Credit Card
Terms and Conditions: Only 44 percent of consumers read every word of credit card contracts, according to a 2003 FindLaw.com survey, and here are reasons why you should read the fine print:
The terms tell you how much you're going to pay and what happens if you make a late payment. And, for existing credit cards you already have, it tells you of higher rates or changes in rewards programs.
Interest rates: Often different interest rates apply to purchases, cash advances and balance transfers. And penalty rates can apply if you're a moment late paying your bill or you exceed your credit limit, as well as if your credit score drops.
Penalty rates can reach as high as 40 percenton some cards offered to bad credit people, and up to 30 percent on mainstream cards.
The rate for cash advances is typically 5 percentage points higher than the rate for purchases. Card promotions that urge transferring debt to another card tend to take advantage of lower rates are often for a limited period.
Many card holder agreements won't allow you to pay off the highest rate charges first, because the issuer may state that payments will be applied to the lowest-rate balance before making a dent on the higher-rate one. Why? Because banks can lose money on a promotional rate, so they use payments to pay down that balance first.
If you have good credit, frequently call your bank and ask for a lower rate or start shopping for a credit card with a better rate. But remember that too many open, revolving credit accounts can damage your credit report score.
If you make a late credit card payment, or charge more than your authorized credit limit, you may be charged a fee. To make matters worse, many issuers have reduce the grace period fom 30 days to 20 or 25 days. Those late fees can also push you over the credit limit by being added to your account balance.
If you make a purchase overseas, issuers charge up to 3% to convert the transaction into U.S. dollars.
The warning notice of contract changes may be only 15 days in advance, because credit card issuers are only required to give you 15 days written notice before raising rates, reducing or eliminating rewards or other changes. You can choose to reject the new terms and pay off your balance, but you'll likely have to notify the company in writing.
If you refuse changes, some issuers will let you pay off your balance on the old terms but won't let you make any new purchases. Others will let you keep the old terms and continue charging on the credit card until it expires.
Notices of changes are included in monthly statements, but at the start of each year many card holders are also sent amended agreements that include a host of changes that will occur later during the year.
Some credit card terms do not allow card holders to sue. Nearly half the banks that issue credit cards require you to give up your right to sue and instead go through arbitration to resolve a complaint. In arbitration, both parties settle the dispute outside the courtroom. An independent arbitrator or a panel hears the case, and in most cases card holders have no right to appeal an arbitrator's decision.
A benefit of using a credit card is that if you're not satisfied with the purchase, you can ask your bank to dispute the charge. But the right to dispute credit card charges can carry restrictions. According to the standard language on credit card agreements, the merchant's address must be in the same state or within 100 miles of the card holder's, and the disputed amount must be more than $50.
If a thief gets hold of your MasterCard or Visa credit or debit card, for example, you generally have zero liability for unauthorized purchases.
Also, MasterCard and Visa say their debit and credit card customers can usually dispute purchases of any amount regardless of where they're bought, under certain conditions. These conditions include items that are damaged, defective or not received by the customer.
Learn more credit card facts and review interest rates as well as card user ratings, perks and rewards.
