6 Things You Might Miss in Your Credit Card's Fine Print
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Be honest: Do you ever read through all that fine print in your credit card agreement? Or do you simply skim and sign up? While poring over fine print might feel like a waste of time, it's important. It can hold critical information about your new card; read it carefully to understand the following key terms and conditions.
1. How your credit limit can change
First things first: Make sure you know exactly what your credit limit is. Introductory offers often include language like "You can be approved for as much as $10,000!" or "Up to $20,000 credit limit!" Those "as much as" and "up to" phrases are important, because they don't guarantee that amount of credit; they just imply that it's possible. Know exactly what your credit limit is so you don't go over it, because doing so tends to invoke fees and trigger a high interest rate.
Once you know how much credit you have on a certain card, find out what actions or events might change your credit limit. If you miss a payment, make a late payment, or incur a fee, will your credit limit change? It's important to know, particularly if you plan to use the card to make a big purchase. (See also: 4 Questions to Ask Before Getting a Credit Increase)
2. How the interest rate will change
You'll often see the interest rate for a new credit card in big, prominent print on the initial offer. That's because a low interest rate is often the marketing tactic used to appeal and bring in new cardholders. How soon will that introductory interest rate change, and what will it become when it does? Look through the fine print for terms like APR (annual percentage rate), variable rate information, interest rate, and introductory interest rate to be sure you know exactly when that introductory offer is over, and what happens when it ends.
Be aware, also, that something as simple as one missed payment could cause you to lose the introductory interest rate sooner. Those terms should be spelled out in the fine print, and it's important to know that slipping up on a payment may bump your interest rate up sooner than you expect. (See also: Everything You Didn't Understand About Credit Card Interest, Grace Periods, and Penalty APRs)
3. How your payments will be allocated
If you use a credit card for purchases as well as cash advances, you probably have two different interest rates. Typically, cash advances come with a higher interest rate than purchases made on the card. And if you use the card for purchases made after that introductory, low-interest period, you'll have three different interest rates in play. (See also: How a Credit Card Cash Advance Costs You More Than a Purchase)
You want to find out exactly how your payment will be allocated for these different interest rates. In some cases, the default terms might put a much lower percentage of each payment toward the higher interest rate charges. Find out in the fine print if that's true, and if you have the option to request a particular payment allocation yourself for each payment you make.
4. How extra fees might add up
Credit cards come with plenty of extra fees: missed payment, late payment, and extra fees for cash advances or particular types of purchases. Look, too, for fees that kick in if you use the card over the credit limit.
Read the fine print to find out how many potential fees come with the card, when those fees are charged to you, how much each fee is, if there is a limit to how many fees can be charged, and if the company can change the fees at any time.
The ability to change fees can become problematic if you're counting on a particular window of time before a payment becomes late and that window changes. Some credit card companies will even set a time of day for payments due — say, noon on the 25th — and if your payment processes after 12 p.m., you're charged a late fee. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)
5. How old debts might resurface
Although this particular term may not be as common, it's one well-worth noting. Some credit card companies purchase old debts, then offer cards to those debt-holders. The first statement comes in and the old debt is included in the balance due. If you've ever defaulted on a debt, read the fine print to make sure the credit card company is not asserting their right to include old or defaulted debts on newly opened credit cards.
6. How those terms can change
One last important point to remember about the fine print: What you read in that initial agreement can change, usually at any time. Credit card companies generally retain the right to change the terms of the agreement as they see fit, but they're required to update the card holders when those terms change.
That's why reading the fine print isn't a one-and-done event. You need to stay updated on changes to your credit card agreement, which means going over any material you receive with your regular monthly statement. If you see a change you don't like, take action right away: Call the company and negotiate for different terms, or, if the terms are really bad, simply pay the card off and stop using it. It's often better to go this route instead of canceling, since canceling a card can hurt your credit score. (See also: How to Close a Credit Card Without Dinging Your Credit Score)
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