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Breaking Down Credit Card Contracts: What’s in Them?

How many times have you been physically handed or sent a form online to sign when making a purchase, marked that you’ve read it and signed it without actually reading every letter? Probably every time this has happened. You’re not alone, many of us have taken out a credit card without reading the contract word-for-word. It’s always advisable to have a good read through them to make sure you know exactly what you’re agreeing to, but here’s a basic breakdown of what’s included in most credit card contracts.

Annual Percentage Rate

The annual percentage rate (APR) is probably one of the few things you definitely will check. This is the annual interest rate you pay on top of your balance. You should have already agreed what this will be, but it’s vital you double check to avoid getting lumped with the wrong APR. It will be either fixed or variable and the APR you’re approved for will depend on a number of factors. Lower rates are often available to those with a better credit rating.

Credit Limit

The credit limit is the maximum amount of money you can spend on your credit card. The credit limit is usually based on the information you supply to the credit card company when you submit your application. They are usually based on factors such as your credit rating, your income and your loan repayment history, among other factors.

You should check your credit limit very carefully as part of the application process. If you exceed your limit, you may face fines and penalties in addition to your regular payment. You should also remember that your lender reserves the right to change your credit limit.

Right to Cancel

If you decide you no longer want or need a credit card, it’s not always as simple as cancelling and being done with it. Check for the right to cancel terms. Often you will be able to cancel the credit card agreement within 14 days of receiving your card but will be liable for any debt built up.  If you do not give notice in this time you will be liable for the card and its payments, although you can still close this card once you’ve brought the balance down to zero.

A Load of Fee Information

There’s a range of different fee information that will be included:

  • Balance transfer: When transferring a credit card balance from one card to another this will apply. Some cards have a cap on this.
  • Cash advance: This should explain how your payments will be applied to your charges.
  • Replacement card: If you lose or have your card stolen you may have to pay a charge.
  • Late payment: These can increase the more missed payments you make and land you in debt.
  • Any other fees: Check for specific fees listed.

Rewards

For first time credit card holders a lot of providers offer incentives and perks to entice you in. These can include attractive APR, however conditions will apply and it will likely only be for a set period of time. Carefully check the small print in your contract to avoid being misled by these and so that you’re aware of when the perk will end.

There will be further important information in your credit card contract but these are some of the main ones to check so you know you’re not getting scammed.  

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