 | Interest Rate: 8-30% |
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 | Late Fees: $15-$39 |
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 | Cash Advance: $30-$75 |
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| New federal credit card rules went into effect Feb. 22, 2010; the Federal Reserve Board provides an overview of the changes. | | |
| Typical costs: | - The annual interest rate on purchases is usually between 8 and 19 percent. However, the card issuer can increase this to a "ceiling" rate of 21-30 percent or more if a payment is late, a check bounces or there is other "risky" behavior by the cardholder. Cards that offer rewards usually have higher interest rates. A single credit card can have three different interest rates -- one each for purchases, cash advances and balance transfers.
- A cash advance may trigger either a flat fee of $30 -$50 or 3 percent of the advance, usually with a maximum charge of $75. Transferring balances from other accounts might be free, or could cost up to 3 percent of the amount transferred or a flat fee of $30 -$75.
- Late-fee charges ranged from $15 -$39 in 2008, according to consumer-action.org's 2008 credit card survey. The average late fee was $13 in 1995, $34 in 2005, $25.90 in 2008 and $28.19 in 2009, according to CreditCards.com. Paying less than the minimum due can trigger a full-charge late fee.
- Annual fees for having a card can be $20 -$75, but no-annual-fee cards often have higher interest rates. Some cards have a monthly maintenance charge of $6 -$12, or $72 -$144 a year.
What should be included: | - A credit card lets cardholders make purchases for which they are billed later, and the amount due can be rolled over from one billing period to the next. A charge card is a specific kind of credit card and must be paid in full for each billing period; the balance cannot be carried over. The Federal Reserve Bank of San Francisco provides an overview.
- As of Feb. 22, 2010, credit card issuers are required to send a notice 45 days before increasing the interest rate, changing certain fees or making other significant changes to the terms of the card. However, the 45-day notice is not required if the card has a variable interest rate, if an introductory rate expires and the card reverts to a previously disclosed rate, or if the cardholder does not make agreed-upon payments in a debt management agreement.
- Rewards cards offer cash back, gasoline rebates, airline miles or other incentives for purchases. A wide range of businesses offer cards that earn rewards from that particular company, such as Disney, Amazon or REI outdoor gear stores.
- Specialized credit cards are issued by nonprofit organizations such as alumni associations like the Rutgers University Alumni Association, offering cardholders various benefits while supporting the organization with each purchase. For example, each time theWorking Assets credit card is used, 10 cents is given (at no cost to cardholders) to groups such as Doctors Without Borders or Project Vote.
- Student credit cards are issued to those enrolled at colleges or universities, and even sometimes to high school students. Because they're a first card for people with little or no income and no credit history, these accounts traditionally have higher interest rates combined with a variety of rewards targeted toward young adults. Under the changes that took effect Feb. 22, 2010, underage consumers (less than 21 years old) must show proof of their ability to make payments or have a co-signer. CNNMoney.com provides an overview.
Additional costs: | - Purchases or ATM withdrawals made outside the United States or on a foreign-based website can generate a 1-3 percent foreign currency fee, even if the transaction was made entirely in US dollars. BankRate.com provides an overview.
- There can be other fees to watch for when reading the fine print, such as $3 -$15 for paying by phone, $5 -$15 for an expedited payment, or $20 -$39 for bouncing a check, according to the consumer-action.org 2008 credit card survey. Some experts predicted that credit card companies would impose new fees when the new rules took effect in February 2010, but Bankrate.com found few new fees in an April 2010 survey.
Shopping for a credit card: | - The Federal Reserved explains how to shop for a credit card, including how to learn more about a credit card offer and how to read a credit card statement.
- CreditCards.com provides comparisons for different types of credit cards.
- IndexCreditCards.com has lists of cards by categories: cash back; gasoline rebates; travel and airline; and others.
- Carefully read the Card Member Agreement before signing up. Also read any notices of changes, and check the interest rate on each credit card annually.
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Article updated October 2010 |
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