Aaron Bell
Athena Cocoves
Signing up for a credit card can give you access to rewards and increased purchasing power. It’s vital to carefully read the fine print to avoid fees and unwanted charges. Whether it’s your first card or your newest rewards-earner, here’s what to know about credit card terms and conditions (T&Cs).
What are credit card terms and conditions?
Credit card T&Cs are regulations that outline the rights and responsibilities of both the cardholder and the issuer. They disclose the policy of the issuer for a variety of important topics such as spending, repayments and fees.
When you sign up for a credit card, like any other form of credit, the issuer must provide you with a copy of the T&Cs which comply with relevant laws and regulations. It’s important you read and understand these to avoid unnecessary fees and charges.
You can usually find a copy of the T&Cs on the issuer’s website, and you should read it before you apply. You can also find it on your contract (after you sign up) or by contacting the credit provider’s customer service.
Links to T&Cs for credit cards from the Big Four banks can be found below:
🤓 Nerdy Tip
Don’t stop with your card’s T&Cs. The rewards programs, electronic banking, insurance policies and perks on types of credit cards also come with fine print. Make sure you understand the ins and outs of whatever scheme you sign up for.
What to look for in the fine print
The T&Cs will cover key elements of the agreement such as:
Interest rates
Interest is the cost of borrowing money that you will be charged by your credit provider. It’s important to check how this is calculated and charged. Typically, interest is calculated and charged on the last day of your statement period, based on your daily unpaid balance, unless an interest free period applies.
The T&Cs generally don’t include the interest rate (this will be on your contract, lender’s app, and website). It will provide details about interest-free periods, when a payment is considered late, and how interest will be charged.
For example, interest may be charged differently for:
- purchases
- cash advances
- balance transfers.
T&Cs should also explain what the issuer considers as cash advance, a balance transfer and the types of transactions they do and do not allow.
Fees
Apart from interest charges, credit cards also come with fees such as establishment fees, annual fees, cancellation fees and late payment fees, cash advance fees or over the limit fees.
Before signing, be sure to check which fees apply to your card and how they are charged.
Interest free period
Some credit cards offer an interest-free period. This generally commences from when you make the purchase up until the due date.
You won’t be charged interest during this time if you pay your statement balance in full by the due date. If you don’t pay your statement balance in full by the due date, you will generally be charged interest on the unpaid balance from the day after the payment due date shown on your statement, until you repay it in full.
Interest-free periods can sometimes be tricky and difficult to understand. Additional special terms can apply to interest free periods especially when you’ve taken on things like balance transfers or instalment plans.
The conditions of the interest-free period offered with your card, as well as information about how to pay your credit card, should be outlined in your T&Cs and contract.
Contract length and termination
Credit cards can have open-ended contracts. It’s important to check this, as well as how to terminate your contract correctly should you need to in the future. There should also be information about how much notice your issuer needs to give you before changing the terms.
Also check whether you have the option to pay off your contract out early, and what to do if you can’t afford the repayments.
Rewards and benefits
One of the reasons you may be considering a credit card is to access rewards and benefits. Reading the T&Cs of the rewards programs will give you an understanding of how they can be earned, redeemed and if and when they expire.
Security
The T&Cs will also outline what the lender provides in terms of security and fraud detection. It’ll outline steps so you know what to do if you believe your card was lost or stolen, or know it has been compromised and used for unauthorised transactions. This will help you understand what responsibility they take, if you will be reimbursed etc.
» MORE: How thieves obtain and use stolen credit cards
Why read the fine print?
- Understanding costs: Anytime you borrow money, you need to be aware of the cost of borrowing. The cost of interest rates and fees will help you decide whether a credit card is something you can afford and is worth the ongoing fees and interest you may have to pay.
- Avoiding unnecessary fees: If you don’t understand the costs of a credit card, you can quickly be hit with hefty fees and interest rates. At the time of writing, Commonwealth Bank Credit Cards come with interest rates as high as 21.99%pa for purchases and cash advances. Understanding the costs and grace periods will help you stay on top of your repayments and avoid being hit with late fees and charges or affecting your credit score.
- Maximising rewards: Credit cards can come with great incentives such as cashback offers and rewards points. The T&Cs will help you understand how to earn and use them correctly.
- Understanding termination: It’s important to understand how to cancel your credit card and pay off any existing debt without extra fees should your situation change.
Ultimately, not reading your card’s T&Cs puts you at risk of taking on debt you can’t afford, and being hit with fees and interest down the track you may not be able to pay.
What to do if you’re confused
Speak to an expert
If you have concerns or questions or you’re unsure if taking out a credit card is the right option for you, seeking expert advice may help.
Compare offers
Researching and comparing credit cards offered by various financial institutions can help you decide on the right product. Fees, interest rates and credit limits (the amount you can charge to the card) will all vary between offers.
Tools such as the Moneysmart Credit Card Calculator can also help estimate how much future repayments may be.
Choose another form of credit
A credit card may not be the best form of credit, depending on your situation. For example, personal loans may come with lower interest rates, and be more in line with your needs.
Being unable to meet your credit card repayments can impact your credit score and influence your ability to borrow in the future. If you are already managing other debts such as a car loan, mortgage, or personal loan, it may be an added stress.
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