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