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What's Hiding in Your Credit Card Application

We all know we should read the fine print when applying for a new credit card. But the reality is that few of us do. Fortunately, Card Hub, a credit card review website, is doing some of our homework for us.

In its latest survey, Card Hub took a look at the 10 largest credit card issuers and ranked them on the clarity of their online applications. It wanted to see which lenders clearly divulge information about their APRs, annual fees, balance transfer fees and rewards programs.

The good news is that credit card issuers overall are improving their applications and scored higher than they did on last year's survey. And, the disparity between the highest and the lowest scoring lenders is smaller than it was in the 2010 study.

It's also worth noting that most applications do a few things well. They were very upfront about their annual fees and how to earn rewards. They also clearly disclose the purchase APR to consumers.

So where do applications fall short? Many of the lenders tried to bury details regarding their reward programs and redemption costs. Citi, for example, tells potential customers that they earn five ThankYou points with every dollar spent on restaurants and entertainment and one ThankYou point on all other purchases. But the company doesn't tell you how much those points are worth, according to Card Hub.

Most of the lenders also aren't open about their balance transfer fees. Wells Fargo, for example, buries this information within a text heavy paragraph in the bottom right hand corner that is misleadingly titled "About Our Introductory Rates".

And another annoying habit the study found is the regular use of ambiguous language and phrases such as "up to" and "as low as" on the online application. Discover, among others, is guilty here. On the Discover More Card's landing page it says the applicant will receive "up to" 1% cash back on other, non-bonus category purchases. "The language is vague, and therefore the applicant has to read the fine print to find out exactly how much cash they will get back for their purchases," according to Card Hub.

So which banks are the most upfront on their applications? Capital One and Bank of America continue to be the best performing issuers, with top scores of 98.6 percent and 97.9 percent, respectively.

The two lowest scoring issuers are Discover and Citi, with scores of 82.5 percent and 82.1 percent, respectively. Both issuers fell by 4 positions relative to their rank in 2010.

Here are the full survey results:

1. Capital One (98.6%)

2. Bank of America (97.9%)

3. Chase (91.8%)

4. U.S. Bank (91.4%)

5. Wells Fargo (87.1%)

6. HSBC/Orchard Bank (86.0%)

7. USAA (85.0%)

8. American Express (85.0%)

9. Discover (82.5%)

10. Citi (82.1%)

So now the question is how should regular consumers use this survey data? I think it would be a mistake to avoid a Citi or Discover card just because their applications aren't entirely clear. Their cards may offer you features you're looking for. But if you are interested in one of these lenders' products, you should take a few extra minutes and read through that boring fine print. No doubt there's something there that you need to know.

Do you read the fine print?

Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
Credit Cards image courtesy of Flickr, CC 2.0.
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