Credit Card Terms and Conditions

Although most consumers use credit cards today, many of us do not pay attention to the credit card terms and conditions or the other forms of “fine print” that accompany credit agreements. Do you ever read all of the fine print when you receive a credit card offer in the mail? Do you pay attention to a change in terms on an existing account? If you don’t, you could be missing some very vital information that may impact your credit at some point down the line. Consumer credit issues can arise if consumers do not educate themselves on credit card terms and conditions BEFORE they start to use them.

Many consumers have already found themselves in a situation of mounting credit card debt. They feel as if they are in a downward spiral because they continue to incur late fees and penalty fees on top of their already existing debt. A big part of this disaster might be caused by not understanding basic credit card terms like interest rates, credit limits, etc. Fortunately, there are consumer credit counseling services to help them pay off debt and get back on the right financial track.

Considerations

When you decide to get a new credit card, look at the terms and conditions and ask yourself these questions:

• How do you intend to use this card?
• Is the credit limit high enough?
• Will the card be widely accepted at different business and in other countries?
• What security features does the card offer? If it is lost or stolen, can you ensure that you will be sufficiently protected?
• What other perks does the card offer? (Air miles, discounts at affiliated businesses, or donations to the sponsoring organization)

Familiarize Yourself with Important Credit Card Terms

• Annual Fee: A fee charged once per calendar year to a consumer as the cost for maintaining a credit account. The fee amount can vary from creditor to creditor.
• Annual Percentage Rate (APR): The cost of credit expressed as a percentage (includes interest rate and fees). This percentage can be fixed (meaning that it does not fluctuate with the market) or variable.
• Balance Transfer: The fee a customer incurs for transferring outstanding credit debt from one account to another.
• Grace Period: A length of time designated by a credit issuer (usually between 25-30 days) in which a consumer can pay off the entire amount of their credit debt and will not incur finance charges.
• Minimum Monthly Payment: The minimum amount a consumer can pay to keep their credit account from defaulting. This amount typically ranges from anywhere between 2-4% of the outstanding balance.
• Penalty Charges: Typically, if two or more late payments are made on a credit account, the creditor will increase the A.P.R. as a punitive measure.
• Prime Rate: The rate of interest that banks charge their most creditworthy customers.

The Cardholder Agreement (Credit Card Terms & Conditions)

In the world of consumer credit, the Cardholder Agreement is a legally binding document between the consumer and the credit issuer that outlines, in detail, all of the credit card terms and conditions. When you “sign on the dotted line” and accept a credit card agreement, you are also accepting the terms and conditions that come along with it. You are responsible for everything that is written in fine print, whether or not it is easy to understand.

Protecting the Consumer’s Credit: The Schumer Box

Most of us receive credit card solicitations by mail, and it can be hard to compare one offer to the next to decide which one will best meet our needs. Now included by law on every credit solicitation, you will find a section called the “Schumer Box” – an abbreviated listing of the most important pricing terms for that account. This legislation was passed in March 2004 to aid consumers in understanding key elements of a credit card solicitation. It includes such items as rates, fees and penalties. Know the definitions of these words. Various websites, such as bankrate.com, will allow you to quickly compare credit card terms for a variety of companies.

Please Note: Although the Schumer Box is included on the credit solicitation, only the Cardholder Agreement details ALL of the terms and conditions of the account. The initial offer of credit often excludes important portions of the agreement.

Just because you receive a particular credit offer in the mail doesn’t mean that you will be approved for the same offer. You may still be extended an offer of credit, but with less favorable credit card terms or a lower credit limit.

Beware of the term “introductory rate,” which indicates that the annual percentage rate (APR) of your card will change after a period of time.

Credit card terms and conditions can change at any time, so be on the lookout for mailings with “Change-In-Terms” literature enclosed.

I’ve already gotten into trouble. What can I do now?

Be an educated consumer. The more you know, the better off you will be. Since education is the key to a financially fit life, consult an expert credit counselor. A certified consumer credit counseling service can offer important educational advice, and even help you manage your credit card debt if it is necessary.

Contact Clearpoint Credit Counseling Solutions for a personalized consultation at 800.750.2227 (CCCS). If you are in debt and have mismanaged your credit accounts in the past, we can help. Go ahead and get started with a free budget review.