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Not too long ago, one of my CardRatings.com colleagues came home to find an offer from Best Buy in her mailbox. It was for a MasterCard that came with some nice perks:
- An introductory APR of 0% – good for a year
- Four percent back on Best Buy purchases
- A minimum of 1% back elsewhere
- Two percent back during special promotions (e.g., for travel and dining)
- A point system, where your spending leads to reward certificates good for buying music, movies, electronics, etc. at Best Buy
- Members-only deals, sweepstakes, and sales
- The liability on unauthorized purchases is $0
Unfortunately, there were some not-so-nice features of this offer – for example, a 5% fee for cash advances. That's on top of a 25.99% interest rate for cash advances – no introductory rate here, folks! Getting a cash advance on a credit card is almost always a bad idea, but on this Best Buy card, it'd be incredibly costly and anything but a best buy.
There's a late payment fee of $29 to $35, depending on the balance. On top of that, "If at any time you fail to make at least your Minimum Payment in time to be credited to your Account by the Payment Due Date, or you exceed your credit limit, your entire Account balance will increase to the variable Default APR."
That’s 29.99%. Ouch!
Even worse, there’s a fee for credit limit increases (CLI). Here’s how it’s explained in the terms and conditions that accompanied the card offer:
“If requested and approved a CLI fee of up to 50% of the CLI may be charged to your account depending on your creditworthiness.”
In other words, say you're in Best Buy and come upon a fantastic sale. Rather than risk going over your credit limit, you call to see if you can get a $500 credit line increase. While you may get that increase quickly enough to take advantage of the sale, there may also be a $250 CLI charge on your MasterCard!!! So much for a great bargain.
The notion of a lender charging us for the privilege of making them more money has never sat well with me, even when we're talking about the typical $10 to $25 fee. Fifty percent is different. Waaaaaaaaaaay different.
One of my colleagues made some calls to ask the card issuer for an explanation. Someone in management was supposed to get back to us, but didn't. So we decided to do what anyone should do when they have questions about a card.
We called the toll-free customer service number. The service rep said that while there isn't a credit limit increase fee "at this time," it's a disclosure that there might be one in the future (we were also told that there is more than one variation of this card offer). The bigger issue, though, is the fact that they're even thinking about something like this. Simply put, this is downright scary!
Perhaps most disturbing about this Best Buy card offer is that all these consumer-unfriendly terms were really buried. They’re not in the fine print of the Schumer Box, where lenders are required to show their basic rates and fees. You’d only find them if you chose to read the teeny-tiny print that follows the Schumer Box.
And the Moral of the Story Is …
No matter how tempting the offer, read the fine print – and the teeny-tiny print before you apply. If it raises as many red flags as this card does, rip or shred it to pieces, whatever your pleasure. There are plenty of great credit card offers out there that do not have such worrisome terms.
Have you seen any egregious … or excellent … credit card terms lately? We welcome your comments.