How to Actually Understand Credit Card’s Fine Print: What You Need to Know About Terms, Conditions & Fees

Signing up for a credit card is pretty easy, but it’s the fine print that can make life difficult.

Annual percentage rates (APR), late penalties, credit scores, changing rewards and bonuses; they’re all part of what you get when you sign up for almost every credit card out there.

If the vocabulary is a little overwhelming for you, you aren’t alone. Consumers have long been pretty frustrated over what can be a pretty confusing experience, and that’s part of the reason why President Obama signed the Credit CARD Act of 2009.

The act was put in place to keep credit card companies and banks from using the fine print to hit consumers with heavy fees, increased interest rates without notice and other deceptive practices.

But that was more than seven years ago, and we tend to get into a lull when it comes to being vigilant with our finances, right?

It’s kind of like when the word goes out that there have been break-ins at different houses in your neighborhood. You’re super watchful for one or two months, but after the fear and worry dies down, so do your defenses.

When you let down your defenses with your credit cards, the fine print can sneak its way into your finances and slowly start leeching a few dollars here and there, month after month.

We don’t like it when that happens, and we know you don’t either. So, consider this article a guide to the main areas you need to watch as you apply for a credit card. The tips and insights we give you are meant to be a security system for your financial house.

We’re going to tackle late fees, penalty APRs, promotional APR periods, balance transfers and a few important aspects of terms and conditions.

What Happens When You Pay Late?

One of the first questions you should ask about the credit card you want is what goes down when you make a late payment. They happen to most of us, whether we mean to pay late or not.

Here’s a great example from U.S. World News & Report’s Matt Schultz, in a 2014 article:

“It was all my fault, and I felt awful about it. Worse yet, I was stuck with it, unless I got a break. I’m talking about a $25 late payment penalty fee on a department store credit card that I opened within the last few months. As so many people have, I signed up for the card at the checkout counter, largely for the discount, and didn’t really concern myself with the interest rate. But I would pay it all off in a big hurry, so I didn’t have much to worry about – or so I thought.”

Did you notice how he mentioned the $25 penalty? This fee is pretty much standard in the credit card industry, and the only exceptions occur when a company forgives your first late payment (more on that in a second).

Here’s the main point: don’t be surprised about your late penalty, and know what it is before you apply for a credit card. Here’s a list of the late fees on almost all of the 20 credit cards we’ve reviewed over the past couple of years:

Which Is Worse, APR Penalties or Late Fees? 

As you can see from the list above, you’re going to get penalized if you make a late payment. That penalty will range, most likely, from $15 to $37, or it will result in an increase in your APR (or both). You might be inclined to sign up for a Citi Simplicity or Anywhere Visa since there aren’t any late fees, but hold up!

If you plan on racking up a bunch of charges on your card and you’re prone to paying late, the APR will probably end up costing you more than a one-time late fee. Don’t believe us?

Let’s take the average American with a balance on their credit cards, for example. He or she has a total balance of about $16,000 and nearly 4 credit cards. That’s an average of around $4,000 per card at any given point during the year.

So, let’s say you make a late payment on a card where your APR is 20 percent, but the penalty shoots that APR up to 30 percent.

Pre-penalty, your monthly interest payment on your $4,000 balance was about $67. Post penalty, your payment is around $100 a month, a difference of about $33. That’s totally fine if you’re just paying the penalty once, but you aren’t.

That penalty APR could last up to six months, in the case of the American Express Blue Cash Preferred. Instead of paying a one-time fee of $35, you could end up paying six months’ worth of $33 penalties, which adds up to almost $200!

Pro tip: Don’t apply for a card with penalty APR’s if you don’t normally pay your credit card on time. The bigger balance you have, the more likely your penalty APR payments will be higher than late fees.

How Do Promotional APR Periods Work? Are They Too Good to Be True? 

Promotional APR’s are easy to spot. They’re usually plastered all over the front of the envelope you receive in the mail or written in all caps in the subject line of a spam email.

Screenshot of Chase Slate Card offerScreenshot of Chase Slate Credit Card offer

Simply put, promo APR’s are offers where you pay no interest on purchases or balance transfers for a certain amount of time. Usually, the length of the no-interest offer depends on your credit scores. Good scores mean longer promos, bad scores mean shorter promos (or no promos).

What you’ll find is that most cards with awesome intro APR’s won’t have travel benefits attached to them. Credit card companies would rather you sign up for three cards, each with their own unique benefits than sign up for one card with travel, APR and cash-back benefits.

Here’s a list of the low-APR offers you can expect from the cards we’ve reviewed. Remember, these offers were available at the time of our research and can change:

  • Chase Freedom: 0% APR for 15 months
  • Chase Freedom Unlimited: 0% APR for 15 months
  • Quicksilver from Capital One: 0% APR for 9 months 
  • BankAmericard Cash Rewards: 0% APR for 12 months
  • BankAmericard Travel Rewards: 0% APR for 12 months
  • Discover it: 0% APR for 12 months
  • American Express Blue Cash Preferred: 0% APR for 15 months
  • Citi DoubleCash: 0% APR for 18 months
  • Citi Simplicity: 0% APR for 21 months
  • Costco Anywhere Visa from Citi: 0% APR for 7 months

The real question here is whether or not these intro APR offers are actually worth it. The answer lies in your own personal situation. First, you have to be honest about your financial life. Do you usually make your payments on time? Do you make enough money to pay off your purchases before the APR promo is over?

If you answer no to the first question, avoid these cards. Just one late payment will end the intro APR and you’ll be paying, in most cases, between 15 and 30 percent interest. If you answer no to the second question and you plan on using this card for a big purchase, remember that you’ll be charged interest on that entire purchase if it’s not totally paid off by the end of the promo period.

Are these cards too good to be true? Not if you have the discipline to pay off the balance. They can be a great tool to spread out payments on a big purchase but only do that if you know you have the income to pay off the balance in time.

Related: 4 Types of Credit Cards Responsible Consumers Use for Big Rewards

What’s the Deal With Balance Transfers?

Most of the hype surrounding credit cards has to do with travel rewards, cash back or intro APR’s. Balance transfers get lost in all of this, but can be a savior to consumers who are buried under high-interest credit card debt and have a decent income.

Balance transfers are almost always paired with intro-APR promotions.

The cards we listed in the last section offered 0 percent interest on balance transfers, though some (Citi DoubleCash, 21 months) had promo periods three times as long as others (Anywhere Visa, 7 months).

Basically, this promo period means that you won’t pay any interest on balances you transfer from other cards. Interest only kicks in when the promo period is over and you still have a balance on your card left over from any transfers you made inside the promo window.

While most cards will charge you 3 or 5 percent of your balance to transfer it to your new card, keep an eye out for cards that offer no-fee transfers. At the time of our research, Chase Slate was one of those cards.

However, the majority of cards you come across will charge you a fee. For example, if you’re transferring $1,000, a 3-percent fee means you’ll pay $30 to make the transfer.

So, why pay up if the card is advertising 0-percent interest? You’ll often save more money by transferring it and paying a fee than you would if you just kept the balance on your current card.

Here’s an example:

  1. You have a $2,000 balance and pay 20% interest, resulting in $33 of interest payments per month.
  2. You’ll pay off the balance in 10 months, spending $188 on interest.
  3. The fee for transferring your balance to a 0% card will be 3% of $2,000, or $60.
  4. You’ll save $128 in interest payments if you pay off the balance in 10 months.

If you can pass that test, it’s totally worth it to transfer a balance so you can save money on interest. If the numbers don’t add up, then avoid the card; it won’t help you out, especially if you don’t pay off the balance by the end of the promo period.

If you forget when your APR promo period ends, call your credit card company. They’ll be able to tell you what the deadline is.

Pro Tip: Once you transfer your balance from your old card, don’t start racking up debt on that card again. Your balances will just keep growing and you increase the chance you won’t pay off those 0% balances in time and interest will kick in, burying you under more debt. 

Strings Attached, Terms and Conditions and Rewards Program Exceptions

The main thing you need to remember as you ponder the fees and terms of your credit card is that there’s usually an end to every good thing. If you get an APR offer, it will eventually come to an end. If you get a travel card, the awards points you get will eventually run out. If it’s a cash-back card that you want, up-front bonuses will eventually run out.

What you’re left with is a card that has a defined set of benefits, and those benefits typically fall into two categories: cash-back rewards or travel points accrued on purchases. Which of those benefits is more valuable to you has a lot to do with your personal preferences.

There are Always Strings Attached

Every perk you get from your card is probably going to have a fee or condition stuck to it. For instance:

  • You can have 50,000 travel points, but if you cancel your card before cashing them in, you lose the points.
  • You can get hundreds of dollars in cash back, but it only comes as a check or statement credit once a year.
  • They’ll give you 21 interest-free months, but the moment you make a late payment your APR jumps back to the usual interest rates.
  • They’ll offer you no-interest balance transfers, but if you don’t pay off a transfer by the time the promo ends, you owe interest on the entire amount.

Every Credit Card Has Terms and Conditions…You Just Have to Find Them

Credit card websites (and mail offers) sell you on everything that’s awesome about the card and they try to hide what’s not-so-awesome about it. You’ll have to do some searching to find out where the fee structures and various terms/conditions are. In our experience, you can usually find them at the very bottom of the page or, on Chase’s credit cards page, for example, underneath their “Learn More” buttons.

Chase’s credit cards page

The placement of the terms and conditions may not always be straightforward, but once you find the link to the information, it’s typically presented in a table divided up into fee categories. Here’s a good example from the Costco Anywhere Visa:

Costco's Anywhere Visa terms

We’ve decided to save you some time and provide you with the terms/conditions links to some of the more popular credit cards on our site and ones we’ve mentioned in our articles:

These links take you to terms and conditions, but credit card sites often have other pages that talk about the specifics of certain rewards programs. We’ll get to those in a second.

Pro tip: Most credit card companies will send you a hefty packet of paperwork than includes your card’s complete terms and conditions. Store them where you can find them, just in case.

Exceptions to the Rules Are Usually Found in the Rewards T&C

During our extensive research of various credit cards, we’ve discovered that, for the most part, any cards that offer rewards on purchases have a few exceptions you should know about.

For instance, the Costco Anywhere Visa gives you 4 percent cash back when you buy gas. And, most of the time, that’s true. But their rewards T&C reveal that you get only 1 percent back if you buy gas at:

  • Superstores
  • Supermarkets
  • Convenience stores
  • Warehouse clubs

You see these types of exceptions with travel cards, too. For instance, Chase has an entire page devoted to questions about what qualifies as a rewards purchase and what doesn’t. The Chase Sapphire Preferred cards, for example, gives you double points on travel purchases.

Most of the time, your travel spends will get you points. But Chase’s Rewards T&C reveals that purchases made at the following locations don’t qualify for double points:

  • Websites or owners that rent vacation properties
  • In-flight goods and services
  • On-board cruise line goods and services
  • Sightseeing activities
  • Tourist attractions
  • Merchants in airports

Imagine if you booked a Mediterranean cruise and, when you got your statement, you realized none of the drinks you bought on board or any of the pricey tours you took or stuff you bought in airports got you the double points you expected. It may sound trivial to the non-travel types, but for those who love their travel cards, it can be really annoying.

Pro tip: Capital One has a similar Rewards T&C page, as does Citi’s Thank You rewards program.

7 Questions to Ask Before You Sign Up for a Credit Card

The federal government – thanks to outcry from average consumers – took a big step in corralling credit card companies’ predatory and just plain unfair practices.

However, legislation doesn’t give consumers the right to get lazy about knowing the basic and not-so-basic principles of the credit card offers they receive.

Before you sign up for a credit card, you should be able to recite, or at least have direct access to, the following information:

  1. What happens when you pay late?
  2. Does your card charge you a late fee, penalty APR or both?
  3. How long is your intro APR, and what APR kicks in after the promo period?
  4. How much would a balance transfer cost, and can you pay it off before the promo period ends?
  5. What are the strings attached to your travel, APR and cash-back offers?
  6. Do you know where to access your card’s terms and conditions?
  7. What are the main exceptions to the rewards program?

If you can answer these questions, or at least know where you can get the answers, you’ll put yourself ahead of most consumers. Your financial health is your responsibility; don’t let excuses or placing the blame on others (i.e. credit card companies) get in the way of making smart decisions about cards.

And if you want to read up on the latest credit card offers and reviews, stop by our credit cards reviews page. Our number of reviews is growing every month; with each article you get a solid look at offers, terms and conditions, fees and more.

More on Personal Finance:

J.R. Duren

J.R. is an award winning journalist who uncovers the hard truths about personal finance, health and fitness through in-depth research and interviews with experts.


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