A credit card is more than just a piece of plastic that lets you spend money. It's a way to access the credit limit the card issuer has agreed to allow you to borrow against. Your credit account comes with some stipulations that you have to stick to if you want to keep using your credit card and avoid having your credit affected. The rules of your credit card are outlined in your credit card agreement, a type of contract that outlines the terms, conditions, pricing, and penalties of the credit card.
You may not realize it, but you're automatically agreeing to the terms in your credit card agreement when you accept the credit card. What the credit card issuer says, goes. There's not much room for negotiation. The credit card issuer can change the credit card terms at any time, with advance notice. Continuing to use your credit card means that you agree to the changes in the terms.
You may be able to reject certain parts of your credit card agreement, like the arbitration clause, but it depends on the credit card issuer.
What's in a Credit Card Agreement
Credit card agreements aren't the easiest to read. A 2018 study from Science Direct found that the average credit card agreement is written on an an 8th to 9th grade level, higher than the average American reading level. More complicated credit card agreements were associated with higher finance charges.
Even though credit card agreements can be lengthy and complex, you need to know what you're agreeing to when you use using your credit card. After all, it's a legally binding agreement.
The credit card agreement will list pricing information for the credit card that outlines when and how you will be charged interest and fees on the credit card. At a minimum, your credit card agreement has to list:
- The annual percentage rate for each type of balance that can be carried—purchases, balance transfers, and cash advances and the penalty rate, if it applies
- The index rate to which a variable rate is tied, e.g. the prime rate
- The finance charge information including the minimum finance charge, the finance charge calculation method, and when you may not be charged a finance charge
- Grace period
- The fees you can be charged and when they will be 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 using your credit card in another country
- How your minimum payment is calculated
- Options for paying your credit card balance and how your payments are applied
- How your credit card is reported to the credit bureaus
- How your information is shared or kept private
- Changes the credit card issuer can make to your account
- What constitutes a default and what happens if you default
- How to handle a lost credit card
- How to close your account
- How to handle billing disputes with the credit card issuer
- The legal body who enforces the credit card agreement
If your credit card comes with a rewards program, details about how you can earn and redeem points will be listed in your credit card agreement.
How to Find Your Credit Card Agreement
Federal law requires all credit card issuers 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 agreement for your account when you request it.
Finally, the Consumer Financial Protection Bureau maintains a database that includes generic credit card agreements from more than 300 credit card issuers.