Business News Select | SMPost | Terms

Term: Terms And Conditions (Credit Card)

19 Jan 2015

A formal statement of the rules and guidelines that govern the relationship between a credit card issuer and a credit card holder. A credit card’s terms and conditions spell out the fees and interest charges you could incur as a cardholder. This document provides the credit card’s annual percentage rate (APR) for purchases, APR for balance transfers, APR for cash advances and penalty APR. It also states how long the grace period is, what the minimum interest charge is if you carry a balance, the annual fee, balance transfer fee, cash advance fee, foreign transaction fee, late payment fee and returned payment fee.

In addition to providing dollar amounts and percentages for fees and interest rates associated with a credit card, the terms and conditions also describe how the credit card company will calculate your balance (e.g. using the daily balance including current transactions method), what actions will trigger the penalty APR (e.g. missing the minimum payment deadline), and how the company will apply payments to your account (e.g. it might apply payments to your lowest APR balances first, up to the minimum payment due, then apply payments to the highest APR balances). If the credit card has a rewards program, the terms and conditions (or sometimes a separate document) will explain the basic rules of the rewards program, including the types of transactions that earn rewards (for example, purchases but not balance transfers). If the credit card has a promotional offer, such as a sign-up bonus or low introductory rate, the terms and conditions will also describe how to qualify for the offer.

The document containing a card’s terms and conditions sometimes goes by a different name, such as “disclosures,” “rates, rewards, and cost information,” or “pricing and terms.” A credit card’s terms and conditions will be available when the consumer applies for the card. It will also be mailed to the consumer when a new card is issued. Consumers should read the terms and conditions carefully before applying and again upon receiving the new card to make sure they fully understand any fees and interest charges they might incur. Consumers should also read the terms and conditions to make sure they understand how to qualify for any promotions and rewards associated with the card.

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