Shopping for a
Credit Card
Shopping for A Credit Card
• Comparison shop credit cards
• Don’t take the first offer that comes to you:– Pre-approval
• Means nothing• No special rates
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
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 you’ve selected a card.
Annual Percentage Rate (APR)• Annual Percentage Rate
(APR)• Interest• F (Fixed) rate• V (variable) rate
– Prime + ___– Libor + ___– Won’t go below floor
• Introductory rate– How long?– What will the rate
“go to” afterwards?
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
Billing Methods: Average Daily Balance
• Determined by:– Adding each day’s
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
Billing Methods: Two-cycle Billing
• If you don’t pay your balance off it:– Charges you interest
based off of the current and previous month
– Interest starts the day you make the purchase.
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
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.
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.
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
Late-Payment Fee• Charge imposed for not
paying on time• Know your payment due
date & time– 9 a.m.– 12 noon– 5 p.m.– 11:59 p.m.?
• Pay via U.S. mail, phone, online, automatic bill pay, etc.
Over-the-Credit-Limit Fee
• You can exceed your credit limit but it will cost you– Fee– Higher interest rate
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
Cash-Advance Fee & Interest • Don’t 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
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.
Returned-Check Fee
• Your check “bounces” at the bank because:– Not enough money in
your account– You don’t have a
cash-advance line at the bank to cover the check
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.
• Don’t select this card– $1.50 * 12 = $18– Similar to an annual
fee
What You Don’t Need in a Credit Card Offer
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.
Theft Insurance
• If your card is stolen– Federal law limits your
liability to $50• Don’t need theft
insurance because you’re already protected
• Report missing cards within 24 hours or ASAP
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
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.
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 Cardweb’s analysis of 10,200 card offers in August, 2005.
Top 10 Consumer-Friendly CardsCard Issuing bank Intro APR Go-to APR Cash advance
feeLate-payment fee
Over-limit fee Currency-exchange fee
Platinum MasterCard Town North none v 7.99% 2% $15 $15 none
Visa PlatinumFirst 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 BB&T 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
www.cardweb.com/cardlocatorFind Cards That Fit You
Not sure what card to apply for? Let CardWeb.com make some suggestions based on a few questions you answer. Simply answer the questions below and click "Search". CardWeb.com's search engine will then display a list of cards that fit your needs.
Required Information
The following questions are required and is the minimal amount of information CardWeb.com's search engine needs in order to perform a search for you.
Are you over 18 years of age? Yes
Are you employed? Yes
How do you plan to use this card? pay off monthly
SearchOR continue filling out the optional information below
www.cardweb.com/cardlocatorOptional Information
The following questions are optional. Each additional question answered will increase the accuracy of the search.
Are you looking for a card for business or personal use? Personal
Are you looking for a card without an annual fee? yes
Are you looking for a particular brand? Any
Are you a student? Yes
Do you earn more than $30,000 per year? No
Are you looking for a card that offers rewards? Yes
Search
www.cardweb.com/cardlocatorSearch Results
Card Reward Type Brand A.P.R. Annual Fee Grace Period Juniper Frontier MasterCard Platinum
877-523-0478 Airline MasterCard 14.24% V None 20 days
Fleet MilesEdge 800-225-5353 Airline Visa 14.99% V None 20 days
Chase Travel Rewards Platinum
Travel MasterCard 9.24% V None 20 days
MBNA Norwegian Cruise Line 800-932-2775
Travel MasterCard 9.90% V None 25 days
MBNA Royal Caribbean 800-932-2775 Travel Visa 9.90% F None 25 days
Bank One Flexible Rewards Visa Signature
Travel Visa 10.24% V None 20 days