Credit Card "Gotchas": The Fine Print on Plastic You Ought to Know About
NEW YORK ( MainStreet) "Make sure you read the fine print." Everyone says it. No one does it, especially not with credit cards. Your credit card's fine print is probably far above your pay grade and that's fine: you don't have to read all of it. You should, however, know about some of the key provisions that vary from one card to another. Not knowing can cost you money in fees and charges, or just have you leaving rewards points lying on the table at the end of the year.
Today's Fine Print Is Largely Formalized
Jody Farmer, vice president of Strategic Marketing at CreditCards.com, points out that the CARD Act has largely normalized the fine print.
"A lot of the gotchas are gone because of that act," she said.
What this means is that there's not much fine print these days in the actual card holder agreement. Your interest rate is your interest rate. Your late payment fee is your late payment fee.
It's all basically going to be right there in front of you and what isn't is boilerplate that's roughly the same in every card.
Watch Out for the Arbitration Clause
Most people don't even know what an arbitration clause is, even though they're almost certainly a party to one. What does it say? "If you have a beef with the card company, you can't take them to court, and you certainly can't without submitting to arbitration. You can't even joint a class action lawsuit." What's more, it's incredibly rare for a credit card company to lose in arbitration.
Late Payments Can End Up Costing a Lot
Erik Larson of NextAdvisor puts it bluntly: "Even if you understand English, you still need to understand the terminology in a cardholder agreement." One place where a lack of understanding can end up costing you a lot of money, even in this post-CARD Act work is late payments.
"Not only are you going to get charged a late fee," explains Larson, "which is $25 or $35, you're also going to get charged interest retroactively. You're basically going to pay interest on 60 days worth of charges because you paid a day late."
You might be able to get this taken off if your payment is a day or two late -- the first time. But if it's a week late, or your second time, it's just not going to happen.