Terms and benefits checkup: Assess your credit card's value
It might be time to replace your card – or upgrade it to top-of-wallet status
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Do you know your credit card agreement inside and out?
Just 26 percent of cardholders said they read their credit card contracts in a 2016 CreditCards.com study. What you don’t know could hurt you, at least when it comes to changes to your credit card terms and benefits.
“It’s important to remember that credit card companies update their terms and conditions on a regular basis,” says John Heath, directing attorney at Lexington Law in Salt Lake City. Those updates can affect your annual percentage rate, rewards and other card perks.
At the end of February 2018, Discover did away with five travel and shopping benefits, citing a lack of use among cardholders. Those benefits included purchase protection, extended product warranties and auto rental insurance.
And in early April 2018, Chase announced that one of its travel cards, United MileagePlus, will no longer offer price protection and return protection as of June 1, 2018. Chase also is said to be reviewing benefits on other cards in its portfolio.
Some terms and benefit updates are more advantageous to consumers. In January 2018, Citi removed foreign transaction fees from the Costco Anywhere Visa card.
Reviewing your credit card terms and benefits regularly is essential for staying on top of the latest changes. It’s also helpful for figuring out which cards deserve top-shelf status in your wallet and which ones you may be better off without.
Card term and benefits checkup: What to look for, what to do about it
- Changes to your APR: The 2009 CARD Act spells out five possible scenarios in which an APR will increase.
- Fee changes, including annual fees, balance transfer fees and foreign transaction fees.
- Rewards program updates: Some categories can be downgraded; others can now earn more points than before.
- Changes to other card perks: Shopping and travel protections can be slashed while new perks are added.
- Your card issuer should give you notice when changes are made to your card’s terms.
- If your card’s status has changed, consider negotiating better terms or closing the card.
Credit card companies have a broad scope when making changes to your terms and benefits.
Some of the most common changes you may see include:
1. Changes to your APR
According to the 2009 CARD Act, your card’s APR can change if:
- An introductory or “teaser” period ends.
- The card user is more than 60 days late making monthly payment.
- Your risk profile changes if you fail to make timely payments to other creditors, such as other credit card issuers, car lenders or utilites – a practice called universal default.
- You are a military service member who ends active duty – federal law caps credit APRs for military service members at 6 percent as long as they are on active duty.
- The interest rate is tied to an index, such as the federal funds rate, and is variable – which is key in a rising-interest-rate environment.
- Interest rates cannot increase during the first year on new accounts except under the five exceptions listed above.
- If there's a change in your card’s interest rate or terms, your card is required by law to send give you a 45-day notice.
“Interest rates have changed significantly over the past year or so because the Federal Reserve is raising rates,” says J.R. Duren, personal finance expert at HighYa.com. With a variable rate card, your card’s APR is tied to the federal funds rate, “so when the prime rate goes up, your APR goes up.”
2. Fee changes
If you carry a balance, your APR influences what you pay for purchases when interest is added in. But fees are just as important in gauging your credit card’s true cost.
In addition to annual fee increases, credit card companies can also change the terms of balance transfer fees, cash advance fees and late fees. Taking time to review the fee schedule can help you avoid being nickel and dimed.
3. Rewards program updates
A March 2018 CreditCards.com poll found that rewards, in the form of points or cash back, were by far the biggest lure for people signing up for a new card, with 27 percent of respondents citing it as the main reason.
Your favorite card can, however, lose some of its luster if your rewards program no longer holds the same value.
Mike Arman, a retired Florida mortgage broker and real estate agent, says that while credit card companies often increase rates or fees, they can move in the opposite direction with rewards.
That includes limiting redemption options, lowering rewards values for redemptions or updating guidelines for transferring points to partner loyalty programs in the case of travel cards.
In February 2018, for example, the American Express Platinum card downgraded its points-earning level of Uber rides to 1x instead of 2x.
For example, in January 2018, Capital One launched a new partnership with Hotels.com that allows Venture and VentureOne cardholders to earn an unlimited 10x miles per dollar on eligible bookings through 2020.
4. Changes to other card perks
As the latest updates from Chase and Discover illustrate, you can’t count on card perks sticking around forever.
Regardless of what card you have, here are some of the card benefits and perks to check on:
- Travel protections, such as accident insurance, baggage delay insurance, concierge service access and auto rental insurance.
- Shopping protections, such as price matching guarantees, return guarantees and extended warranty programs.
- Entertainment benefits, such as presale access, VIP ticket purchases to selected events and discounts on entertainment and at restaurants.
In the grand scheme of things, these benefits may seem less important than your APR, fees or rewards, but they’re still worth paying attention to in case you ever need to use them.
Know the rules and your rights
“The major thing to remember is that credit card companies are supposed to give you 45 days’ notice” when they change your card’s terms of benefits, says Heath.
That window must be observed before a credit card company can raise your APR or make any other significant change, according to the CARD Act.
“Any time your credit card company makes changes, you should get a notice by mail or email,” says Duren. “It can be annoying to have to go through every correspondence to catch the changes, but it’s worth it.”
If you think your terms have changed, but you didn’t get a notice, call your credit card company or log in to your online account for a copy of your cardmember agreement.
Heath says to use the 45 days wisely if you’re notified of a pending change. “You have this grace period to think about the changes.”
That includes reviewing your current APR and what your rate may be increasing to, along with any changes to your rewards program. You should also review your reasons for opening the account in the first place to determine whether it’s still a good fit.
“The other purpose of this 45-day period is to give you a choice to close the account and walk away from the card,” says Heath.
Dealing with unfavorable terms and benefits changes
When a rate change is on the horizon, consider how it’s going to affect your day-to-day financial life.
Video: Negotiating a lower credit card interest rate
“If your APR goes up 1 percent over the course of the year and you’re carrying a daily balance of $4,000, that small jump in the rate will cost you an extra $40 per year,” says Duren.
Consider whether negotiating better terms is an option before you write off a card. Several years ago, in the pre-CARD Act era, one of Arman’s card issuers raised his APR by 3.5 percent, so he called them.
After some negotiating over the phone, “the rate went back to where it was and that was that,” says Arman. Wary of further rate hikes, he opted to pay the balance off but left the card open.
If you plan to try your hand at negotiation, keep these tips in mind.
- A positive track record of paying on time and responsible card use can work in your favor.
“Remember that if you’ve been a great long-term customer, you’re going to have better bargaining power,” says Heath.
- It’s also a good idea to do some research before approaching your card issuer.
“Be aware of what other banks are offering so you can go to your credit card company and provide examples of better deals,” he says. That could give you some leverage for convincing your current credit card company to keep you as a customer.
- Be aware that certain banks may have more consumer-friendly policies than others.
If you can’t get your card issuer to budge, you may want to think about closing your account for good. But first, consider the possible impact to your credit score.
- If you plan to apply for a car loan or mortgage in the near term, you’d likely want to leave your accounts open to avoid any credit score hit. On the other hand, if you won’t be borrowing anytime soon there may be no reason to keep the card open.
- Think about how frequently you use the card before pulling the trigger on closing the account.
“You have to sit down and weigh how you use a particular card as a tool in your financial life and do that analysis to figure out whether it makes sense to keep it” after the terms or benefits have changed, says Heath.
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