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Credit and Charge Cards

What Consumers Should Know about the Cost and Terms of Credit Cards. Using credit and charge cards to pay for purchases is a fact of life for consumers today. Many people have at least one credit card, if not more than one card.

Applications and solicitations for credit and charge cards are readily available. You may find them in "take-one" racks in stores and restaurants, in some magazines or catalogs, or in your mail at home, even if you haven't asked for an application.

Credit Cards vs. Charge Cards

Many people use the terms credit card and charge card interchangeably, but there are important differences. In general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow you to carry a balance from one billing cycle to the next; however, you have to pay interest on that balance. Usually, you have to pay at least a certain amount of your balance each time you receive a bill.

A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing to the next. Because you cannot carry a balance, a charge card doesn't have a periodic or annual percentage rate, so there is no rate for a charge card issuer to disclose.

Uniform Disclosures

To make sure that consumers receive detailed and uniform disclosures of rates and other cost information related to credit and charge card accounts, Congress passed the Fair Credit and Charge Card Disclosure Act in 1988. To implement the law, the Federal Reserve amended its Truth in Lending regulation (Regulation Z).

Truth in Lending is designed to help consumers know the cost and terms of credit. The regulation requires credit and charge card issuers to reveal important information in a clear, easy-to-read, and easy-to-compare manner so that consumers can shop for the credit terms that work best for them. This pamphlet summarizes some of the major features of the regulation.

The regulation has always required credit and charge card issuers to tell consumers things such as the interest rate they'll be charged for credit, but the information wasn't always easy for some people to find.

Now, all issuers of credit and charge cards must either provide specific information in an easy-to-read table with headings, or they must alert you of any costs associated with a card and provide a toll-free number and an address so you can find out the details. This information will make it easier for you to find important cost information and compare the terms offered by different card issuers.

What Must Be Disclosed

When you apply for a credit or charge card, a card issuer must either disclose directly, in the form of a table with headings, or tell you how to obtain the following information: