Help Desk FAQ

Personal Finance

 

What information is a creditor required to disclose about a credit card or other loan product?

The Truth in Lending Act requires creditors to make specific written disclosures about the cost of credit and to present the information in a clear, easy-to-read-and-compare format. The regulation makes it easier for consumers to choose the best credit offer. The Home Equity Loan Consumer Protection Act requires creditors to provide similar disclosures for open-ended credit secured by the borrower’s home—commonly known as a home equity line of credit, or HELOC. The following information must be disclosed when you are offered or apply for a credit or charge card. It may be provided to you directly, in writing, or you must be told how to access it. (Some of these requirements apply only to credit cards and not charge cards, such as American Express, because charge cards do not permit cardholders to carry over a balance from billing cycle to billing cycle.)
  • APR (annual percentage rate): the regular finance charge, expressed as a yearly interest rate, for purchases made on credit when you carry over a balance from one billing cycle to the next; you will also be told of any introductory, or teaser, rate and how long it will last
  • Other APRs: under what circumstances the interest rate would be different from the regular purchase rate (for cash advances and balance transfers, for example) and what those rates would be; penalty rates, too, for things like paying late or going over the limit, must be disclosed
  • Variable-rate calculation: how the rate is determined, if it is not a fixed rate
  • Balance computation method: the method used to calculate the finance charge on purchases if you carry over a balance—average daily balance, adjusted balance and previous balance are examples
  • Minimum finance charge: the lowest amount you could be charged if you carry a balance from one cycle to the next—in many cases, 50 cents
  • Fees: all fees, including any annual fee, per-transaction fees (for things like purchases, cash advances or balance transfers), and per-incident fees (for going over the limit or making a payment late, for example)
  • Grace period: the number of days you have to pay your bill in full without triggering any finance charges on purchases (cash advances and balance transfers typically start accruing interest immediately)
  • Charge card repayment: when charges made to a charge card are due and payable—typically, upon receipt of your statement
The disclosure statements for other loan products may not look exactly like a credit card disclosure, but they will still include the:
  • APR (the cost of the credit as a yearly rate)
  • finance charge (the dollar amount the credit will cost you)
  • amount financed
  • total amount you will have paid by the end of the loan term (assuming all payments are made on time)
  • total cost of your purchase on credit, including your down payment.
 
 
 
 

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