Pitching Those Disclosures Could Cost You
Every so often, among the mail you receive, you may find a pamphlet from a financial institution or credit card company with which you have a credit card. Under federal regulations, the credit card company is required to send you the disclosure any time there is a change in the terms of your card. Although it’s difficult to find the time to read the fine print, you should think twice about throwing away this important information because it can cost you.
For example, the pamphlet you receive may be informing you of a change in the late payment fee or a change in the way the minimum payment is calculated. To understand the impact these changes might have on your bottom line, you can use any of the dozens of convenient online credit card calculators.
Let’s say you’ve received a notice that your minimum payment will now be either $15 or 1% of your balance plus finance charges, whichever number is larger. Now let’s plug in some numbers. You have a $2,000 balance and your interest rate is 13%. Using an online credit card calculator, you’ll see that if you paid only the monthly minimum payment, it would take more than 17 years to pay it off and you would end up paying over $1,800 in interest!
Knowledge is power. By reading the fine print and actually calculating how it will affect you, you can decide if you want to continue with the card or not. (Of course, you’ll need to pay off the balance to close the card.) If you had thrown out that disclosure without reading it, you may have found out after it was too late that you were going to be paying a lot more money than you had originally bargained for. So the next time you receive a disclosure, take the time to read and understand it before pitching it. If you don’t, it could cost you.
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