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How to read your credit card’s terms and conditions

Do you know what the terms APR, 0% offer and sign-up bonus mean?

Summary

Consumers should know how to read their credit card’s terms and conditions so they’re aware of what they are signing up for. Without fully understanding the terms of a credit card offer, you could be in for an unpleasant surprise.

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Credit card advertisements are often filled with dazzling promises – sign-up bonuses with a line of zeroes, trips to sandy white beaches near sparkling blue water and 0% balance transfer offers that last for months upon months. If you’re racing toward the apply button in the hopes of cashing in on a free vacation or saving hundreds of dollars of interest, stop right there: Have you taken a careful look at the terms and conditions that accompany that offer?

Without fully understanding the terms of a credit card offer, you could be in for an unpleasant surprise in case you:

  • Apply and don’t qualify for that large bonus
  • Unexpectedly forfeit your 0% offer and end up with hundreds of dollars in interest charges
  • Start racking up tens to hundreds of dollars of unexpected fees

What are credit card terms and conditions?

You’ll usually find a terms and conditions link close to the apply button on a card’s promotional page or application page. If you can’t immediately locate the link (sometimes the information is directly on the page), searching the page for common phrases can help you locate the information:

  • “benefits and terms”
  • “rates and fees”
  • “pricing details”
  • “APR” (i.e., the card’s interest rate)
  • “see rates”
  • “pricing and terms”
  • “offer details”
  • “rates and disclosures”
  • “terms and conditions”

Terms and conditions example

The terms and conditions page is usually divided into two parts. At the top, you’ll find a Schumer box, which contains all the rates and fees information in a standardized table. Below that, you’ll see a dense collection of fine print that spells out the card’s terms and conditions, such as payment allocation, rewards program information and card benefits. This information is often all located on the same page, but not always – sometimes you’ll have to look elsewhere for rewards program and benefit information. (For instance, Chase keeps this info under a separate link titled “offer details.”)

The CARD Act

The Credit Card Responsibility and Disclosure Act of 2009, or the CARD Act, gave credit cardholders some valuable protections. This law gives you a safeguard from retroactive rate hikes on the card balances you carry, more time to pay bills and more advance notice about any changes in the credit card terms, among other protections. It grants consumers 45 days to look for a better deal if they are unhappy about any changes in terms and conditions, whereas previously, they had only 15 days. They also can opt-out if they don’t agree with significant changes in terms and conditions on their account. If they choose to opt-out, they would have to pay off their balances as per their existing cardholder agreement and shut down the account.

Features of terms and conditions

Regular interest rate

The interest rate charged for carrying a balance on the card (AKA the card’s “APR”) is located at the very top of the Schumer table. The APR is usually listed as a range. If you’re approved for the card, you will receive an APR that falls somewhere within that range, depending on your creditworthiness.

Regular interest rate

0% offers for balance transfers and new purchases

If the card includes an introductory APR for balance transfers or new purchases, that information will also be listed in the first two rows of the Schumer box, in the following format:

Introductory rate (usually 0%) + number of months the offer lasts + the go-to rate  (the regular APR after the introductory offer expires)

0% balance transfer and new purchase offers

Annual fee

Within the Schumer box, you can find the annual fee – i.e., the fee that you have to pay for card membership. The terms will also indicate whether the fee is waived in the first year.

Annual fee

Other fees and penalties

Any other rates and fees that the card charges will also be listed in the Schumer box, including: balance transfer fees, cash advance rates and fees, foreign transaction fees, returned payment fees, late payment fees and the penalty APR (if the card has these).

Fees and penalities

Sign-up or welcome bonus

Usually, near the top of the fine print, you’ll find the information on the  card’s sign-up bonus, including the amount of points or cash back offered, requirements to earn the bonus (typically a dollar amount spent in a certain period) and limitations on earning the bonus. (Note that the below example may not reflect a currently available offer.)

Sign-up Bonus

Earning rate

Near the sign-up bonus section in the fine print, you should also find information on earning points or cash back, including earning rates, what types of purchases are qualified to earn points or cash back, caps on earning and other limitations.

Earning rate

Redeeming rewards

Usually, in the vicinity of the earning rate, you’ll see information on redeeming rewards, including redemption options and limitations, as well as rewards expiration. Unfortunately, this info isn’t always located neatly in one location. In fact, for points- and miles-based programs, which tend to be more complicated, it’s a good idea to visit the rewards program site to get the full details on redeeming rewards.

Redeeming rewards

Other benefits

Details on other card features – such as car rental insurance or extended warranties – may be listed in terms and conditions. Here you can learn what the benefit covers, eligibility requirements and limitations.

Other benefits

Combing through the cardholder agreement

Scrolling through a card’s terms and conditions can be tricky – with a page crammed full of spidery print, it’s easy to overlook important information. A small oversight can end up costing you in fees and penalties, lost sign-up bonuses, forfeited rewards or even more dire consequences for your personal finances. Based on some common cardholder complaints, we suggest you keep a close eye out for the following items:

  • Sign-up bonus limits. Before you apply for a card to earn a giant sign-up bonus, make sure you’re eligible. Issuers will usually specify in the fine print whether owning the card previously or having other cards within the same family will disqualify you from earning the sign-up bonus. Sometimes you’ll have to wait for a certain timeframe before you can reopen the same card to earn another bonus. Sometimes you can only earn a bonus for a particular card once in your lifetime. (While you’re at it, keep an eye out for unwritten limitations, like the Chase 5/24 rule.)
  • Earning rate caps or limits. Be sure you understand fully what kinds of purchases qualify or don’t qualify for bonus rewards (purchases are tracked using MCC codes) and keep an eye out for spending caps on that bonus (e.g., you can only earn a 5% bonus for the first $2,500 in purchases per year). Issuers are usually good about specifying spending caps upfront, but it’s a good idea to check the terms and conditions for less conspicuous caps.
  • Rewards expiration, forfeiture and cancellation. Keep an eye out for terms that could result in your losing your rewards earnings – e.g., not paying your bill in time or defaulting on your account. One item to keep an eye out for is an expiration date for your points or cash back. While some issuers let you keep unredeemed rewards as long your account is open, other issuers impose a strict time limit on your rewards (as short as one month).
  • Redemption limitations. Check the details on redeeming rewards carefully – what are the redemption options, what dollar or point amount do you need to reach to redeem your rewards, and how difficult is the redemption process? If a card offers a high rewards rate, but you have to jump through a lot of hoops to claim your rewards, it may not be worth your time.
  • Restrictions on 0% offers. Watch out for terms that could cause you to forfeit that 0% introductory APR on balance transfers or new purchases – e.g., missing a payment due date.
  • Balance transfer fees: If you think that 0% balance transfer offer is going to cost you $0, think again – you’ll usually have to pay a 3% to 5% balance transfer fee, which can amount to more than a hundred dollars, depending on the size of your balance. Be sure the fee is worth it before you sign up.
  • Restrictions on other benefits: You should peruse the terms and conditions for any additional benefits that you intend to use. These might include purchase protection (How much and what types of purchases does it insure? How do you file a claim?), car rental insurance (is the coverage secondary or primary? What types of rentals does it cover? In which countries?), travel credits (What is covered? Do you have to enroll to earn the credit?) and other benefits.
  • Cash advance terms: We generally don’t recommend using credit cards for a cash advance, and when you read the terms, you’ll understand why. You’ll often have to pay an exorbitant fee and a higher rate of interest, plus there’s no grace period (you immediately start accruing interest on a cash advance).
  • Unexpected fees: Do a close read to make sure you understand all the fees that the card may incur. In addition to checking whether the card charges an annual fee (and whether it’s waived in the first year), you should look for penalty fees (which are common), returned payment fees (which are also common) and a penalty APR (which can cause your interest rate to skyrocket). Less common, but especially important to watch out for, are additional maintenance fees on top of a card’s annual fee. While a card geared toward applicants with good scores is unlikely to include such hidden fees, subprime cards sometimes advertise an annual fee upfront and only mention in the fine print that you’ll have to pay additional fees each month on top of the annual fee.
  • Arbitration waivers: The terms and conditions may inform you that your cardmember agreement will include a waiver for arbitration – which means you waive your right to have a claim heard in court or jury or to participate in a class-action lawsuit. You may be able to opt-out of arbitration early on. In case you can’t, it’s good to know what you’re getting into upfront.

Bottom line

Many a credit card holder has experienced the pang of buyer’s remorse after signing up for a card that didn’t deliver on their expectations. Of course, terms and conditions are dense and confusing (and don’t always spell out all the limitations), so misunderstandings can’t be completely avoided. However, by reading the terms and conditions closely and looking out for key pieces of information, you may be able to spare yourself some disappointment.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

Credit Card Rate Report
Reward
16.39%
Student
17.07%
Airline
16.04%
Business
14.62%
Cash Back
16.51%

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