds good, especially if your credit rating is shaky, but it pays to remember that in advertising, things are not always as they seem.
Really, you haven't been pre-approved for anything. It just means that you have met "some" criteria for being considered credit worthy. Perhaps you are meaningfully employed, or perhaps you hold another credit card. If you read the fine print in the agreement, you will find there is NO guarantee the card issuer will approve you for the new card if you accept the offer.
The card company always has the last word. A so-called preapproved credit card offer holds out no advantage over other credit card offers, so take your time and investigate all the best card offers to choose the best credit cards for your circumstances.
Annual FeeMany credit card companies charge an "annual membership fee" to their cardholders. This fee can range from around $25 to $75, depending on the benefits offered. And the annual fee on some premium credit cards can range up to $100 or more. You need to examine the annual fee in the agreement closely and see what it covers, because you might never use some of the benefits you'd be paying for. Often, a no-fee credit card is the best choice for the average credit card user.
Transaction FeeYou will find that many credit card issuers charge a "transaction fee" for credit card transactions other than regular purchases. For example, if you use your card to get a cash advance or balance transfer, the fee is often calculated as a percentage of the transaction dollar amount; but, expect a minimum fee to be charged for small transactions.
With large transactions, some card companies will cap the transaction fee at a specified dollar amount, but those companies are becoming harder to find; most stick with a percentage as it works to their advantage.
As part of their introductory offers, some credit card issuers will waive transaction fees for new cardholders, but only for a limited time. You need to be aware of the transaction fees mentioned in the cardholder agreement and compare credit card terms to avoid costly surprises.
Grace PeriodSome credit cards offer the cardholder a "grace period" that permits you to avoid paying interest charges as long as you pay off your credit card balance in full before a specified due date. If a grace period is not offered, interest on the balance will start to accrue from the moment you use the card.
For example, let's say the agreement offers you a grace period of 21 days. This means interest won’t begin accruing for 21 days as long as your card balance was paid in full the previous month.
Thus, by paying your card balance in full before the due date, you can take advantage of the grace period and avoid paying finance charges on your purchases. This gives you the convenience of using a credit card instead of cash without paying any interest. It's the smart way to use a credit card.
Summing up, it pays to compare credit card terms when choosing a credit card. By reading the cardholder agreements you can gain the upper hand and avoid needless expense.
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