November 15, 2007
If you're thinking of starting up your own credit card company and you'd like to sneak a bunch of unsavory terms and conditions by your customers with few people noticing or objecting, put them in tiny print in a long document that no one will want to read. That's what the big card companies seem to do.
According to Bill Hardekopf of LowCards.com, we should all aim to read our cards' "Terms and Conditions" at least twice a year. (That right there is a good argument for owning relatively few credit cards. Who would want to read dozens of terms-and-conditions documents?)
He also pointed out some of the kinds of details you'll unearth in the fine print. For example:
- The terms and conditions for American Express (NYSE: AXP ) cards state not only that APRs for their offers aren't guaranteed, but also that they can change in any number of ways. Rates can rise, and fixed APRs can change to variable and vice versa. Moreover, the company "may change the terms (including APRs) at any time for any reason." Yikes! It seems that JPMorgan Chase (NYSE: JPM ) cards carry similar terms.
- Discover Financial (NYSE: DFS ) cards state that under certain conditions, your minimum payment due may get hiked to a maximum of 4% of the balance due. This is actually not so bad. Sure, given that minimums are typically around 2%, it might be an unwelcome surprise to learn that your obligation has doubled. But the flip side is that it can help you clear your debt much faster.
- Citigroup (NYSE: C ) cards (and most others) state that your payments are applied toward balances with low APRs first. That means that if you get a low-rate offer for part of your balance, you'll end up losing that rate if you make new charges at a higher rate. This flies in the face of what we've long recommended to those in debt: to pay off high-interest-rate debt first. Paying off your low-rate debt first will just keep you in debt longer.
- A Chase rewards card notes that it charges up to $25 for those redeeming points for air travel.
Be a smart credit card user. Learn much more about the surprisingly interesting credit card industry in our Credit Center, and check out the following articles: