Make no mistake, giving up on reading credit card contracts can penalize you financially in multiple ways. Chief among them are “surprise” fees, as well as interest rates and payment obligations you may not have realized you agreed to. The problem is, once you sign the card contract, you’ve accepted the credit card provider’s rules and terms – for better and for worse.
The way forward for credit card consumers is to know what key card contract terms and language really mean, and to use that education to take the necessary steps to get the maximum value out of their credit cards. Start that process by recognizing these 15 “fine print” credit card terms and consumer obligations in card contracts — and get on the path to credit card mastery.
Language in most credit card contracts calls for any disputes over card charges to be umpired by an arbitrator usually selected by the card issuer. You can always get relief by asking your card provider for the correct documents that allow you to opt out of arbitration mandates.
Write or call the credit card company directly (within one month of signing a card deal) asking to opt out of any arbitration mandate. If the card issuers OK that you are opting out, you’ll avoid the mandate and still get your credit card.
There may be different language used regarding zero-interest or low-interest introductory offers. Read the language carefully on what happens if your miss a payment. Usually that action triggers a heavy penalty rate – sometimes over 30%.
You’ll want to know what happens if you accept a 0% card offer, but owe even $1 of the original balance when the 0% deal expires. When that happens, contract language often states that your card company can boost your interest retroactively.
The language in card contracts includes ATM cash advance fees. Usually, cash advance interest rates are much higher than they are for regular card purchases—often well over 20%. Watch out for extra “cash out” advance fees, too. Read more here to learn about common credit card fees.
All the leverage on interest rate charges lies with the card issuer. In fact, hidden deep in some credit card contracts, is language that can allow card providers to boost interest rates for various reasons. For example, an issuer can hike rates when a credit card promotional rate ends, when there is a variable rate language in the contract or when card owner makes a late payment. Act on your right to be notified within 45 days of a card rate hike, and know that most rate hike notices come in the mail — and in a thin, white envelope you can easily miss.
Cardholders may not realize it, but the language in card contracts means late payments can impact you in two ways: Once in the form of a late payment fee and again in the form of an interest rate hike. Know that before you procrastinate on a card payment. Even paying the minimum owed is better than skipping a payment all together. You can avoid missing a payment due date by setting up auto bill pay. Here are some other fees you don't need to be paying — and how to avoid them.
Historically, credit card companies have been generally OK in offering grace periods of 25 days without triggering big penalty fees and rate hikes. Recently, those grace periods are tightening, with some credit card providers cutting them to around 21 days.
By definition, a credit card grace period is the timetable between the end of the monthly credit card billing cycle and the credit card payment due date for that payment cycle. Pay the full amount owed by the due date and you’ll steer clear of onerous interest charges.
Credit card consumers may understandably believe they won’t see the card contract early in the application process, and often just before they’re supposed to sign off on the card. These days, though, card providers include a web link to the contract on the credit card application web page. Put it to good use and review the contract before you apply for a credit card.
Buried in the credit card contract is language that compels card providers to review your card account once every six months to potentially decrease your interest rate if you’ve paid your bills on time. Hold your card provider accountable for that stipulation — it might come in handy.
Card companies include language in credit card contracts about late penalty fees. But what might not pop up is mandated language that states card companies can only charge late fee and over-balance credit card limit fees of about $25 for a first offense and about $35 for a second offense within the next six months (the fee amounts can differ with various card providers). Know the contract rules and hold card companies accountable for any fee and penalty charges within those mandates.
Sure, a card company can close a card account if the cardholder isn’t making payments. But cardholders may not know that a card company can close a credit card account using any rationale they want (for example, card providers have been known to close accounts because the specific credit card wasn’t profitable).
Credit card customers have the right to opt out of any data sharing. If you don’t notice the opt-out language in your contract, make sure to ask your card provider about it.
Credit card contracts will include a section on card defaults, such as when you’re overdue on payments. Note that default actions are also triggered when you exceed your credit card spending limit if you don’t agree to changes to your card contract, or even if you don’t use your credit card. The fact is, card providers can cancel your card for a variety of reasons, and cardholders should know that.
Lastly, to get better educated on credit card contracts, and what they really say, The Bureau of Consumer Financial Protection (also known as the Consumer Financial Protection Bureau or CPFB) offers a database of credit card agreements by an issuer on its website. Find it here.
This article originally appeared on Experian.
Image: Steve Debenport
Get essential money news & money moves with the Easy Money newsletter.
Free in your inbox each Friday.