A credit card is more than just a piece of plastic that you can spend. It is a way of accessing what credit limit the bank has agreed to lend you against. Your credit account is affected with some provisions that you must adhere to if you use your credit card and avoid using your credit. Every credit card comes with a credit card contract which is a type of contract that outlines the terms, conditions, prices, and penalties of the credit card.
Whether you know it or not, you agree to the terms in your credit card contract when you use your credit card. What the credit card company says goes. There is not much room for negotiation. The credit card issuers can change the credit card terms at any time, with notice. Continuing to use your credit card means that you agree to the changes in the terms. You can reject certain parts of the credit card contract, such as the arbitration clause, but it depends on the credit card company.
What’s in a credit card contract
Credit card contracts are not the easiest document to read. According to a 2016 study, the average credit card contract is written at an 11th grade reading level. This is quite difficult, especially since more than half of the American population is below 9th grade reading. The average credit card contract is also over 4,900 words long and would take 20 minutes to read.
However, since a credit card contract is a legally binding contract, you need to know what you are agreeing to by using your credit card.
The credit card contract will list pricing information for the credit card that outlines when and how you will be charged interest and charges on the credit card. At least your credit card contract has to list:
- the APR for each type of balance that can be borne – purchases, balance transfers and cash advances – and the penalty rate if applicable
- the index rate from which a variable rate is linked, eg the prime rate
- Financing costs information including the minimum fee, calculation method in the financing costs, and if you cannot be charged a financing cost
- Payment term
- the cartoons can and will be charged when charged
- Other credit card information
In addition to pricing information, your credit card agreement will include every detail of your credit card, including:
- the types of transactions you can make on your credit card
- Your credit limit and information about how your credit card issuer can change it
- Details about your credit card in another country
- how you calculated your minimum payment
- Options applied to your credit card balance and how you pay your payments
- How your credit card is reported to the credit bureaus
- how your information is shared or kept private
- Credit card companies can make changes to your account
- what constitutes failure and what happens when you set the standard
- how to handle a lost credit card
- how to close your account
- how to handle billing disputes with the credit card company
- the legal entity that enforces the credit card contract
How to find your credit card contract
Federal law requires all credit card companies with more than 10,000 credit card accounts to list a copy of their credit card agreements online. Your credit card issuer should also provide you with a copy of the credit card contract for your account if you wish. Finally, the Consumer Financial Protection Bureau maintains a database that includes generic credit card contracts from more than 300 credit card companies.