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.

Even a place like this is hard to enjoy when you don't know what you're paying! (photo: wikimedia.org)

Now that the recession is leveling off, many people are getting ready to start using their credit cards again. Because the economy is projected to reach its turnaround point mid-summer, consumers are looking to use their cards to pay for summer vacations.

Marilyn Dean of Los Angeles, California stated, “We haven’t had a real vacation in two years…the first year we just opted not to go but the second year the recession hit us hard and we couldn’t.” Like many other Americans, Dean is planning for a year of normalcy, and that includes a well-deserved vacation.

Paying for vacations

When it comes to paying for vacations, many Americans are looking to their credit cards. Anne Banas, editor of SmarterTravel.com, stated, “It’s pretty much the best way to make a purchase, especially your big items. It’s just really easy. And you don’t lose much in the exchange.”

Some consumers are worried about exchange rates, however, those are secure. Both Visa and MasterCard secure money based on “wholesale rates offered to large banks and corporations,” instead of the retail rates most customers are charged. Every time Americans use a credit card for an overseas purchase, they are guaranteed an excellent exchange rate.

Stiff fees for overseas purchases

Although the exchange rate is taken care of if a consumer pays with credit cards, there are other things to be aware of when traveling. Fees can crop up quickly with any overseas purchase. Most banks charge a “currency conversion fee” when their customers purchase items outside the US. This fees can range anywhere from 1% to 3% of the purchase price. Consumers should do some advance planning and call their credit card companies to find out what the fees for foreign conversion are.

A recent study by Bankrate.com showed that Capital One was the only card company that did not pass the conversion fee on to their customers. If you know you’re going on vacation in a few months, it may benefit you to open a credit card account that has no conversion fees and use it solely for travel.

Over-the-top fees for cash advances

Taking out cash advances on credit cards is a huge budget-breaker. Interest rates on cash withdrawals often exceed 20%, and that interest begins accruing from the minute the money is withdrawn. David Lytle, editor of Frommers.com, stated, “The rates on those things are awful. It’s the worst way to get money.”

Hidden fees for debit card withdrawals

When traveling abroad, the best way to get money is to use a local ATM and a debit card. A debit cards is linked directly to the cardholder’s account, so it deducts funds automatically. Consumers should be aware, however, that some banks charge anywhere from $2 to $5 for each withdrawal from an ATM outside their network. It’s also possible for some banks to charge 2 to 3% of the amount withdrawn with a debit card at an ATM.

Consumers need to understand the fees and policies of their banks before they travel abroad, and if they find a bank that offers a better deal it may be wise to open a special travel account. With some careful research and planning, paying for  an overseas vacation really can be worry-free.