25 Jun 2015

DEFINITION of ‘Upfront Pricing’
The interest rates and fees stated in a credit card agreement when the card is issued. Upfront pricing lets a consumer know what the interest rate will be for purchases when carrying a balance, the fee for not making the minimum payment on time, the charge for transferring a balance and the annual fee (if any). Upfront pricing also lays out foreign transaction fees, returned payment fees, the cash advance APR, the minimum interest charge and other costs the consumer could incur as a cardholder.

You can see a credit card’s upfront pricing before you even apply. At the credit card issuer’s website, look for a link to “pricing and terms,” “pricing information” or “rates, rewards and other info.” After the 2009 Credit CARD Act became effective, credit card agreements became simpler and upfront pricing became clearer. We don’t know how much of these change is specifically because of the act. While the act required many changes to how credit card issuers advertise to and communicate with consumers and limited certain fees and the conditions under which credit card issuers can increase interest rates, it did not specifically require credit card agreements and upfront pricing to be presented in a certain way. The CARD act does not cover business credit cards, only consumer credit cards.

Credit card issuers can change the rates and fees disclosed in upfront pricing if they follow the rules of the CARD Act. The issuer must give the cardholder at least 45 days’ advance notice of any changes, and consumers who disagree with certain changes are allowed to close their accounts and pay off their existing balances under their existing terms. Issuers also can’t increase the card’s upfront interest rate for new transactions until the consumer has held the card for at least a year. Upfront pricing does disclose the penalty APR and when consumers will have to pay it, and it also discloses whether a credit card’s APR is variable, what the variable rate is based on and when it might change. If a consumer pays his credit card bill late or if market interest rates increase, the credit card issuer may increase the consumer’s interest rate.

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