How Does the Fair Credit and Charge Card Disclosure Act Help You?

All those facts and figures on your credit card statements may be intimidating, but reading and using this information each month helps you stay in control of your finances.

Why is there so much information on your credit card statements? Because the Fair Credit and Charge Card Disclosure Act, designed to protect you, requires creditors to provide you with certain data on a regular basis. You should understand why information is provided to you and how valuable it is when you can make decisions about using credit.

You Have a Right to Know

When you receive credit card statements from banks and retailers, you should see interest rate and fee schedule information. This information is also included in pre-approved credit offers you receive. Examples of this type of information include:

• Annual fee – the yearly charge for having the credit card.

• Annual percentage rate (APR) – the yearly interest rate charged.

• Monthly periodic rate – APR divided by 12, or the rate at which monthly interest is calculated.

• Daily periodic rate – APR divided by 365, or the rate at which daily interest is calculated.

• Finance charge – the total cost of having the credit card, including interest and fees.

• Transaction fee – certain charges to use various services, such as receiving a cash advance or using an ATM.

• Late payment fee – the charge placed on the account when payment is not received by the due date.

• Over the limit fee – the charge placed on the account when the credit limit has been exceeded.

• Grace period – the time between the transaction date and the due date where you can avoid interest charges if you pay in full, usually 20 - 30 days. For example, if you pay the balance in full on May 1 and charge an item on May 2, you will not be charged interest between May 2 and your next statement date.

• Minimum payment – the minimum amount accepted by the creditor for the payment due each month, usually between 2% and 3 % of the balance.

Verify Your Statement Monthly

Preview your statements each month to ensure you stay in control of your finances. If you have any questions about what you read, call your credit card company and ask. In 2006 the U.S. Government Accountability Office (GAO) released a report on credit card fees and disclosure practices. Read the Consumer-Action.org summary or download the pdf file of the GAO report.

To learn more about credit cards, read the relatedarticles in our Knowledge Center library.

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