Choosing a Credit Card

Often times you will receive multiple credit card offers in single week.  How do you make sense of all the offers and decide which one is best?  Each one has its own flashy gimmick to grab you and make you want to apply. "Low APR!" "No Annual Fee!" "Cash Advances!" which one is best?

Here are some tips on comparing credit cards, and remember you DO NOT have to accept or apply for each credit card you are offered.

Important Things to Remember

  • Only use a card when there is no doubt about ability to pay off the charges at the end of the billing cycle.
  • Record all expenses and keep receipts.
  • Using monthly receipts check credit statement for errors.
  • Always pay off balance completely and timely within the grace period.

 

The Schumer Box 

Schumer Box Example
Credit card companies are required to provide certain information in any offer that they make to you, under the federal Truth in Lending Act (TILA).

You can find this information printed in what's known as the "Schumer box" (after the U.S. Senator from New York who drafted the bill).This box will appear on the back of the letter offering you credit, or on another sheet of paper enclosed in the same envelope.

This box lists all fees charged for ownership of the card for using it. By using the Schumer Box, you can compare the total costs of each card and decide which one is best for the way you plan to use it.

Disclosures in the Schumer Box

Some very important information is displayed in the Schumer Box, including the following:
  • the APR or APRs
  • the minimum finance charge
  • the minimum payment required
  • the method used for computing your outstanding balance
  • the actual company offering you credit (sometimes not the company marketing the card)
  • the credit limit
  • the grace period
  • the annual fee, if any
  • the fees for credit insurance, if any.

The issuer must make it clear whether there is an introductory or promotional rate and, if so, how long it will last.  Pay close attention to the fine print of what disqualifies you from the "teaser"rate.  It can be as little as one day late from the due date or a dollar over the credit limit. Look for a "universal default clause". If you are reported late by another creditor, your APR can be increased even if you are paying your bills on time with that creditor.

The issuer must also disclose the regular APR for purchases, cash advances and balance transfers as well as any penalty rate and what actions on your part will trigger the penalty rate.