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FDIC Consumer News

Spring 2011 – Special Edition: Shop and Save…at the Bank

Credit Cards: Read the Fine Print Before You Sign Up

Not all credit cards are alike. That's why it's important to carefully review a card's terms and costs before you sign up for it.

In general, if you expect to pay your card bill in full each month, your best bet is a card with no annual fee and with the kinds of rebates or rewards that fit your lifestyle. "You also want to make sure the creditor grants you a 'grace period' before incurring interest charges; not all card companies do that nowadays," said Karen Porter, a Senior Consumer Affairs Specialist at the FDIC. With cards that have no grace period, you always pay interest, starting from the date of purchase.

If you don't expect to pay off your card balance in full most months, go for a card with a lower Annual Percentage Rate (APR) and the right mix of rebates or rewards to justify any fees. Also, if the card has a low, introductory interest rate, be sure you know when the new, higher rate will take effect and what that rate will be. And credit cards with offers of "zero-percent interest" on purchases for a certain amount of time could end up being more expensive if you don't pay the balance in full by the expiration date.

"When considering a balance transfer, make sure you know all the details and terms of the transfer," added Nancy Tillmon, an FDIC Consumer Affairs Specialist. "Online credit card calculators also can help you compare the terms of existing accounts against the details of the new card. Comparing card products could save you money."

Also, be cautious of all fees. For example, credit cards that offer generous "rewards" (such as points or cash back) may have high annual fees. "The terms and conditions of earning and using the rewards can be complicated," warned Porter. "Rewards cards may also cause you to overspend just to earn the points."

Other fees to think about include late fees, over-the-limit fees (for transactions that would put you over your credit limit), and balance transfer fees.

For more information on choosing and using credit cards, see New Realities, New Directions for Credit Cardholders.

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Last Updated 5/13/2011

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