Sifting through the terms and conditions of a credit card can be daunting. The language is not always easy and it is not uncommon to feel lost.
Two-thirds of consumers say they fully understand credit card rewards offerings, according to JD Power’s 2019 Credit Card Satisfaction Survey. However, cardholder satisfaction with the explanation of terms provided by issuers is low compared to other card features and services.
But the more you understand your card, the better your financial decisions will be. “I really enjoy calling the company and asking them to explain to me,” says Jamila Souffrant, creator of Journey to Launch, a personal finance blog and podcast.
Here’s what to think about as you browse the fine print on your map.
You can understand the long-term expenses associated with carrying a credit card by examining the accompanying card agreement. Identify each potential load and stay organized.
“Have all the material in front of you, pull out your highlighter and identify the key information you need to be aware of: the interest rate, any fees, terms, things of that nature,” says Yusuf Abugideiri. , a certified financial planner at Yeske Buie, a financial planning firm.
Start with the , an essential table on the first page of your card contract that lists fees and interest rates, including:
Your “Standard Variable APR for Purchases” is the interest owed on purchases when you carry a balance. Your APR will vary depending on the card and your creditworthiness, but the average APR in Q2 2019 for credit card accounts that earned interest was 17.14%. You can avoid interest charges by paying your monthly bill in full. Note that some cards have different APRs for things like balance transfers and cash advances.
Some cards have a 0% introductory APR offer that can help fund a large purchase without interest for a period of time, or help you pay off an existing balance faster by transferring it to the card. Note that this is different from a . In these cases, “interest will accumulate and if you do not pay the entire balance before [the promotional period expires], you’re going to get bitten retroactively with all this interest, ”says Chi Chi Wu, an attorney at the National Consumer Law Center. Note the expiration date.
are typical rewards cards or cards for those with low credit (usually credit scores of 629 or less). For the rewards cards, Souffrant says she is looking for perks that can offset the fees. Cards designed for low credit generally don’t offer any rewards. A better choice might be no annual fee . These require an initial cash deposit, usually a few hundred dollars, which becomes your credit limit. You get the money back when you switch to an unsecured card or close the account in good standing.
Look for fees on things like cash advances, balance transfers, or late payments. You can avoid some of them quite easily, but others may be unavoidable, depending on your habits. For example, if your card has an overseas transaction fee, you’ll be charged every time you use it overseas.
If your card offers a rewards program, its terms may be included in the general card agreement or in a separate document. Here’s what to look for:
While these can be generous, you’ll first need to hit a spending threshold – often several thousand dollars – within a certain period of time. Don’t spend too much just to earn a bonus; make sure you can really afford it, says Abugideiri. If you plan to hold the card for the long term, its ongoing rewards will be more important than a one-time bonus.
Terms and conditions often state that reward values vary depending on what you’re trading, but they don’t always state the value of each option. You may need to sign in to your account or ask customer service. Be aware that some cards have a minimum number of trades required, which means you can only trade “starting at $ 25” or “in increments of $ 5”, for example.
Credit cards with bonus categories may specify limitations on them. Buying gasoline at the pump might get you a fare, but buying something inside a gas station convenience store might get you a different fare. Cash advances or balance transfers are generally not eligible for rewards.
This article was written by NerdWallet and was originally published by The Associated Press.