What Is a Credit Card Disclosure?
Every credit card offer has to give specific details about the credit card's pricing and fees. Because all credit card issuers are required by law to disclose the same pricing information, consumers can better compare credit cards and choose the credit card that best fits their cost preferences.
The required credit card disclosure also somewhat forces credit card issuers to offer competitive pricing. The Truth in Lending Act requires credit card issuers to include these credit card disclosures with credit card applications and with new credit cards. Here's what you can expect to see in a credit card disclosure.
Credit cards often come with multiple APRs (annual percentage rate), and they must all appear on the credit card disclosure.
- APR for purchases or regular APR. Several APRs or an APR range may be listed. The APR you qualify for is based on your credit history, amount of debt, and income.
- Promotional APRs must be listed, along with the promo rate's time limit, and whether certain actions will end the promo rate immediately.
- Balance transfer APR. An introductory balance transfer rate should be listed as well as the rate's period, and post-promotional balance transfer APR. With some credit cards, the balance transfer APR and purchases APR may be the same.
- Cash advance APR. The cash advance APR is typically higher than other APRs.
Each APR disclosure must state whether the APR is fixed or variable. If the APR is variable, the disclosure should list the index rate.
The penalty APR, also called default APR, is the APR that goes into effect when you default on your credit card terms. The disclosure must state the penalty APR, what you do to trigger the APR, and how long it will last.
The grace period is the amount of time you have to pay your balance in full before you pay interest. The grace period may appear on the credit card disclosure in a section called “How to avoid paying interest on purchases.”
Note that grace periods usually only apply to purchases, not balance transfers and cash advances. That means interest begins accruing on those balances immediately. The grace period may not apply if you had a balance at the beginning of the billing cycle.
Minimum Finance Charge
Credit card companies often specify a minimum finance charge that you’ll pay whenever you’re charged interest on the account. For example, your minimum finance charge can be $1.00 even if your calculated finance charge is $0.75.
Finance Charge Calculation Method
Credit card disclosure must state how your finance charges are calculated. Credit card issuers use some methods to calculate your finance charge using your interest rate and either your beginning balance, ending balance, average daily balance, or an adjusted balance. Finance charges may or may not include new purchases.
Credit card issuers are no longer allowed to assess finance charges on balances that have already been paid, i.e., the double billing cycle method of calculating finance charges.
Credit card disclosure must contain a list of fees associated with your credit card. While these fees vary by credit card, some common credit card fees include, but are not limited to an annual fee, balance transfer fee, cash advance fee, the foreign transaction fee (also called currency conversion fee), late payment fee, over-the-limit fee, and returned payment fee.
Some fees, like the annual fee, are fixed. Other fees, like a cash advance or balance transfer fee, may be fixed or vary depending on the transaction amount. For example, a cash advance fee can be $5 or 5% or the advance, whichever is greater.