Solve your debt in 5 days or less!

Make sure you understand the terms of a credit card plan 
before you   accept the card. 
Pay bills promptly to keep finance charges as low as 
possible. 
Keep copies of sales slips and promptly compare charges when 
your   bills arrive. 
Draw a line through blank spaces about the total when you 
sign   receipts. 
Keep a list of your credit card account numbers and the 
telephone   numbers of each card issuer in a safe place in 
case your cards are   lost or stolen. 

                  Bureau of Consumer Protection Office
                  of Consumer & Business Education
                  (202) 326-3650

Chances are you have received offers in the mail asking if 
you would like to open credit card accounts. Frequently, 
these offers say that you have been 'pre-approved' for the 
card, with a line of credit already set aside for your use. 
Typically, these offers urge you to accept quickly, 'before 
the offer expires.' However, before accepting a credit card 
offer, understand the card's credit terms and compare costs 
of similar cards to get the features and terms you want. 
Choosing a Credit Card
Credit card offers may seem attractive, but remember a 
credit card is a form of borrowing that usually involves a 
'finance charge' -- a charge for the convenience of 
borrowing -- and often other charges as well.  
Credit Card Terms
Before selecting a credit card, learn which credit terms and 
conditions apply. Each affects the overall cost of the 
credit you will be using. Under the Fair Credit and Charge 
Card Disclosure Act, you can compare terms and fees before 
you agree to open a credit card or charge card (no interest) 
account. Be sure to consider and compare the following terms 
that direct-mail applications and pre-approved solicitations 
must reveal. 
Annual Percentage Rate
The 'annual percentage rate,' or APR, is disclosed to you 
when you apply for a card, again when you open the account, 
and it is also noted on each bill you receive. It is a 
measure of the cost of credit, expressed as a yearly rate. 
The card issuer also must disclose the 'periodic rate' -- 
that is, the rate the card issuer applies to your 
outstanding account balance to figure the finance charge for 
each billing period.  
Some credit card plans allow the card issuer to change the 
annual percentage rate on your account when interest rates 
or other economic indicators (called indexes) change. 
Because the rate change is linked to the performance of the 
index, which may rise or fall, these plans are commonly 
called 'variable rate' plans. Rate changes raise or lower 
the amount of the finance charge you pay on your account. If 
the credit card you are considering has a variable rate 
feature, the card issuer must tell you that the rate may 
vary and how the rate is determined, including which index 
is used and what additional amount (the 'margin') is added 
to the index to determine your new rate. You also must be 
told how much and how often your rate may change. 
Free Period
A free period -- also called a 'grace period' -- allows you 
to avoid the finance charge by paying your current balance 
in full before the 'due date' shown on your statement. 
Knowing whether a credit card plan gives you a free period 
is especially important if you plan to pay your account in 
full each month. If there is no free period, the card issuer 
will impose a finance charge from the date you use your 
credit card or from the date each credit card transaction is 
posted to your account. If your credit card plan allows a 
free period, the card issuer must mail your bill at least 14 
days before your payment is due. This is to ensure that you 
have enough time to make your payment by the due date. 
Annual Fees
Most credit card issuers charge annual membership or other 
participation fees. These fees range from $25 to $50 for 
most cards, and from $75 on up for premium 'gold' or 
'platinum' cards. 
Transaction Fees and Other Charges
A credit card also may involve other types of costs. For 
example, some card issuers charge a fee when you use the 
card to obtain a cash advance, when you fail to make a 
payment on time, or when you go over your credit limit. Some 
charge a flat monthly fee whether or not you use the card. 
Balance Computation Method for the Finance Charge
If your plan has no free period, or if you expect to pay for 
purchases over time, it is important to know how the card 
issuer will calculate your finance charge. This charge will 
vary depending upon the method the card issuer uses to 
figure your balance. The method used can make a difference, 
sometimes a big difference, in how much finance charge you 
will pay -- even when the APR is identical to that charged 
by another card issuer and the pattern of purchases and 
payments is the same. Examples of how finance charges based 
on identical APRs can differ are shown on a following page. 
Average Daily Balance (including or excluding new 
purchases) 
The average daily balance method gives you credit for your 
payment from the day the card issuer receives it. To compute 
the balance due, the card issuer totals the beginning 
balance for each day in the billing period and deducts any 
payments credited to your account that day. New purchases 
may or may not be added to the balance, depending on the 
plan, but cash advances typically are added. The resulting 
daily balances are added up for the billing cycle and the 
total is then divided by the number of days in the billing 
period to arrive at the 'average daily balance.' This is the 
most common method used by credit card issuers. 
Adjusted Balance
This balance is computed by subtracting the payments you 
made and any credits you received during the present billing 
period from the balance you owed at the end of the previous 
billing period. New purchases that you made during the 
billing period are not included. Under the adjusted balance 
method, you have until the end of the billing cycle to pay 
part of your balance and you avoid the interest charges on 
that portion. Some creditors exclude prior, unpaid finance 
charges from the previous balance. The adjusted balance 
method usually is the most advantageous to card users. 
Previous Balance
As the name suggests, this balance is simply the amount that