Shopping for a Credit Card

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Shopping for a Credit Card
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Shopping for A Credit Card

• Comparison shop credit cards
• Dont take the first offer that comes to you
• Pre-approval
• Means nothing
• No special rates

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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

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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 youve
  selected a card.

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Annual Percentage Rate (APR)

• Annual Percentage Rate (APR)
• Interest
• F (Fixed) rate
• V (variable) rate
• Prime ___
• Libor ___
• Wont go below floor
• Introductory rate
• How long?
• What will the rate
• go to afterwards?

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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

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Billing Methods Average Daily Balance

• Determined by
• Adding each days balance
• Dividing by total number of days in the billing
  cycle.
• Multiplying by monthly periodic rate (APR/12)

• 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

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Billing Methods Two-cycle Billing

• If you dont pay your balance off it
• Charges you interest based off of the current and
  previous month
• Interest starts the day you make the purchase.

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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

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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.

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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.

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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

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Late-Payment Fee

• Charge imposed for not paying on time
• Know your payment due date time
• 9 a.m.
• 12 noon
• 5 p.m.
• 1159 p.m.?
• Pay via U.S. mail, phone, online, automatic bill
  pay, etc.

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Over-the-Credit-Limit Fee

• You can exceed your credit limit but it will cost
  you
• Fee
• Higher interest rate

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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

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Cash-Advance Fee Interest

• Dont 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

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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.

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Returned-Check Fee

• Your check bounces at the bank because
• Not enough money in your account
• You dont have a cash-advance line at the bank to
  cover the check

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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.
• Dont select this card
• 1.50 12 18
• Similar to an annual fee

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What You Dont Need in a Credit Card Offer
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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.

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Theft Insurance

• If your card is stolen
• Federal law limits your liability to 50
• Dont need theft insurance because youre already
  protected
• Report missing cards within 24 hours or ASAP

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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

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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.

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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 Cardwebs analysis of 10,200 card offers
  in August, 2005.

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Top 10 Consumer-Friendly Cards
Card Issuing bank Intro APR Go-to APR Cash advance fee Late-payment fee Over-limit fee Currency-exchange fee
Platinum MasterCard Town North none v 7.99 2 15 15 none
Visa Platinum First Tennessee f 3.90 v 8.40 3 35 35 3
Visa Gold Pulaski f 0.00 f 8.50 none 35 29 none
Visa Platinum Rewards Simmons First National none f 8.95 3 29 29 2
Target Visa Target National none f 9.90 3 35 none 1
Visa Platinum BBT f 1.90 f 9.90 3 35 29 2
Platinum MasterCard Franklin Templeton Bank Trust none v 9.99 3 29 29 2
Visa Platinum RBC Centura f 2.90 v 9.99 4 29 29 1
Visa Platinum Commerce f 2.99 v 10.49 none none none 2
Visa Platinum Zions none v 11.50 2 29 29 1
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www.cardweb.com/cardlocator
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www.cardweb.com/cardlocator
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www.cardweb.com/cardlocator