What you need to know before applying for a credit card

Two women sitting on the couch using a laptop and talking about applying for a credit card.If a consumer wants all the facts before applying for a credit card, there is no getting around the fine print. However, the reality is that most people do not have the patience or the time to meticulously read the arduous language in the pricing disclosures before they apply for a credit card. Therefore, consumers must know the absolutely essential information to look for ahead of time, before they click “Apply Now.”

Credit card application checklist

The following is a checklist of key terms of your credit card agreement that you should look for before applying: the introductory and regular APRs for new purchases and balance transfers, the annual fee, the balance transfer fee and details on rewards programs. In order to determine how much of the above information could be easily found on credit card applications, CardHub.com conducted a study investigating the online applications of the 10 largest credit card issuers, based on outstanding balances.

Which companies have the clearest disclosures

In the CardHub.com Summer 2010 Credit Card Applications Study, Capital One and Bank of America ranked the highest in terms of clarity on their applications. These companies did the best in clearly disclosing the key information mentioned above without the applicant having to actively search for it. The credit card issuer with the least upfront applications was U.S. Bank, followed by USAA and American Express.

Common problems on credit card applications

The area in which most of the credit card companies were lacking was disclosure of the balance transfer fee. This is particularly problematic because not only is it the hardest component to find, but it is also the component that applicants are least likely to know to look for. The balance transfer fee is a common fee that is assessed when a customer transfers their balance from one credit card to another, and it is usually between 3 percent and 4 percent of the amount of the transferred balance. Another common problem was clarity on how much rewards points and miles are worth on non-cash back rewards credit cards (i.e. are 20,000 rewards points worth a family ski trip or a new dress?).

Improvements on credit card applications

Although there were common areas of weakness, the study also found that vague and misleading language, such as “as low as” or “up to,” has diminished considerably. Many companies were much more likely to clearly display the full range of APRs (e.g. Regular APR 12.99 percent — 24.99 percent) and clearly define how much cash back a customer would get on the purchases they made for cash back rewards credit cards.

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