The Schumer Box has been around for over a decade, but the truth is that there is a lot more to the concept of having a summary of credit card fees and interest rates that you see on every credit card agreement.
For those of you that don’t know the history, it’s actually named after Chuck Schumer. He was a New York congressman that pushed this legislation hard in hopes of giving the consumer more power.
The law here is clear: long term credit card interest rates have to be posted in at least 18 point type, and other disclosures need to be in at least 12-point type. If that’s not large enough for you, you are free to get out your magnifier — and you definitely should!
There are other things that need to be listed: the annual fees if there are any, APRs for purchases, APRs for balance transfers and cash advances, as well as penalties and defaults that can occur based on your behavior.
It gets even better: any grace period needs to be listed, and you need to ensure that you have the interest charge calculation method. Any transaction fees on balance transfers and cash advances or even late payments need to be listed as well.
The problem is that the Schumer Box just isn’t enough protection. In fact, it’s been shown that relying too much on the Schumer Box tends to make consumers get into credit card terms that really aren’t that favorable at all. For example, you might be excited to find a credit card with only about 7% variable interest. However, where are they getting the variable point from? Generally speaking, that’s the prime rate. Most consumers aren’t going to monitor the prime rate to know when their credit card terms are going to shift.
You’re still going to need to make sure that you read the fine print to really make sure that you’re not getting into a card that’ll have you in over your hard. You will need to still look at how often the interest rate can change, as well as how much notice you get before these changes happen. Finally, you have still figure out how high the interest rate can go. The terms and conditions are long for a reason — to throw you off and protect the interests of the company.
It’s time to fight back and not just give into our own natural desire to laze about and take whatever we’re given. Now that you realize the credit card company isn’t going to be your best buddy, you need to make sure that you read everything. Even if you had to take it to a legal professional before you sign up, wouldn’t that be better than creating problems down the road? We definitely think so.
Rewards programs are now part of the credit landscape, something that wasn’t around when Schumer was pushing this law through Congress. You need to figure out how many points you need to accumulate before you can redeem for any prize, and you also want to make sure you know when the points expire. Even if you have a card that says the points won’t expire, don’t get too comfortable — what if you get behind on your payments or trigger a default? Are those points still going to be there? Also, which purchases qualify for those bonuses — you can’t just use your card as you see fit and hope the rewards are still going to be there for you.
Knowing is truly the majority of the battle — once you know something, you can definitely plan accordingly. Start now and don’t delay — it can be the best thing you could possibly do for your credit!