Explanations to ask for before taking out a revolving credit card
30/10/2020
Irrespective of whether you arrange a credit card at a bank branch, at some other location (e.g. at a stand or shopping centre) or online, you must be provided with full preliminary information to understand the product’s characteristics and risks through to expiry.
The bank or intermediary is obliged to help you consider whether the credit arrangement and, in particular, the suggested payment method is suitable for your needs and financial situation. Remember, they must provide you with bespoke explanations of the card’s characteristics, clarifying any pre-contractual information if necessary and, above all, warning you of the risks attached to default so that you understand how the new credit arrangement might affect your personal finances.
In addition, the party marketing the card must remind you that quarterly information on the interest rates and the fees typically charged by banks is available from the Banco de España (enlace al post Información trimestral sobre las comisiones habitualmente aplicadas). This service can help you to compare similar products offered by other banks and even alternative financing options offered by your bank.
Borrowing through revolving credit cards can be highly onerous; therefore, banks need to be meticulous in their explanations. Before the product is arranged, the bank will need to understand your needs and your financial position so as to provide you with the right information for your particular circumstances.
Adequate explanations should include information on the following:
- The interest payable, in terms of NIR (nominal interest rate) and APR (annual percentage rate.
- The various repayment options that the credit arrangement offers, with simulations (combination of limits and monthly instalments) showing the total cost of the credit and the estimated date on which you would complete repayment if you make no further use of it. In these simulations, you will find that if you choose a very small instalment, only a very small portion of the credit will be repaid each month, thus prolonging the debt.
Such simulators are particularly useful in the case of distance selling, including the simulator provided by the Banco de España through this Bank Customer Portal. - Where to find the “Quarterly information on the fees and interest typically charged or offered in the transactions frequently provided to individual customers” published on the Banco de España websiteAbre en ventana nueva.
Whoever sells you the card, don’t hesitate to enquire about the above points. If you intend to arrange the card through digital channels, find out what services the bank offers its customers, such as telephone enquiry lines, explanatory videos, frequently asked questions, simulators, chatbots, live chats and others.
