Shopping for a Credit Card

Shopping for a Credit Card Shopping for A Credit Card • Comparison shop credit cards • Don’t take the first offer that comes to you: – Pre-approval • Means nothing • No special rates Card Holder Agreement • Written statement that gives the terms and conditions of a credit card account. – Look here for all info before signing up – Required by Federal Reserve – Card issuers can change terms at any time with 15 days notice Billing Statement • The monthly bill sent by a credit card issuer to the customer. • It gives a summary of activity on an account. • Important changes to a credit card account are included in small-print fliers that are sent with the statement. – Schumer box: Important to look here once you’ve selected a card. Annual Percentage Rate (APR) • Annual Percentage Rate (APR) • Interest • F (Fixed) rate • V (variable) rate – Prime + ___ – Libor + ___ – Won’t go below floor • Introductory rate – How long? – What will the rate “go to” afterwards? Grace Period • Interest-free time between: – Transaction date – Billing date • Usually 20 – 30 days • No grace period if: – Carry a balance – No stated grace period Billing Methods: Average Daily Balance • Determined by: – Adding each day’s • Example – Day 1: Charge $100 – Day 2: Charge $200 – Avg. Daily Bal $150 – 30 days in billing cycle = – $5 average daily balance – Card with 15% APR has a 1.25% monthly periodic rate (15% / 12 months) – $5 daily balance = $6.25 finance charge balance – Dividing by total number of days in the billing cycle. – Multiplying by monthly periodic rate (APR/12) Billing Methods: Two-cycle Billing • If you don’t pay your balance off it: – Charges you interest based off of the current and previous month – Interest starts the day you make the purchase. Credit Limit • The maximum amount you can charge on a credit account. • You're approved up to $25,000! – “Up to” is the key phrase – Enticement offer – Actual credit limit based on credit score • Recommended limit – 20% of net income Default and Universal Default • Default – A designation that indicates a person has not paid a debt that was owed. • Universal default – If you are more than 30 days late on a payment to anyone, your credit card company can raise your interest rate. Payment Allocation • How your payments will be applied when you have differing rates • Matters when you: – Use card during and after promotional period – Purchases and cash advances • Payments will pay off lower rate first – Costs you money. Makes the bank money. Annual Fees on Reward Cards • Paying for the privilege of using a credit card • Many cards offer rewards without an annual fee • Weigh cost of annual fee to value of reward – Mileage • Avoid annual fees Late-Payment Fee • Charge imposed for not paying on time • Know your payment due date & time – – – – 9 a.m. 12 noon 5 p.m. 11:59 p.m.? • Pay via U.S. mail, phone, online, automatic bill pay, etc. Over-the-Credit-Limit Fee • You can exceed your credit limit but it will cost you – Fee – Higher interest rate Currency-Exchange Fee • Credit Cards have replaced traveler's checks. • Fee will be – Flat amount – Percentage of withdrawal • Important only if you travel internationally frequently Cash-Advance Fee & Interest • Don’t take cash advances • Fee – Flat amount – Percentage of withdrawal • Cash advance interest rate is always higher and has no grace period • Payments are applied to lower-interest balance first Balance-Transfer Fee • Balance Transfer – The process of moving an unpaid credit card debt from one issuer to another • Cards charge to transfer balance to or from one card to another. Returned-Check Fee • Your check “bounces” at the bank because: – Not enough money in your account – You don’t have a cash-advance line at the bank to cover the check Minimum Finance Charge • Also called “No Balance Fee” • Fee charged for using the credit card even when you pay off the balance in full every month. • Don’t select this card – $1.50 * 12 = $18 – Similar to an annual fee What You Don’t Need in a Credit Card Offer No on Credit Card Insurance • Life and disability insurance policies will cover credit cards. • Any type of credit card insurance is not as flexible as traditional policies. • You will have to take a policy out on each credit card. Theft Insurance • If your card is stolen – Federal law limits your liability to $50 • Don’t need theft insurance because you’re already protected • Report missing cards within 24 hours or ASAP Life & Disability Insurance • Credit life insurance – pays off the debt you owe if you die. • Credit disability insurance – Pays minimum monthly payments, but not for new purchases Unemployment & Property Insurance • Involuntary unemployment credit insurance – Pays minimum monthly payments, but not for new purchases • Credit property insurance – Cancel debt on items that are destroyed by specific incidents not covered in other policies. Find a Consumer-Friendly Card • Consumer Reports Top 10 cards have – No universal default – No two-cycle billing – No balance transfer fees • Grace period of at least 25 days • No annual Fees – Based on Cardweb’s analysis of 10,200 card offers in August, 2005. Top 10 Consumer-Friendly Cards Card Issuing bank Intro APR Go-to APR Cash advance fee Late-payment fee Over-limit fee Currencyexchange fee Platinum MasterCard Town North First Tennessee Pulaski Simmons First National Target National BB&T Franklin Templeton Bank & Trust RBC Centura Commerce Zions none v 7.99% 2% $15 $15 none Visa Platinum Visa Gold Visa Platinum Rewards Target Visa Visa Platinum f 3.90% f 0.00 v 8.40 f 8.50 none $3 $35 $35 $35 $29 none 3% none none f 1.90 f 8.95 f 9.90 f 9.90 $3 $3 $3 $29 $35 $35 none $29 $2 $1 $29 $2 Platinum MasterCard Visa Platinum Visa Platinum Visa Platinum none f 2.90 f 2.99 none v 9.99 v 9.99 v 10.49 v 11.50 none $3 $4 none $2 $29 $29 none $29 $29 $29 $2 $1 $2 $29 $1 www.cardweb.com/cardlocator Find Cards That Fit You Not sure what card to apply for? Let CardWeb.com make some suggestions based on a few questions you answer. Simply answer the questions below and click "Search". CardWeb.com's search engine will then display a list of cards that fit your needs. Required Information The following questions are required and is the minimal amount of information CardWeb.com's search engine needs in order to perform a search for you. Are you over 18 years of age? Are you employed? Yes Yes How do you plan to use this card? Search pay off monthly OR continue filling out the optional information below www.cardweb.com/cardlocator Optional Information The following questions are optional. Each additional question answered will increase the accuracy of the search.  Are you looking for a card for business or personal use? Are you looking for a card without an annual fee? Are you looking for a particular brand? Are you a student? Yes No Yes Any yes Personal     Do you earn more than $30,000 per year?  Search Are you looking for a card that offers rewards? www.cardweb.com/cardlocator Search Results Card Juniper Frontier MasterCard Platinum 877-523-0478 Fleet MilesEdge 800-225-5353 Chase Travel Rewards Platinum Travel MBNA Norwegian Cruise Line 800-932-2775 MBNA Royal Caribbean 800-932-2775 Bank One Flexible Rewards Visa Signature Travel Visa 10.24% V None 20 days MasterCard 9.24% V None 20 days Reward Type Airline Airline Brand A.P.R. Annual Fee Grace Period None None 20 days 20 days MasterCard 14.24% V Visa 14.99% V Travel Travel MasterCard 9.90% V Visa 9.90% F None None 25 days 25 days