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Credit Cards

I Want to Shop Around for a Credit Card. Where Do I Begin?

Your local banks and credit unions are a good place to begin shopping for a credit card. Using the form in Fees Associated with Credit Cards, you can begin comparing which card might be best for you. If you have a computer, your credit card shopping options increase. At www.BankRate.com , you can shop for a variety of credit cards. For example, you can shop for a card that features:

• Low-interest rates for credit card balances
• No annual fee to use the card
• Low fees for transferring credit balances from a high-rate card to a low-rate card

Beware of “Teaser Rates”

There are many credit card companies out there and they all want your business. Offering an introductory or “teaser rate” for charges on unpaid balances is one way credit card companies try to attract your business. 

While teaser rates might appear very attractive and well below rates other credit cards offer, teaser rates are good only for a certain period of time, such as six or nine months. After the introductory period ends, you will be charged the credit card company’s normal rate on unpaid balances. 

In some cases that normal rate may be in line with what other companies charge. In other cases, it will be a lot higher. If you are interested in a credit card offering a teaser rate, be sure you know what rate you will be charged on unpaid balances after the introductory period ends.

Transferring Credit Card Balances — What You Need to Know

If you want to transfer credit card balances to a lower-rate or lower-cost card, make sure you know:

• The fees charged to transfer the funds—usually three to four percent of the balance. That amount will be added to your existing balance.
• The transfer rules—when does the advertised rate, or “teaser rate,” end? What could trigger the teaser rate to end earlier than advertised, such as a late payment?
• Usually the teaser rate applies only to transfer balances, not on existing balances, or balances for new purchases. What rate will be charged for new purchases? Often the rate for new purchases is higher than the teaser rate.

Fees Associated with Credit Cards

Using credit comes with a price, and in different forms. It literally pays to know what to look for when shopping around for a credit card. Here is a list of fees you need to know about so you can knowledgably assess which card is right for you.

If you are unable to determine exactly what type of fee might be charged from the credit card company’s brochure or web site, call the credit card company and speak with a representative.

Provisions of the Credit CARD Act of 2009

The goal of this legislation that became fully in effect February 22, 2010, is for consumers to easily determine what fees lenders charge, when, and for what amount. Here is a summary of new restrictions imposed on credit card companies.

Interest Rates	Companies cannot raise interest rates on existing balances for the first 12 months after you open an account unless: Your card is tied to a rate index, which moves up and down over the course of time. The period for an introductory (“teaser”) rate ends (see Beware of Teaser Rates). The account is at least 60 days overdue. However, credit card companies can increase interest rates for new charges, but only after the first 12 months of opening your account.
Fees	Over-the-Credit-Limit Fees. Consumers must agree in advance (opt-in) to pay for purchases that exceed their credit limits. If that advance agreement is not made, credit card companies will deny purchases that exceed credit limits. Caps on High-Fee Cards. Some credit card companies charge an application fee, or annual fee to use the card. These fees cannot exceed 25 percent of your credit limit. For example, if a card has a $500 credit limit, application or annual fees charged for the first year can’t exceed $125. This provision does not apply to penalty fees, such as a late payment fee.
Payments	Companies may not charge consumers a fee to pay by phone, electronic funds transfer, or mail unless the consumer requests to expedite the payment. For balances charged one APR for purchases and another APR for cash advances (usually a much higher APR), the portion of a credit card payment that exceeds the minimum balance must be applied to the balance with the higher APR. Consumers must receive statements at least 21 days before the grace period ends—the period where purchases are not subject to interest charges.
Due Dates	Due dates must be the same every month.
Student Cards	Consumers under the age of 21 are eligible for a credit card only if they can demonstrate independent sources of income or if a parent, guardian, or spouse co-signs the credit card contract.
Gift Cards	Issuers of prepaid cards, gift cards, and gift certificates cannot charge service or inactivity fees unless 12 months have passed. Cards cannot expire within five years of the card’s activation date.

Source: Board of Governors of the Federal Reserve System. “What You Need to Know: New Credit Card Rules Effective Feb. 22.” www.FederalReserve.gov

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