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The Schumer Box gives important information on the pricing of the credit card offer, which details the card's prevailing annual percentage rate (APR), the grace period before interest in charged, and other fees or penalties. You can usually find the Schumer box on the back of the credit card application or a separate insert. The example presented below is realistic.
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Annual Percentage Rate (APR) for Purchases2
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Preferred Pricing:1
14.49% for Elite Pricing, or 16.49% for Premium Pricing, or 20.49% for Standard Pricing from account opening.
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Other APRs2
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Preferred Pricing - Balance Transfers/Balance Transfer Checks:1 For Elite and Premium Pricing, fixed 0.00% introductory rate for 9 months from account opening.1 Thereafter, 14.49% for Elite Pricing, or 16.49% for Premium Pricing. Fixed 0.00% introductory rate for 3 months from account opening for Standard Pricing.1 Thereafter, 20.49%.
Cash Advances/Cash Advance Checks: 21.49% for Elite or Premium Pricing, or 23.99% for Standard Pricing.
Non-Preferred Pricing/Default APR - For All Balances: Up to 29.49%.
Overdraft Advances: Fixed 13.99% (not available in some states).
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Variable Rate Information2
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Your APR may vary.
Preferred Pricing-Purchases and Balance Transfers/Balance Transfer Checks:1 For all purchases from account opening, and for both outstanding and new balance transfers after the introductory period for accounts with Elite Pricing, the rate is determined monthly by adding 8.99% (or 10.99% for accounts with Premium Pricing, or 14.99% for accounts with Standard Pricing) to the Prime Rate.3
Cash Advances/Cash Advance Checks: The rate is determined monthly by adding 15.99% to the Prime Rate (not less than 19.99% for accounts with Elite and Premium Pricing, or not less than 23.99% for accounts with Standard Pricing).3
Non-Preferred Pricing/Default APR - For All Balances: The rate is determined monthly and is up to the Prime Rate plus 23.99%.3
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Grace Period for Repayment of the Balance for Purchases
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Not less than 20 days
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Method of Computing the Balance for Purchases
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For billing cycles ending on or before February 28, 2005: Average Daily Balance (including new purchases).
For billing cycles ending on or after March 1, 2005: Two Cycle Average Daily Balance (including new purchases).
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Annual Fee
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No annual fee first year. Thereafter, the $19 annual fee will be waived if at least nine (9) purchase transactions were made in the prior year.
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Minimum Finance Charge for Purchases
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$1.00 (if a finance charge is imposed)
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Transactions in Foreign Currency
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For billing cycles ending on or before March 31, 2005: 2% of the converted transaction amount.
For billing cycles ending on or after April 1, 2005: 3% of the converted transaction amount.
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Footnotes:
1. Any promotional rate may change to your regular Preferred Pricing rate if any minimum payment on your Account was past due or if your Account was closed for any reason. Any promotional rate or regular Preferred Pricing rate may change to your Non-Preferred/Default APR rate if any loan or account of yours with us or your other creditors was past due, your Account was over limit, any payment on your Account was returned unpaid or if your Account was closed for any reason. Top...
2. You understand that the terms of your account, including the APRs, are subject to change. This means that the APRs for this offer are not guaranteed; APRs may change to higher APRs, fixed APRs may change to variable APRs, or variable APRs may change to fixed APRs. We reserve the right to change the terms (including the APRs) at any time for any reason, in addition to APR increases that may occur for failure to comply with the terms of your account.
Any changes will be in accordance with your Cardmember Agreement.
3. For billing cycles ending on or before March 31, 2004: the Prime Rate used to determine your APR is highest rate published in The Wall Street Journal on the last business day of the prior month. For billing cycles ending on or after April 1, 2004: the Prime Rate used to determine your APR is highest rate published in The Wall Street Journal two business days before the Closing Date on the statement for each billing period.
Transaction Fee for Cash Advances/Cash Advance Checks: 3% of each transaction ($10 minimum)
Transaction Fee for Balance Transfers/Balance Transfer Checks: 3%, $5 minimum, $75 maximum per transaction unless otherwise disclosed to you in writing.
Late Payment Fee/Late Fee: $15 for a Balance up to, but not including $250.00; $39 for a Balance of $250.00 or greater ("Balance" means Previous Balance on statement that shows the late fee); and $39 when Non-Preferred/Default APR rate is in effect on monthly statement.
Overlimit Fee: $35.
Other fees may apply. Top...
What Do The Terms Mean...
Annual percentage rate (APR) for purchases...
The interest rate you will pay, on an annual basis, if you carry over balances on purchases from one billing cycle to the next. If the card has a temporary introductory rate, the rate that applies after the temporary rate expires is also stated. The APR can be fixed or variable.
A fixed rate remains constant until the credit card issuer gives written notice of a change. By federal law, issuers must give consumers 15 days' notice before changing the interest rate on a credit card.
The variable APR is usually based on an index such as the prime rate plus a certain percentage, and the card issuer may adjust the APR on your account when the prime rate changes. Some of the common indexes are the prime rate; the one-, three- or six-month Treasury bill rate; or the Federal Reserve discount rate.
The periodic rate is the interest rate the credit card issuer applies to the outstanding balance to calculate the finance charge for each billing period. The monthly periodic rate is determined by dividing the yearly APR by 12. For example, the monthly periodic rate on an APR of 21.9% is 1.825% (.219/12 = .01825). Top...
Cardholders with an outstanding balance on their credit cards can estimate the monthly finance charge by multiplying the periodic rate times the balance. For example, the estimated finance charge on an outstanding balance of $3,000 at 1.825% is $54.75 ($3,000 x .01825 = $54.75). If the consumer makes a payment of $54.75, the interest due is paid but no money is left to apply toward the principalthis payment only covers the cost of monthly interest and the loan would never be paid off! If the consumer makes a payment of $60, then $5.25 is applied toward the principal. The result is that it will take the consumer over 11 years to pay off the $3,000 debt that would cost the consumer $8,082 ($3,000 + $5,082 interest).
Other APRs...
The interest rates you will pay, on an annual basis, if you get a cash advance on your credit card, if you transfer a balance from another credit card, or if the card issuer applies penalty rates. (More information on the penalty rate may be included outside the disclosure box--for example, in a footnote.)
Variable-rate information...
If the card has a variable rate instead of a fixed rate, this section will tell you how the variable rate is determined. (More information may be included outside the disclosure box--for example, in a footnote.)
The variable rate is calculated by adding a fixed percentage (e.g., 9.9%) to the index rate listed for the week specified. Rate changes will raise or lower the finance charge amount paid on accounts. If a credit card has a variable rate feature, ask the card issuer whether there is a minimum and maximum APR and how often and by how much the rate can change. When the prime rate is decreasing, the variable rate is the best choice, but if it is increasing, the more stable fixed rate is generally best. Make a selection based on the risk you are willing to take. A consumer who consistently pays the total balance owed each month will find the APR not as important as other factors. Top...
Grace period for repayment of balances for purchases...
The number of days you have to pay your bill in full without triggering any finance charges. With most plans, the grace period applies only to purchases; cash advances and balance transfers may start accruing interest immediately.
Many cardholders mistakenly believe that if a 25-day grace period is provided, all new purchases will be free of finance charges until after that 25-day period. Under most plans, the only time a cardholder's new purchases escape all finance charges is when both of the following conditions are met:
1. There is no unpaid balance left over from the previous billing cycle. That is, either the entire "new balance" on the last month's bill was zero, or, if that new balance was greater than zero, the cardholder paid it in full by the due date.
2. The new balance of purchases made during the current billing cycle is paid in full by the current due date.
If the consumer does not pay the entire outstanding new balance due on the previous statement, any new purchases made in the current month will start accruing interest immediately. The consumer forfeits the grace period. If you have an outstanding balance on your credit card at the beginning of the new billing cycle, you will not benefit at all from the grace period. If your goal is to avoid paying finance charges, you must pay off your credit card balance in full each month.
Method of computing the balance for purchases...
The method that will be used to calculate your outstanding balance if you carry over a balance and will pay a finance charge. Top...
If your credit card plan has no "free" or "grace" period, or if you expect to pay for purchases over time, it is important to know how the card issuer calculates the finance charge. The finance charge, or the dollar amount you pay to use credit, will vary depending upon the method the card issuer uses to figure the balance. The method used can make a difference in the amount of finance charges a consumer will payeven when the APR is identical to that of another card issuer and the pattern of purchases and payments is the same. For consumers who never carry over a balance (always pay the balance in full), the finance charge computation method used by the credit card issuer is not as important as other factors.
There are two basic ways card issuers calculate balances on which finance charges are computed:
Average Daily Balance (including new purchases or excluding new purchases). This method gives the cardholder credit for payment from the day the card issuer receives it. To compute the balance due, the card issuer first totals the beginning balance for each day in the billing period. Next, any payments credited to the account are deducted on the day received. New purchases may or may not be added to the balance, depending on the plan, but cash advances typically are added. The daily balances are summed for the billing cycle and the total is then divided by the number of days in the billing period. The result is the "average daily balance." Note the Schumer box reveals the most commonly used average daily balance method (including new purchases). Top...
Two-Cycle Average Daily Balance (including new purchases or excluding new purchases). This balance is the sum of the average daily balances for two billing cycles. The first balance is for the current billing cycle, and is figured by adding the outstanding balance (excluding or including new purchases and deducting payments and credits) for each day in the billing cycle, and then dividing by the number of days in the cycle. The second balance is for the preceding billing cycle and is figured in the same way as the first balance. The two-cycle average daily balance is used primarily to backcharge interest on a previous balance on which consumers did not pay finance charges (because their balance was zero), but neither did they pay off the current balance due in full. The method affects consumers who always or sometimes carry over a balance.
Annual Fee...
The annual fee (or other periodic fee) the issuer charges for you to have the card. You may have to pay this fee even if you never use the card.
Most credit card issuers charge annual membership or other participation fees. These fees range from $15 to $35 for most cards and from $50 and higher for some "premium" or "gold" cards. Some institutions still offer "no fee" cards, but these are less common than they used to be. Other institutions waive the fee for the first 12 months, but then bill the cardholder as soon as the second year begins. Still other issuers have a use fee (e.g., $1.75) for each month the card is used, meaning cardholders will pay $21 a year if the card is used monthly.
The best deal for most consumers is a "no fee" card. Some credit card issuers will reduce or eliminate annual fees if cardholders indicate they plan to switch to another company's "no-fee" card. A change can be requested by phone. You also have the option of canceling the card within a stated period to avoid the annual fee. There may, however, be a cancellation fee. Top..
Minimum Finance Charge...
Any minimum or fixed finance charge that could be imposed during a billing cycle. A minimum finance charge usually applies only when a finance charge is imposed, that is, when you carry over a balance.
Transaction Fee For Cash Advances...
Any charge imposed when you use the card for a cash advance. If the card charges transaction fees for purchases, these fees will also be stated here. Many issuers charge cash advance fees, which typically amount to between 2% and 3% of the total cash advance. The fee may have a minimum amount, often $2, and a maximum amount, such as $10. Note the Schumer box reveals the cash advance fee. The cash advance fee may be assessed for each cash advance taken. A consumer who is charged $5 for $20 in cash is paying a transaction fee equal to 25% of the amount borrowed. Using a credit card to obtain a cash loan is often the most expensive way for consumers to borrow money.
Some issuers charge higher interest rates on cash advances than for purchases. As an example, one card issuer offers a 7.9% APR on purchases made with the credit card, but charges a rate of 21.65% APR on cash advances. Issuers are not required to disclose the cash advance APR rate in solicitations or on applications. However, the information is usually provided in materials sent with the credit card to the applicant. A cash advance can also be obtained with a credit card at a bank or an automated teller machine (ATM) or by using checks linked to a credit card account. Top...
Several card issuers offer cash advances with 25-day grace periods. The transaction fee they charge for the cash advance, however, may be more expensive than simply paying interest from the date of the advance.
In addition, if the cash advance is not paid off in full when due, finance charges are accrued at the cash advance rate beginning on the first day of the new billing cycle until it is paid back. Below is an example of charges that could be imposed for a $200 cash advance that is paid in full when the bill arrives:
Cash Advance Fee = $4 ($200 x .02 = $4)
Interest for one month = $3 (18% APR ¡À 12 = .015/month; $200 x .015 = $3)
Total cost of cash advance = $7 ($4 fee + $3 interest = $7)
In comparison, a $200 purchase with a credit card having a grace period would cost nothing if it is paid off promptly in full by billing due date.
Balance Transfer Fee...
A fee for transferring balances from another card to this card, if any.
Late (Payment) Fee...
The fee imposed if your payment is late, if any. Top...
Late fees are typically charged when a cardholder fails to make at least the minimum monthly payment by the due date. Some issuers charge a flat late fee, for example, $10. Other issuers charge a fee that is a percentage of the minimum payment due (e.g., 2 to 5%). Note the Schumer box reveals the late payment fee is $10. Some issuers allow cardholders 10 or 20 days to pay their bill after the due date before a late fee will be charged. Other issuers, however, charge late fees immediately after the due date.
To avoid late fees, mail payments in plenty of time to arrive before the due date.
Over-The-Credit-Limit Fee...
The fee imposed if your charges exceed the credit limit set for your card, if any. This fee is charged each time you exceed your limit, so you could be hit with several of them during one billing period. Top... |