All credit card offers are required to include a chart detailing their basic rates and fees. This chart is called a "Schumer’s Box" after Senator Chuck Schumer who pushed for the regulation. You can click on this image to see a full sized sample of one Schumer’s Box for a Citi Simplicity credit card offer from Citibank.
How do you make sense of these charts? Let’s go through it step-by-step:
- The first section of any Schumer’s Box is the annual percentage rate (APR) or interest rate. For this credit card, the rate is 10.49% after a 12 month 0% introductory period.
- Next up is the other APR section. Don’t breeze over this important information about specific interest rates for balance transfers and cash advance requests. You’ll also find the default rate in this section. For the Citibank card the default rate is 31.49%. This is the rate you will receive if you make a late payment or exceed your credit limit.
- After this is the variable rate category explaining that your interest rate can (and will) change. This is explained by listing the APR’s as their "prime plus" formulas, meaning that they are the prime rate plus a set number. For example, to calculate the default rate you add 22.39% to the prime rate.
- Next is the grace period which is the period of time after your bill when interest charges are not yet applied on your debts. The grace period for the Citi Simplicity card is 20 days as long as you paid your bill last month in full. If you don’t pay this balance in full, interested is charged immediately on your new purchases along with on the balance you have carried over.
- After this is the method for computing balances. For the Citibank card this method is the average daily balance including new purchases. This is the most common way credit card issuers calculate your finance charges and is more expensive for consumers than calculating based on the previous balance or adjusted balance. This only applies if you don’t pay your credit card balances in full each month.
- The annual fee is listed next. The Citi Simplicity card doesn’t have an annual fee so this is marked as "none." Be sure to read this section, some popular rewards cards and secured credit cards come with expensive annual fees.
- Also detailed in the Schumer’s Box is the minimum finance charge. This is the amount that you will be charged if you carry a balance month to month even if your actually finance charges would be less. For example: if your interest charge added up to only $0.25 by calculating your average daily balance, you would actually be charged $0.50 because that is the set minimum.
- Almost done! The next section details the international transaction fees that you will be charged for using your credit card in a foreign country. If you used this Citi Simplicity card for a purchase in Canada, you would be billed 3% of the transaction amount for the currency conversion.
- Finally, the last section details the other fees that are included. The Citi Simplicity card charges a 3% fee for cash advance and balance transfer requests. The card also includes a $0 to $35 late fee depending on the status of your account and a $29 fee for going over your credit limit.
Easy as 1-2-3, right? While decoding this rate and term chart can be confusing, imagine how much worse it was before the Schumer’s Box!
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