It will surprise no one that advertising can be misleading. There's lemonade with 0% fruit juice, pharmaceutical companies compare their drugs to placebos rather than what's already on the market, and credit card issuers tout benefits that they're federally mandated to provide.
While reading credit card advertisements can certainly clue you in to exciting deals and promos, card issuers have a tendency to celebrate the bare minimum. Here are a few claims you should take with a large (read: mammoth) grain of salt.
1. $0 liability on unauthorized purchases
It's true: the credit card advertised will cover you in case of fraud. But it's not necessarily out of the goodness of the issuers' hearts. The Truth in Lending Act of 1968 limits your liability on unauthorized purchases to $50, and stipulates that you're not on the hook for any charges that occur after you report your card lost or stolen. This means that if you call your credit card issuer as soon as you know the card's missing, you probably won't have to pay anything. Worst case scenario: you're out $50. Sure, it's not entirely enjoyable, but card issuers probably won't be getting any medals for zero liability.
2. No co-signer required
A number of college student credit cards will bill themselves as "no co-signer required." Prevailing thought is that students must have someone else, usually a parent, sign on to the loan to guarantee the debt. A college kid could well think that the advertised card is special in allowing him to apply on his own. However, that card is in the same boat as every other credit card, student or otherwise.
According to the Credit CARD Act, your credit limit will be determined by your individual income, not your household income. This means that a student can't put down his parents' income on his credit card application unless they co-sign. If he has an income, he can apply on his own; otherwise, it's a co-signer or nothing. The Federal Reserve clarified earlier this year that this provision applies to everyone, from college kids to stay-at-home parents.
Therefore, when a student credit card claims to not require a co-signer, it really means that if a student has an income, he will be considered for a credit card on his own. That's a claim that any credit card, student or adult, can make.
3. No credit check
This is a claim most often seen on prepaid debit cards (often erroneously called prepaid credit cards). Unfortunately, it's a lure that targets the unbanked, who tend to be less affluent, and less financially literate. Prepaid debit cards are just like debit cards: they don't extend a line of credit. Why would you need to run a credit check on someone before allowing him to leave his money with you? A customer with limited or bad credit may quickly snap up a prepaid card rather than run the risk of being denied, leaving himself vulnerable to the hefty hidden fees that often accompany such cards.
When you're reading a credit card offer, do your research first. If a benefit is offered by every credit card in its genre, it's probably nothing special. The best credit cards aren't necessarily the ones that list the most perks. A few things that do distinguish credit cards are their rewards programs (do rewards expire, or are they subject to an annual limit?) the presence of fees (such as cash advance or late fees) and interest rates.
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