What Credit Card Offers Don’t Tell You

Posted on: June 1st, 2010 by

Financial Planning - Rockville, MDI’m sure, like everyone else, you receive at least one or two credit card offers per week in the mail.  Usually I just shred them and call it a day, but sometimes we all consider getting that second card.   When reading the offers though, you have to be very careful.  There are a few things you need to keep your eye out for.  The first is the annual percentage rate, or APR.  This is the fee (finance charge) you will be charged if you don’t pay your bill in full every month.  Some cards will waive this fee for six, or sometimes even 12 months as part of their introductory offer.  What they won’t list is that the average going rate for all credit cards, which is about 13% at the moment, so you don’t have any context for whether the offered interest rate is a fair deal.

Second, you need to make sure that you are aware of the balance calculation method.  This is how credit card issuers determine the balance on your card, upon which it charges interest.  Most use average daily balances; but what they neglect to tell you is that this is the most advantageous method for the company because new purchases immediately become part of the debt.   Cards that use the “adjusted balance” method are the best deal.  Interest is based on the balance at the beginning of the billing cycle.

Also, make sure you pay attention to their “grace period”.  This is the amount of time you have past your due date to make a payment before you’re hit with finance charges and late fees.  If a card offers one, by law it must be at least 21 days long.  What they won’t tell you is that if the due date falls on a weekend or holiday, you have until 5 p.m. the next business day to pay and avoid a late fee.

Finally, look out for buzzwords like “annual,” “activation,” “acceptance,” “participation,” “monthly maintenance” and/or “account set-up” preceding the word “fee”.  This simply means that you will be paying to own the card. These charges are deducted from the credit line.  What this means is that if a card has a $400 limit and a $100 fee, your available credit is $300.  I would not recommend these cards unless absolutely necessary.



  1. Tag Cloud
  2. Blog Home