Consumers would be wise to continue to be vigilant in managing their credit card accounts. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 has resulted in changes in the credit card industry designed to help protect consumers. Despite these changes, it remains the responsibility of each individual to ensure they not only understand the rules governing their account but also abide by these rules to avoid negative consequences.
Read the fine print
The easiest way to avoid making costly mistakes when handling your credit card is to read the fine print of all correspondence coming from the issuer of the card. While many credit card companies have been blamed for card holders getting in over their heads in debt, in most cases disclosures regarding the account were available in the fine print. Considering the length and in some cases complexity of terms, many card holders fail to familiarize themselves with the conditions to which they are bound. New regulations resulting from the CARD Act require card issuers to clearly disclosure important terms, however the need to read the fine print remains.
Important terms card holders must understand
When reading the fine print and other information regarding your account, it is important to clearly understand the following terms:
Interest rate- It is not only important to know the interest rate applied to balances on your account but also how those interest rates are applied. Take the time to learn the difference between APR (annual percentage rate) and APY (annual percentage yield) to better understand how interest is compounded.
Introductory offers- A common tactic used in the past by credit card issuers was offering great introductory offers which are followed by long term conditions which are not as favorable. Before leaping into an agreement based on introductory terms, consider the long term consequences.
Fees- Credit card companies are infamous for tacking on fees which are “buried” in the fine print. Again, with more regulation on the disclosure of fees, this problem may be less of an issue today, however it is still important for card holders to understand any and all fees associated with their account. Failure to do so will result in unpleasant surprises which could cost card holders a bundle.
When consumers educate themselves as to how to properly manage their credit card accounts, they can reap the rewards associated with credit cards while avoiding the negative consequences which can lead to financial hardship.