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Reading the fine print in a credit card agreement is a lot less fun than shopping or racking up rewards, but it’s an important step you should always take before signing up for a new card.
Fortunately, credit card issuers are required by law to provide a tabular summary of the fine print that is clear, concise, and easy to read. This summary, known as the Schumer chart, can help you quickly assess the costs associated with a credit card before you apply. It can also help you understand the terms of your existing credit cards to avoid unnecessary charges.
This is how you can read a Schumer chart and use the information to inform your credit card options.
What is a Schumer box and where can you find it?
“A Schumer chart is a disclosure of your interest rates and fees for your credit cards that you’ll find on your statement, or if you get a credit card offer, you might see it there as well,” says Rod Griffin, senior director of public education and advocacy for the Experian credit bureau.
Named for New York legislator Chuck Schumer, who was responsible for the 1988 legislation that made disclosure a requirement for all credit card applications and applications, Schumer’s chart is full of important rate information. interest and the fees you may be charged. “Think of the Schumer box as a summary of what this card will cost you,” says Beverly Harzog, credit card expert, author, and consumer finance analyst for US News and World Report.
Harzog notes that if you’re looking for a Schumer box online before applying for a card, you may have to do some searching. On most credit card issuer websites, you’ll see a small link that says something like “Pricing and Terms” directly below the application button. If you click on it, you will see Schumer’s painting in a prominent place.
One caveat, though: “It’s not a substitute for reading the fine print,” says Harzog. While the Schumer Box provides a quick way to access most of the information you need about a credit card, you should still read the full terms and conditions before applying for any card.
Reading a Schumer box
Although Schumer’s boxes vary from card to card from time to time, there are some common sections that you’ll find on most of them. Here’s a basic example of a typical Schumer chart, as well as an overview of what each section tells you:
|INTEREST RATES AND INTEREST CHARGES|
|Purchase Annual Percentage Rate (APR)||This is the APR for new purchases that you charge to the card, which you will pay if you have a balance and do not cancel it within the grace period. The exact rate will be based on your creditworthiness, but will be within the rate range provided. Keep in mind that most credit cards have variable APRs based on the prime rate. If there is a 0% introductory APR period for new purchases, the details will be displayed here.|
|Balance Transfer APR||This is the APR you’ll pay on a balance you transfer from another credit card. If there is a 0% APR balance transfer offer, the details will be displayed here.|
|Cash Advance APR||This is the APR that you will pay if you use your card to withdraw cash. The cash advance APR will generally be higher than the purchase APR or balance transfer APR, making cash advances an extremely expensive lending method. Because of this, try to avoid using cash advances if possible.|
|Penalty APR and when it applies||Some credit cards impose a penalty APR if you miss one or more payments. This section will tell you when it will apply and for how long.|
|How to avoid paying interest on purchases||This section tells you about the grace period. If you pay your bill in full before the due date, you won’t pay a dime in interest on your purchases. This section also specifies when interest on cash advances begins to accrue.|
|Minimum interest charge||This specifies the minimum interest charge on a small balance.|
|Credit Card Tips from the Consumer Financial Protection Bureau||This directs you to a resource page from the Consumer Financial Protection Bureau where you can find more information on the safe use of credit cards.|
|Annual membership fee||This is the amount you pay each year to keep the account open. Many cards don’t have annual fees, but premium cards with enhanced rewards and other perks often do. While some annual pay cards may be worth it because of the extra benefits they offer, make sure the card’s rewards and benefits align with your lifestyle and spending habits so you get your money’s worth.|
|This chart outlines the different types of transactions that will incur fees and how much the fees are.
The balance transfer fee it is the amount you will pay to transfer a balance from another credit card. This is usually a percentage of the amount you transfer, usually 3% to 5%.
The cash advance fee it is the fee you will pay to withdraw money. Please note that this fee is in addition to the high APR on the cash advance balance.
Foreign transaction fees You are charged for using your credit card to make a purchase in a foreign currency. Some credit cards don’t charge foreign transaction fees, but many do.
|Penalties only occur if you misuse your card. These are completely avoidable if you stick to your budget and make your payments on time.
A late payment fee is imposed if you do not meet your due date. You may be charged this fee in addition to a penalty APR.
The return payment fee it is the amount you will pay if your payment bounces because there are insufficient funds in your bank account.
The returned check fee
Most important things to pay attention to
Both Harzog and Griffin said everything in a Schumer box is important, but highlighted a few key areas to focus your attention on. “First of all, you’ll want to look at interest rates,” says Griffin. “You want to look at penalty rates, because if you miss a payment, your interest rate can go up dramatically.”
Harzog also highlighted cash advances, which you should try to avoid using if possible. “With a cash advance, you’ll pay a fee plus that APR, so you really have to pay attention to that.” You should also consult the section that tells you how to avoid paying interest. “Most credit cards from major issuers will have a grace period,” says Harzog. “You want to be sure it’s on the list.” Otherwise, interest could start accruing when you make a purchase. This is important to know so you can make your payments right away.
Please note that it is possible to avoid all of the fees listed in the Schumer chart. If you always pay your bill on time and in full, you’ll never have to pay interest or penalties. But you still need to understand what you could potentially owe in different situations.
Finding the right credit card for you
Schumer’s box is important, but that’s not the place to start when comparing credit cards, according to Griffin. “When you’re looking for a credit card, define what you need from it,” he advises. Do you want to be able to travel without paying taxes? Would you like to earn cash or miles? Are there other perks and benefits, such as travel insurance, that you expect to get from the card?
You need to look at the financial benefits for you first, Griffin says, and then see which cards have the best interest rates and lowest fees. In other words, the Schumer box should be your second point of comparison once you’ve narrowed down your options.
If you will be using your credit card while traveling abroad, check the Schumer box for foreign transaction fees.
Harzog recommends using different credit cards to create a rewards strategy. “Try to get a card that will help him earn rewards that he doesn’t currently get from another credit card he has,” she says. If you already have a card that earns triple points on travel purchases, for example, you may want a different card that provides cash back on groceries.
On the other hand, “if you’re trying to build credit, just get the best credit card you can get,” says Harzog. “Don’t worry about rewards while building credit.”
High-risk borrowers are more vulnerable to high APRs and bad terms, so comparing Schumer boxes between credit cards you qualify for is especially important if you have bad credit or no credit history.