Welcome to our monthly Q&A session, where we shine the spotlight on some of the questions we get asked by our Noddlers.
This month, we’re taking a look at what you can expect to see in the terms and conditions of a credit card and why it’s important to check these carefully.
What are the terms and conditions of a credit card agreement?
The terms and conditions are a legal document that will be included within your credit card agreement. You’ll probably know them as the ‘small print’ and although these can be quite lengthy, you should always make sure you read them thoroughly.
Why is it important to read the terms and conditions?
The terms and conditions are where you’ll see everything you’re getting with your credit card and everything that’s expected of you.
If you don’t pay attention to the terms and conditions, you could find yourself paying more than you realised on your card and even running the risk of falling into debt. Take time to read these carefully and consider whether you can comfortably afford the repayments and manage the amount of credit you’ll have.
What can you expect to see in the terms and conditions?
The terms and conditions within a credit card agreement typically include:
- The minimum amount you’ll need to pay back each month
- A breakdown of all applicable charges
- What you need to do to avoid any additional charges, such as late payment penalties
- What credit limit you have
- What your rights are should you decide you want to cancel the card
What common terms will you find in terms and conditions and what do they mean?
APR (Annual percentage rate)
An APR is a broader measure of the total cost to you of borrowing money which you’ll pay on top of your credit card balance. It not only reflects the interest rate, but also includes any upfront fees or charges you might need to pay.
Your APR will show as being either fixed or variable. If it’s variable, this means rates could change over time – however the credit provider would need to give you 30 days’ notice before making any changes.
The APR within your terms and conditions may be different to the representative APR you may have seen whilst looking around for credit cards. A representative APR is the rate used within advertising, and only a certain number of people will get this rate. Your own APR may vary from this, as it takes things like your credit score into account.
Minimum monthly payment
This is the minimum amount you’ll need to repay each month. If you don’t pay this minimum amount, you’ll be charged a fee.
Right to cancel
Every credit card has a cooling off period of 14 days where you have the right to cancel your card without paying a charge. However, if you’ve used any of your credit within that time you will be liable for paying back the balance.
After the cooling off period you can still cancel your credit card agreement. However, the balance on your card, any interest and any annual fees would need to be paid off (or transferred to another credit card) before you’re able to cancel your agreement.
This is the maximum amount you can spend using your credit card.
Related fees and charges
The terms and conditions will show you details of any fees that are related to the credit card.
These will include the annual card fee, cash advance fees (if you use the card to withdraw money from a cash machine), any foreign transaction fees (if you use the card abroad), any balance transfer fees (if you choose to transfer your balance to another card) and any charges you’ll have to pay if you breach the terms and conditions.
What should you do if you’re unsure about anything you’ve seen in the terms and conditions?
If something’s not clear within the terms and conditions, don’t be afraid to ask the credit provider and get more details. It’s always best to make sure everything’s clear before you sign a financial agreement.
We hope you found this useful. If you’ve got any more burning questions that you’d like to be answered next month – get in touch by messaging us on Facebook @noddleuk or tweet us @useyournoddle.