Nowadays, credit cards have become an important payment method. Although, they have their own perks and benefits; but if not used responsibly, credit cards can land you up in a huge debt. Credit cards come with own terms and conditions, which one must consider before signing for its account agreement. Many people overlook the regulations and ‘fine print’ attached to the agreement, and later on face its consequences. Even if some heed the rules, they ignore the changes in the terms that are usually notified to the credit card user through a mail.
The credit card account agreement is a legal document between the credit card consumer and the issuer. It contains all the crucial information that may affect your credit, including late fees, penalties, and other charges. When you sign up for an account, you also accept that you’ve understood all the terms and conditions. You admit that you are responsible for everything written in the agreement. So, it is necessary that before signing up for a credit card account, you must go through the fine print, including the credit limit, interest rates, annual fee, etc.
Before you enter into the account agreement of a credit card, you must ask yourself some questions. For instance, how will you use your card, is the card having an appropriate credit limit, will the card be accepted at different places across the globe, what are the safety features of the card in case it gets stolen or misplaced, or what are the other benefits of the card such as reward points, airline miles, discounts on select stores, hotels, airline tickets, etc. These are some of the important considerations that you should think before signing up for a new card account.
Knowing the elements of a credit card account agreement
We have come up with some of the important terms that are written in the agreement of the credit card. These are:
- Annual fee: It is the cost for the maintenance of a credit account. It is charged on an annual basis as per the calendar year. The fees can vary for different credit cards.
- Annual Percentage Rate (APR): The APR is the cost of the credit that includes the fees and interest rates on the card. This cost comes in a percentage form, which can either be fixed or variable. Fixed percentage will not vary with the market conditions.
- Balance Transfer: Balance transfer is the charge that is deducted when a customer shifts the outstanding credit debt between different accounts.
- Grace period: It is the period of time that is issued by the credit card company, in which a customer pays the entire amount of his credit debt with no finance charges. This period is normally between 25 to 30 days.
- Minimum monthly payment: This is the least amount that a credit card user is required to pay. If the minimum monthly amount is not paid, then the account can become delinquent. The minimum amount typically varies from 2 to 4 percent of the total outstanding balance.
- Penalties: Usually, if you pay more than two late payments, then the credit card account agreement says that you will be fined with a penalty charge. Your APR will be increased as a punitive measure.
- Prime rate: This is the rate of interest that most of the credit card companies ask from their loyal customers.
Remember that the terms and conditions of a credit card account agreement can be modified anytime, so frequently refer to your mails, in order to stay updated about the alterations.