Credit Cards

How to Read a Credit Card Offer

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Being a credit card user is a lot like being the best looking person in the room. Credit card issuers are constantly trying to get your attention online, through the mail, and even at kiosks in the airport. With so many offers to consider, how can credit card applicants figure out which one is best? The key is to understand how to read a credit card offer.

Here are the three most important things to do when reading a credit card offer.

1. Understand the Interest Rates

Nearly two thirds of American credit card users carry a balance every month and pay interest on that balance. For these cardholders, the most important consideration should be the interest rate offered. The easiest way to determine the interest rate will be to look at the terms and conditions of the offer. By law, these terms must be spelled out in a clear and consistent format known as the Schumer Box, which is named after Sen. Charles Schumer (D-N.Y.), who championed this provision.

The first line of the Schumer Box will indicate the Annual Percentage Rate for purchases. An offer may include several different rates, or a range of rates, which will be assigned to individual applicants based on their creditworthiness. In addition, many cards offer some kind of introductory promotional financing, and the terms of these offers will also be spelled out here.

Along with the interest rates for purchases are several other rates you should be aware of — including those for balance transfers, cash advances and the penalty interest rate.

2. Look for Rewards

Those who avoid interest by paying their balances in full and on time every month should be focused on earning rewards for their spending. Offers for rewards cards often include a generous sign-up bonus, so it is important to understand the terms of these offers. For example, applicants should understand if there is a minimum spending requirement and how long they have to meet that qualification. Credit card users should also be careful to examine the real value of points or miles offered as a sign-up bonus or as a reward for spending.

3. Take Note of Fees

Credit card offers will advertise their rewards, and may even highlight low interest rates, but there will rarely be any mention of fees. To find out what fees they may have to pay, credit card applicants need to return to the Schumer Box. Just below the interest rates will be a table of fees including the annual fee, balance transfer fee, cash advance fee and foreign transaction fees, if any. Other fees include any penalty fees for late payments and returned payments.

Putting It All Together

The market for credit cards in the U.S. is enormous, and in general, each credit card offer is designed to appeal to a different segment of this market. Therefore, cards will always be most competitive in some areas, and less competitive in others. For example, a card advertised as having low rates is unlikely to include generous rewards. Likewise, the best rewards cards will usually have higher interest rates and annual fees than similar products that don’t feature rewards.

Credit card applicants need to decide which features they want to prioritize and look for the most competitive cards in that segment. At the same time, cardholders should also pay attention to the card’s less competitive features to ensure that the terms are acceptable.

Before you start shopping for a credit card, it can be helpful to know what your credit score is so you can target your search to the cards you’re more likely to qualify for.  If you’re looking at cards that require a high credit score but your credit score is in a much lower range, your efforts may fall short.  Keep in mind, too, that each time you apply for a credit card, it’s counted as a hard pull, meaning your credit score will see a small, temporary drop — so it’s better to make the applications count, and go for the cards with general criteria you can meet.  Credit.com is one place that offers you free access to your credit scores and can match you with credit cards you’re most likely to qualify for.

It’s great to know that credit card issuers are competing so fiercely for your business, but it is up to you to make sure that the offers you are considering are worthy of your attention.

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