Be sure you understand the rates and fees on a credit card before you apply. The Schumer Box helps you see and compare credit card rates and fees in a concise, easy-to-read format.
If you’re shopping for credit cards and trying to compare rates and fees for your best deal, the so-called Schumer Box can make your life easier. The Schumer Box is a standardized disclosure statement the federal government requires credit card companies to provide.Look for the Schumer Box to see all a card’s interest rates, annual fees, and other expenses in an easy-to-read format, so you can choose the credit card that’s right for you and make your best decisions for using credit.
What is a Schumer Box?
Prior to 2000, shopping for and comparing credit card terms could be very confusing. Credit card companies presented their annual percentage rates (APR), fees and other terms of their agreements in different ways. It was hard to compare cards or understand the true costs of using credit. Charles Schumer, then a congressman, now a senator, presented legislation requiring clear, standardized disclosure for credit card offers. The law was enacted in 1988, and took effect in 2000.
Credit card companies must provide Schumer Boxes with any credit card offerings and monthly account statements.
How to use the Schumer Box
The Schumer Box can help you stay in control of your finances at all times. Before you sign up for a credit card, use the Schumer Box to compare interest rates and fees and choose the card that’s right for your situation. For example, if you plan to use a card to transfer a large balance from another card, your most important terms will be the balance transfer rate, the length of any introductory period, and balance transfer fees.
After you have a credit card, the information in the Schumer Box helps you minimize interest costs and fees. Knowing your interest rate on purchases helps you decide which source of credit to use, how fast to pay it off, or even whether you should save up the money before you make a major purchase. Knowing about late fees might inspire you to set up automatic payments to make sure you’re never late on your payments.
At least once a year, you should check the Schumer Box to make sure you’re still getting the best deal on a credit card for your credit needs. Perhaps you now qualify for a lower interest rate due to market changes or because you’ve established a better credit history. Or your credit usage may have changed. If you no longer carry a balance from month to month, you may find you prefer a card with better spending perks, instead of the card with the lowest purchase APR.
What the Schumer Box tells you about interest rates
The interest rate charged by a credit card company tends to change with market forces. Many APRs are based on the prime rate, meaning they are equal to the published prime rate plus a certain number of points. Credit cards often charge different interest rates on different types of balances:
- Purchase interest rates. The interest rate on purchases is often lower than the rate on balance transfers or cash advances. One reason for that is the fees credit card companies charge merchants to process transactions.
- Balance transfer interest rates. The APR for balance transfers is often higher, unless you sign up for a special deal. It can still be worth it to transfer your balance from another credit card, however, if the APR is lower than the card you are transferring from, or if you want fewer monthly payments to keep track of.
- Cash advance interest rates. Unless you qualify for a special promotional deal, taking a cash advance on your credit card can be expensive. Cash advance interest rates are generally higher than interest rates on purchases.
- Penalty rates. If you miss even one credit card payment, the interest rate on your balance can go up significantly. And it can stay there until you demonstrate a track record of paying on time again. The penalty rate in the Schumer Box tells you the rate you may pay if you miss a payment.
- Minimum interest charge. When you owe interest on your account, your credit card company may charge a minimum amount, such as $.50.
In addition to information about interest rates, the Schumer Box tells you about your grace period (the amount of time you have to pay the balance on purchases without being charged interest) and other details about how your interest is calculated.
What the Schumer Box tells you about fees
It’s one thing to pay fees you understand and expect. For example, you might choose a card with an annual fee because it also has great cash back benefits. It’s another thing to get slapped with high fees you didn’t see coming. The Schumer Box tells you what fees you may be subject to with a certain card:
- Annual fees. You can choose from plenty of credit cards that don’t have annual fees. However, some cards with fees make it hard to resist by offering great cash back perks, free companion airline passes, and so on. Just make sure to re-evaluate on a regular basis to make sure your benefits are still worth more to you than the annual fee.
- Penalty fees. The extra charge for making your credit card payment even a day or two late can be significant. Try to make at least a minimum payment well before the due date, with automatic payments, if possible. You could also be charged a fee if your payment is returned – for example, if you pay with a check returned for non-sufficient funds. If you do incur a penalty fee, call the credit card company and see if it can be waived. You’re most likely to be successful having the fee removed if this is the first time you’ve missed your payment or had a payment returned.
- Foreign transaction fees. If you travel or make purchases in foreign currencies using your credit card, you may pay foreign transaction fees. Not all credit cards charge the same fees, or any foreign transaction fees at all. It pays to know what your credit card charges before you go abroad.
Where to find the Schumer Box
You can find the Schumer Box on credit card company websites. If you’re a current customer, you can read it on your monthly statement.
Look for the Schumer Box whenever you’re considering a credit card offer, and when you get your credit card statement. By understanding your total cost of credit and comparing it with other options, you can make better credit decisions that help you reach your own financial goals.
If you’re shopping for credit cards and trying to compare rates and fees for the best deal, the so-called Schumer Box can make your life easier. The Schumer Box is a standardized disclosure statement the federal government requires credit card companies to provide.
Look for the Schumer Box to see all a card’s interest rates, annual fees, and other expenses in an easy-to-read format, so you can choose the credit card that’s right for you and make your best decisions for using credit.