Understanding Your Credit Card Agreements

Many credit card holders know very little about the contracts that they sign with their card issuers. Many times, card holders apply for their credit cards without understanding their credit card agreements and don’t know the first thing about what the agreement actually stipulates. In fact, you might not even know the agreement exists until it arrives with your card.

This is where most people get into trouble. If problems develop down the road, the credit card company can simply say that you agreed to the terms and conditions of the card just by using the card. Once you make that first purchase with your card, you are bound by the terms of that agreement.

Perhaps the most concerning clause commonly included in these agreements is the ability of card issuers to raise interest rates at will –  at any time and for any reason. Many credit card agreements state explicitly that they don’t need a reason to raise your interest rates and can do it based on reasons that don’t seem to make a whole lot of sense to their customers.

Another issue with these agreements is late payment penalties. Card issuers generally place a great deal of importance in on time payments. Most credit card agreements stipulate steep late payment penalties. In fact, some card issuers will go as far as saying that you’ve broken the agreement with a single late payment and can immediately terminate the contract and your ability to use the card. Late payments can also result in a multitude of other drastic changes to your card agreement, including higher interest rates, and more expensive penalties and fees.

Another major concern of these agreements is how disputes will be handled between the card issuers and the card holders. Most card agreements now stipulate that the card holder does not have the right to take the card issuer to court for any reason, forcing any disputes to be settled through mandatory arbitration. Quite often, the agreements also stipulate that any arbitration dispute be mediated by an arbitrator of the card issuer’s choosing.

So, as much as you might be tempted to just toss that credit card agreement in the garbage when it comes, make an effort to carefully read the agreement and understand the implications of the contract.

You’ll be glad you did.

Related Posts:

• Little Known Arbitration Clause in Card Holder Agreements - In many cases, credit card owners aren’t even aware that they are agreeing to have all of their disputes settled by an...
• Study Shows Credit Card Arbitration Hurts Consumers - According to a recent study, card issuers have a practice of pre-selecting credit card arbitration companies that they know will not rule...
• Universities Scrutinized for Marketing Agreements - Colleges have been greatly scrutinized as of late when it comes to the on-campus credit card marketing agreements they have formed with...
• Tacking on Fees Breaks Agreements with Card Issuers - Recently, a news team in Portland, Oregon performed a bit of an exposé on small businesses that are charging fees to credit...

This entry was posted on Wednesday, January 16th, 2008 at 12:50 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.