THINGS TO KNOW BEFORE
YOU CHARGE IT!

A credit card is a form of borrowing that often involves in charges. Credit terms and conditions affect your overall cost. So it’s wise to compare terms & fees before you agree to open a credit card account. While nobody really plans to miss a credit payment or spend above the limit, it is important to realise what will happen if you do.

When applying for a credit card, make sure you know all the details of how your card will work. Be sure to understand its terms and cost before signing the agreement. Here are some pertinent questions:

• Is there an application fee for the card?
• Are there processing fees?
• Is there a late payment fee?
• Is there a fee for spending over the limit?
• When and how can a variable rate be charged? When and how can a fixed rate be charged?
• What is the grace period before interest rate is applied?
• How will you be informed of changes in the contract?
• Will the company inform me if I am about to go over my limit?
• If I go over my limit what happened?

CREDIT CARD TERMS
The Consumer Affairs Commission (CAC) urges consumers to consider the following terms before applying for a credit card.

Annual percentage rate: This is the interest rate the credit card issuing company or bank charges to the cardholder. It is a measure of the cost of credit, expressed as a yearly rate. The issuer also must disclose it. Some credit card plans allows the issuer to change a customer’s annual premium rate when interest rates or other economic indices change. Those plans are “variable related” because the rate change is linked to the index’s performance. Other credit cards rates are fixed or tiered, that is, different interest rates are charged for different amounts allotted to the user.
For most credit card purchases or cash advances, interest is calculated daily to interest rate specified by the user. No interest will be charged on your statement once your outstanding amount or balance indicated on your statement is received on or before the stated payment due date. If you don’t understand how your balance is calculated, ask your credit issuer. An explanation must also appear on your billing statement.

Grace period: Also called a “free period.” It allows you to avoid finance charges by paying your balance in full before the date due. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. You can also use this period to your advantage to avoid the effects of interest rates on overdue balances.

Annual fees: Most issuer charge annual membership or participation fees. They often range from $150 to about 2,000 for local currency cards, and US $30 to US$60 for dual currency cards, depending on the issuing bank.

Minimum monthly payment: This is a percentage of your credit card balance stipulated by the issuing bank that must be paid in order to keep you account in good standing. When only minimum payments are made the outstanding amount is carried over to the next period and interest rates are applied.

Transaction fees and other charges: A card may include other costs. Some issuers charge a fee if you use the card to get cash advance, make a late payment, exceed your credit limit, terminate your account, or even ask for an additional copy of your monthly statement. Some charge a monthly fee whether or not you use the card. This is also called an “inactivity fee.”

OTHER COST AND FEATURES
Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee & other charges may be more important than the annual premium rate or interest rates. If you plan to pay your purchases over time, these rates must be considered.

You may probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan’s services and features. For example you may be interested in “affinity cards” – all-purpose credit cards sponsored by professional organisations, college alumni associations and some members of the travel industry. An affinity card user often donates a portion of the annual fees or charges to the sponsoring organisations, or qualifies you for free travel or other bonuses.

Credit card payment:
Your account is usually credited the day payment is received. Outstanding balances must be paid on or before the due date to avoid penalties. To avoid past due fees, payment of an amount equal to or greater than the minimum monthly payment must be received on or before the due date.

Errors on your billing:
The CAC urges customers to inform their credit card company if there are any billing errors. Your statement usually outlines the issuing company’s policy about this issue. Many issuers include a summary of these rights on your monthly bill. If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you didn’t accept, or for an item that wasn’t delivered as agreed.

Unauthorised charges:
If your card is used without permission, you can be held responsible for the charges incurred. If your card is lost or stolen and you report the lost before the card is used, you can’t be held responsible for any unauthorised charges. To minimise your liability, report the loss as soon as possible. Some issuers have 24 – hour toll free telephone numbers to accept emergency information. It’s a good idea to follow up with a letter to the issuer, including your account number, the date you noticed your card missing and the date you reported the loss.

Shopping tips
Keep these tips in mind when applying for a credit card:

• Shop around for the plan that best fits your needs.
• Make sure you understand a plan’s term before you accept the card.
• Pay bills promptly to keep finance and other charges at a minimum.
• Always keep your receipts so that you can reconcile charges when your bill arrives.

• Protect your cards & account numbers to prevent their unauthorised used.
• Draw a line through blank spaces on charge slips so that amount can’t be changed.
• Keep a record – in a safe place separate from your cards – of your account numbers, expiration dates and the telephone numbers of each issuers so that you can report a loss quickly.
• Carry only the cards you think you’ll use.
• Think before you spend.

Applying for a credit card
Most Jamaican banks issuing credit cards require the following information before credit card applications can be successfully processed:

• A current job letter
• Last three pay slips
• Last three rent / mortgage receipts
• Taxpayer Registration Number
• Photo identification such as a driver’s licence or passport
• Bank statements for the prior six months or savings account records such as a pass book
• If you are self-employed, the first two requirements do not apply. However, you will be required to submit income and expenditure forms.

There are many benefits in using credit cards. Financial web site, a-credit-cards-website, gives the following pros and cons of using a credit card.

• Goods can be purchased quickly and easily, in person, over the telephone, or on-line.
• Some credit cards are international and can be used in any country where you see the logo on your cards. Some banks also offer dual currency credit cards.
• Credit cards can provide you with a cost-free form of finance as long as you repay the money within the grace period.
• Some credit cards offer perks such as discount vouchers, air miles and even cash back on purchases.
• Some companies offer insurance on your purchases, and can protect your goods in the event of loss or theft. They can also provide you with travel insurance.
• Credit cards can provide you with instant access to cash, although a fee is usually payable.

However, there are also disadvantages to using a credit card. If you fail to repay your borrowings within the grace period, credit cards tend to be expensive and are hard to control.
Other forms of borrowing, such as a personal loan or extension of your existing mortgage, can be cheaper. These options applying should be considered before applying for a credit card.
It is advisable to keep all receipts and purchases made. Mistakes do happen and you should crosscheck your receipts with you monthly statement. Any discrepancies should be reported immediately to the company. Purchases made abroad may not appear on your statement for a few months and may be billed to you at a later, less convenient time.