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Credit Card Fine Print: Exactly what is a Schumer Box? – Credit Sesame
What is a Schumer box?
A Schumer box is really a table that discloses pertinent information about credit cards, including interest rates, fees, terms and conditions. It's named for Charles Schumer, the lawmaker responsible for legislation that requires all credit card terms to become presented in a standardized, easy-to-read format. The legislation was enacted in 1988 but didn't work until 2000. In addition to stipulating what information must be displayed, the law also stipulates the rate of interest be presented in large font (18 pt) and also the remaining terms in normal – not tiny – font (12 pt).
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The Schumer box includes:
- The annual percentage rate(s) for purchases, balance transfer promotions, payday loans, and penalties
- Any grace period and how to avoid paying interest
- Minimum charges
- Annual fee
- Transaction fees
- Penalty fees
Here’s an example borrowed from a charge card from June, 2021 (Note these terms are no longer available, this offers are expired, the information in the Schumer Box, tables and then any rates, fees or terms mentioned in this article can be used for illustration purposes only.)
Credit card providers also provide the following information, although in our example it is presented as footnotes away from box:
- Information (when applicable) about variable interest rates – when and how they change
- How the balance and finance charges are calculated
Why the Schumer box is important
Fine print and legalese can confuse even the most intelligent consumer. Standardized information from creditors allows customers to compare apples to apples and select the best product. Importantly, the Schumer box likewise helps consumers comprehend the difference between promotional terms and continuing terms. If there’s normally a yearly fee but it’s waived the very first year, or there's a $0 introductory annual fee, the Schumer box reveals that. A reader who reads the Schumer box isn't likely to mistakenly believe that it’s a no annual fee card.
Red flags
The Schumer box is just part of the picture. You'll still have to read all of the terms and conditions and make certain that you simply understand them.
Look for common industry traps that may have a negative impact on your credit. For instance, penalty rates. The issuer will convert this account to some penalty interest rate of 29.99% when the cardholder misses a payment on any other account using the issuer, even if this account is current and in good standing.
A similar example may be the universal default clause. Some creditors will impose a penalty rate when the consumer is reported to have missed a payment to any creditor at all.
Deferred interest is another term to watch out for. Some charge cards offer introductory promotional interest rates as low as zero percent. But when you don’t spend the money for entire balance before the introductory period expires, you’ll pay interest on the entire amount back to the date of purchase, even if you’ve already paid some of it off. Home improvement center credit cards are very well known for this.
What the Schumer box doesn’t tell you
The Schumer box won’t tell you all you need to learn about your credit card.
Rewards program details. Rewards and loyalty programs are controlled by separate conditions and terms that are not tied to or dependent upon the terms described in the Schumer box.
Prime rate predictions. Variable rates are associated with an index that changes periodically such as towards the prime rate and the Schumer box can only let you know what that is at the time are applying. No-one can predict when the prime rate will change or because when much. The card provider can and will raise the rate of interest when the prime rate changes. As a side note, not every variable rate charge cards are tied to the prime rate, some, for example, might be associated with the London Interbank Offered Rate (LIBOR) so ensure you check the Schumer box to determine what index the rate offered is associated with.
More on Credit Cards:
- Credit Card Traps Buried in the Fine Print
- Getting the Most Out of Your Credit Card
- CARD Act Refresher: Are you aware Your CARD Act Rights?
- Credit Cards: The True Price of Minimum Monthly Payments
