Get a Grip on Credit Cards 

On this week’s Saving Thousands! with Robert Palmer we delved deeper into the ways the Consumer Financial Protection Bureau (CFPB) is looking out for you.

If you don’t know, this new federal agency was formed safeguard consumer protection. The CFPB’s main focus is to make sure consumers know what they are getting into when it comes to financial services.

A great example of this is a form on the CFPB’s website that makes it easier to shop for credit cards. It’s literally everything you need to know to be an educated consumer in an easy-to-read, one page form.

If you would like to see the form go to www.consumerfinance.gov and click on “Know before you owe.”

I’m going to walk you through this form section by section:

First is “Cost.” The statement reads: “You may use your credit card for purchases, cash advances, or balance transfers.” The credit card company will actually fill out what the card can be used for.

Then it goes on to say: “Each type of charge will have its own balance. Each balance may have a separate interest rate.” You may not know this, but each transaction whether it’s a purchase, cash advance or balance transfer gets put into its own bucket on your statement and each bucket gets charged different interest rates. This form makes it so you will know the interest rate for each and, more importantly, the penalty interest rate and what triggers that rate. You will also be able to tell if there is a late fee for payment, return payment fee, replacement card fee, rush card fee or foreign transaction fee.

Next is “What do I have to pay and when?”  This is the spot where the credit card company tells you where to send the bill and when it is due. This section explains which balances get paid off with your minimum payment. If you only make the minimum payment, the credit card company decides where to apply it, which means it’s going to the lowest interest rate. However, if you make extra payments those get applied to the highest interest rate.

Next is “What if I pay late?”This portion states if you do not pay the minimum fee by the due date you will be charged a late fee of $X. In addition, if you make a late payment you will be in default and may be subject to an increased interest rate. If you are late more than once in a 6 month period the late payment fee will go up even higher.

The last section is “Special Promotions.” I love that this box is at the bottom. It forces consumers to look at the numbers before signing off on a credit card just because they are going to throw in airline miles or special discounts.

This form is such a great tool for consumers. This is information we all need to understand. It can make a huge difference in our wallets. I encourage you to do your homework and compare credit cards. Hopefully with this process we can make credit card companies finally switch their business models to putting consumers first.

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