Credit Card Fine Print

Get out the magnifying glass

When you sign up for a credit card make sure you read the cardholder agreement very thoroughly. This is because credit card companies are notorious for explaining their terms and conditions in ways the average customer finds hard to understand. Most people end up signing for the card even though they don’t actually fully understand the agreement.

Credit card companies are legally bound to list all of the terms and conditions before you sign the agreement, and while some people consider some of the terms to be unfair, they are all legal as long as they are in the agreement. Once you sign on the dotted line, you have agreed to the contract the way it is written, even if you don’t understand it. If you don’t understand the meaning of the words, make sure you have somebody explain them to you, or call the credit card company and ask for an explanation

Since 2004, each credit card contract has to include something called a Schumer Box, which is a table that lists all of the card’s fees, rates, grace periods, calculation methods and penalties. The Schumer Box is named after U.S. Rep. Charles Schumer, who introduced the legislation in Congress. This standard box makes it a lot easier for consumers to compare credit cards.

Although the Schumer Box has a lot of important information in it, there are a lot more items that aren’t listed in it. By law, these other items appear in the terms and conditions of the credit card. One of the most important terms is the universal default clause, which states that the credit card company can raise the interest rate on your card due to a missed payment on any loan, even a loan with another company, such as a car or mortgage payment.

There is also a clause that protects the credit card issuer from lawsuits and class action suits. If there is a disagreement between the customer and the issuer, the customer is restricted to an arbitration hearing only, and the arbitrator is chosen and paid by the credit card company. Other clauses state that even though your credit card may have a fixed interest rate, the issuer can raise the rate if you spend over your credit limit.

If you want to save yourself from being surprised down the road, it’s a good idea to read the fine print all the way through.