Monday, February 9, 2009

Credit Card Applications: What the Fine Print Really Means

When you apply for a credit card, reading through all of the small print on the application can be a drag. And with everything so fast-paced, do you really have time for all of that? Most people will respond with a "no." They'll simply fill out the application and hope for the best.

Unfortunately, not understanding the fine print can bring trouble your way. You might get hit with high fees or interest rates that you weren't expecting. But by taking the time to look over the fine print, you can potentially save yourself hundreds of dollars in the future. Here are a few things to look for as you read the terms and conditions listed with the credit card:

Rewards with Conditions

Rewards cards are popular these days, but it's important to know what you're getting into before you apply. Some of them come with a higher interest rate, and others include restrictions on the rewards you can receive. You also may find that you'll need to pay an annual fee with the card. So look over the details and make sure that you can really benefit from this type of card before sending in an application.

APR Details

Many credit cards come with 0% APR (annual percentage rate) period. During this time, no interest is charged to your account. When that time period comes to an end, however, a regular APR sets in. You'll want to know what this rate is before you apply.

You'll also want to be aware of other changes regarding the APR. If the APR is variable, the company is allowed to change it at any time. If the interest rate is fixed, it is less likely to change. The company, however, still reserves the right to change it when they want to - they just need to let you know about it before they make the change.

Some cards will increase the interest rate if you miss a payment. Also, certain companies will charge a different APR, depending on whether you are making a purchase, transferring a balance, or taking out a cash advance. Sound confusing? It can be if you don't know about the details. Take the time to read through the APR notes; they can really help you in the long run.

Extra Fees

Some of the fees included in a card are laid out very clearly, but others are not. Before you send in a credit card application, check to see if it charges an annual fee. Also look for the fees charged for late payments or over-the-limit fees. All of these could set you back if you're not aware of them. If, on the other hand, you know about them, you'll be able to avoid any unwanted fees.

In short, reading the fine print can be time-consuming, but it is well worth your time. If you find a term in the form that you do not understand, you can call the credit card company to ask about it before you apply. Understanding the fine print is key to a long, healthy relationship with your credit card.

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