Credit cards can be one of the most expensive types of consumer loans available today-or the cheapest. Fairly priced cards are available, but they're sometimes harder to find (and get), and if you don't read the fine print, you could pay more than you thought you would. 

It used to be that credit card companies wouldn't even tell you how much a credit card cost until you actually got the card in your hands. Congress put a halt to that, however, by passing the Fair Credit and Charge Card Disclosure Act of 1989. Card issuers now, by Jaw, have to give you details up front about how much a credit card costs. Under this law, which is part of the Truth-in-Lending Act, the costs of credit cards must be displayed in an easy-to-read box format on most applications and solicitations. The box that lists the costs of the card is dubbed the "Schumer Box," after Senator Charles Schumer (D-NY), who led this consumer-protection legislation through Congress. 

There are five basic elements to look at when you're selecting a credit card: finance charges, annual fees, grace periods, penalty fees, and balance calculation methods. First, we'll explain what each of these terms means and how they affect the cost of the credit you use. Then we'll show you how to save money by choosing the cards that best fit your personal financial needs. 

Finance Charges 

A finance charge (also called "interest") is the "commission" you pay the bank for lending you money. Most people don't pay their credit card bills off each month in fact, somewhere between one-third and one-half do. If you do pay in full, you'll usually, but not always, be charged no interest at all. Those who fail to pay off all their credit cards in full at the end of every month pay interest (or finance charges). 

You will see finance charges listed on your credit card statement in two ways: as a "monthly periodic rate" and as an "APR." APR stands for "annual percentage rate," and it simply means the stated amount of interest you will pay on a yearly basis. An APR of 19.8 percent means you will pay 19.8 percent interest over the course of a year on your balances. Divide that 19.8 percent APR by 12 (months), and you have a monthly periodic rate of 1.65 percent. 

An interest rate of 1.65 percent a month seems harmless enough, but that depends on your balance. A monthly periodic rate of 1.65 percent on a balance of $1,000, for example, would mean about $16 of interest per month, and over $165 per year.