In a recent interview, Elizabeth Warren, an advisor to the Obama administration slated to head a new federal consumer rights agency, noted that she has received numerous suggestions for providing consistent regulation and guidelines for overseeing consumer credit and lending practices.

Citing inconsistency in advertising credit terms and finance charges, professor Warren recommends standardized food labeling requirements a potential model for clearly communicating the terms and features of consumer credit cards and loans. Consistent labeling would assist consumers with comparing features and avoiding hidden terms that can increase debt. Debt consolidation and credit counseling services typically advise consumers to shop credit card offers and compare terms and conditions.

Managing credit card debt: Understanding credit terms and conditions

Primary consumer complaints include misleading advertising, and credit card and loan terms and conditions that are incomprehensible if not illegible.Although credit card companies frequently promote low interest rates, they may not promote annual fees and other charges assessed to consumers as part of the “fine print.” Examples of credit card terms that can lead trouble include:

  • No interest if paid within “x” months: This offer can quickly gain your attention, and may lead to a buying spree based on the presumption that you’ll pay off your balance within the promotional no interest period. If you fail to do so, or make a late payment, the credit card company may assess deferred interest to your original balance.
  • Transfer balances to a new card with a “low or no initial rate”: This is similar to the no interest promotion, but targets consumers who are carrying credit card balances. The offers claim that you can transfer your balances to a new credit account with a low initial rate. Many of these offers also require paying a transfer fee, and may include provisions for higher interest rates after the promotional period expires. Comparing terms is important before using credit cards for debt consolidation.
  • Too good to be true? Look again: Car dealers, consumer lenders, and retail establishments depend on consumers making impulsive decisions to buy and borrow to pay for their purchases. Avoid pressure for buying, and don’t be talked into buying or borrowing before you’ve fully reviewed terms and conditions associated with opening a credit account for financing your purchase.

Pay attention to your instincts and walk away from any situation that makes you uncomfortable. You can also find reputable non profit debt consolidation and credit counseling services if you need debt help.

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