Understanding Credit Card Terms and Conditions

Information verified correct on September 23rd, 2016

Understanding credit card terms & conditions before you apply online

Each industry has its own jargon. The credit card industry is no different. There are specific credit card terms to understand and be familiar with in order to get the most out of your card. Not knowing and understanding all that you are responsible for and all that is available to you can cost you a lot of money.

Whenever you get a credit card or even consider getting one, the first thing you should do is read the contract from the issuing bank.

The reason for credit card Terms & Conditions is to provide a legal contract between the user and the card provider that lists all the relevant information and therefore covers both parties should any dispute arise later on. You will always be asked to confirm you have read and understood the credit card Terms & Conditions when you apply for one. That’s the little box you always forget to tick that you are then sent back to tick before your application can be submitted. Honestly, how many times have you actually read them through? In fact, even if you weren’t to tick the credit card Terms & Conditions box, the first use of your card would be taken as you having accepted them.

ANZ Low Rate

Low Interest Credit Card

The ANZ Low Rate credit card is a good low interest credit card choice. It also offers a balance transfer option, which reverts to the low interest purchase rate at the end of the balance transfer period.

  • $58 p.a. annual fee
  • 13.49% p.a. on purchases
  • 0% p.a. for 18 months with 3% balance transfer fee on balance transfers
  • Cash Advance Rate of 21.74% p.a.
  • Up to 55 days interest free
  • Minimum Income Requirement of $15,000 p.a.

What is this and what does it mean?

Here is a list of terms and their accompanying descriptions that will help you to understand what your credit card is all about.

  • Cash Advances – Cash advances are transactions that entail taking money out of an ATM machine using your credit card. Cash advances are not a wise practise. There are many costs associated with taking out money using your credit card. There is usually a fee that is immediately assessed and the amount taken out is charged interest at a much higher rate. You will also be charged interest immediately. This is unlike other transactions such as purchases which allow you a little leeway and some time before charging interest.
  • Interest Free Days – Interest Free Days are exactly what it sounds like. You receive days without interest. The amount of days allotted to you will vary from card to card but having any days without being charged interest is a good thing! Most terms are around 44 days up to 55 days. One important aspect of this feature is that if you do not pay off the balance from the previous month, you will not be eligible for that particular interest free period. This is a standard practise among the different credit card companies. You should also be aware that if you are carrying a balance from a balance transfer, that balance will need to be paid in full before becoming eligible for interest free days.
  • Interest rates – You may have chosen a card based on the rate of interest being charged. A lot of people base their decision on a certain card according to the interest rates provided. Some providers will raise a credit limit if they don’t feel that the card is being handled properly or see a difference in the cardholder’s credit rating. It is not necessary, however, for these two factors to be in place for the interest rates to rise. A credit card company has every right to raise the interest rates whenever they want, and they don’t need to inform you that it is happening.
  • Balance Transfers – For anyone wanting to save money, balance transfers are a dream. Balance transfers allow you to transfer a balance from one credit card over to another card. The reason for the transfer is usually because the interest rate on the new card is considerably lower than the previous card. By simply making the switch like this, you can save a lot of money in interest fees. There are some limitations. Some cards have a minimum amount that they will allow you to transfer, and each cards terms and conditions are different. Be sure to choose a credit card with a balance transfer offer that reverts to the purchase rate, and NOT the cash advance rate.
  • Negative Payment Hierarchy – This is one of the conditions of your plastic that you truly need to understand. Most plastic has three different interest rates; one for purchases, one for cash advances, and one for balance transfers. This clause allows the issuer to submit all of your payments toward the debt with the lowest interest rate first. That means if you have a balance transfer that has a zero interest rate for six months and a purchase rate of 10%, all of your payments will go toward clearing out the purchases before even one dollar goes to your transfer. If you are not aware of this clause, you could wind up not saving any money or paying off your balance transfer before the low rate expires.

If you take the time to learn credit card terms, you will be better equipped to handle the responsibilities associated with it. You also be able to take advantage of the many benefits that are afforded to you through your card. They are not terribly complicated and will be in your interest to understand if you ever run into trouble and need to rectify a situation.

Credit limits

At any time the credit limit set for a cardholder can be raised or lowered. Even if you have not spent even close to your limit, it can be lowered without informing you. If it is lowered below the balance you currently have, you will have to pay an overdraft fee. Although this is not fair since you did not go over your limit, you still need to pay for it. It is perfectly allowable since the user agreement states that any changes can be made at any time.

Lower Credit Limits

It is still possible for a lender to modify the terms and conditions of your credit card, even if you are the perfect customer, making all your payments on time. For example, you can find yourself with a much lower credit card limit that you had before, even if you haven’t even come close to the ceiling. Additionally, there is another problem, namely that when your credit limit is lowered, if your balance exceeds the new limit, you could be facing hefty overdraft fees and penalties, even if, previously, you were nowhere near the ceiling. It doesn’t matter that you exceeded your limit because they initiated the reduction of your credit limit.

According to the terms and conditions you signed when were approved for the credit card, the lender is entitled to cut your limit without the need for an explanation. However, if you have a good credit history and have been using your credit card wisely, there is little reason to worry about any changes in terms and conditions. However, it is wise to check with the lender every now and again regarding updates because you want to avoid wasting money as much as you can.

Watching your statement

Every time you receive your credit card statement, you need to look it over to notice any changes. Many card providers will let you know when they have changed a term or condition in the user agreement, but don’t count on it. You need to use due diligence and watch your card statements carefully.

While credit card providers carry all these rights, you also have the right to switch cards whenever you want. Loyalty only goes so far and when you see a better deal that will save you a lot of money it would be in your benefit to make the switch. There are a lot of great promotional offers on credit cards these days and it is well worth looking at the competition to see if you can find a better card than the one you have now.

The credit card small print

These documents are usually very long and complex. This is the main reason that a lot of people don’t really read the contract but merely skim through it. If you find that you can’t stay focused on the contract and finish it in one sitting, put it away and return to it at another time. It is that important.

The terms and conditions of the contract are often referred to as the small print. They are usually printed with a small font and for some people, they are too small to read. There may be certain stipulations put into the contract such as minimum payments required and how long the grace period is.

You can expect to see the terms and conditions printed on a web page at the credit card provider’s site. Unlike the written document, these terms can be read easily on the Internet. If you have difficulty viewing them, you can use the magnifying feature on your computer.

Making changes

If you carefully read the terms and conditions of any credit card, you will find that it is clearly specified that the lender has the right to change any of conditions without the requirement of informing you in advance. So, they can raise your interest rates, reduce your credit limit and more, for reasons only they know.

In many cases, though, such an action is a reaction to your credit card usage. Therefore, if you exceed your limit repeatedly, are late or completely miss payments, or apply for too many credit cards within a short period of time, there is a significant possibly that your lender will change the terms and conditions of your contract, and not in a way that is beneficial to you.

If the card company ever wants to make changes to the conditions or terms, they will send them out to all cardholders. A cover letter will accompany these terms and conditions to help you understand any changes that have been made.

A lot of people end up throwing out the revised terms and conditions since they mistakenly believe that it is junk mail. It is important to always open any piece of correspondence you receive from your credit card provider and read through it. You may be sent some advertisements from time to time, but you will also be sent important information about any changes that occur in the terms and conditions of your contract.

One thing you’ll never be able to do is use the excuse that you didn’t read the terms and conditions before signing the contract with the credit card provider. Always take the time to read through it so that you know exactly what you can expect from your card.

Once you have read through all the terms, it will be up to you whether you want to choose this credit card or not. If you fail to read the document thoroughly, you will not be able to make an informed decision and may regret it later.

Besides having the right to change the terms at any time, card providers do not have to give advance notice when they are planning to make changes. They don’t have to send out a new user agreement either, so you’ll have to watch your statement carefully to make sure that everything is the same as when you signed for it initially.

Interest rate changes

Interest rates can also change without warning and the lender has no obligation to inform you in any way. Terms and conditions are changed, in this case, mainly due to the level of risk you represent to the lender. So, if your credit history has suffered in the meantime, it is quite possible that you will feel it on your credit card as well, because the lender is likely to raise your rates.

The biggest problem with changes in terms and conditions is that you generally don’t find out anything until you receive your credit card bill. While there’s little you can do about a change in interest rates, at least you can avoid being charged penalties if your credit limit is lowered.

Remember that credit card lenders are in the business of making money and ensuring they keep it. Add to that the fact that they can, basically, do whatever they want with the terms and conditions of your contract, and you have some great reasons to ensure that you stay updated with all the movements of the lender to avoid having their losses offloaded onto you.

Terms and conditions

The terms and conditions contract that is sent to you by a credit card provider is a contract that is established between the customer and the lender.

You must read through it in full to make sure there are no hidden fees or charges. Many people have been caught off guard by extra fees added on their statement simply because they didn’t take the time to read it through in full.

Reading the credit card terms and conditions is a tedious task. But, it is important that you do it so you know and can avoid extra fees and interest rate hikes. The credit card company knows the rules inside and out and you should too.

Credit card terms and conditions are those incredibly long, tiny printed, folded up pieces of paper that came with your credit card or your credit card application. When you sign them you agree to all of the banks rules. You also sign off that you read and completely understood the terms and conditions, which is where a lot of people get into trouble because they do not actually read them. You must read them and take the time to make sure that you understand them. If you do not then you will wind up making errors and credit card errors always cost money. You will also not really have any way to dispute charges simply because you did not follow the rules of the credit card. Pleading ignorance or unfairness is not going to work with your credit card company.

Some of the things laid out in credit card terms and conditions:

  • Payment requirements – The credit card company expects to be paid each month on time. They determine what ‘on time’ means, regardless of issues with the mail or your bank account.
  • Penalty charges – If you do miss a payment or go over your limit or make some other credit card error you will be charged penalty fees. The credit card terms and conditions will lay out how these charges are incurred and how they will be applied to your account.
  • Interest rates – Did you know that your interest rate is not guaranteed? If you read your contract carefully, you will probably find that the issuing bank reserves the right to change your interest rate, with little notice, for all sorts of different reasons. Knowing this can save you from being blindsided with a rate hike and give you some back-up if you have a grievance with an interest rate increase. Banks never charge the same interest rate for each type of transaction. They also have rules that say how transactions are categorised as purchase, cash advances, or balance transfers. You must understand how interest is going to be applied to your account and how the bank can change your interest rate.
  • Allocation of payments – Credit cards almost always have an allocation of payments clause that allows them to apply your payments to the cheapest debt first. So, if you have different types of transactions, like those listed above, you will be able to see how much they could all cost in the long term because of the way your payments will be applied to them.

The credit card terms and conditions can be complex. If you do not understand something you should call the credit card company for clarification. Usually they have a call centre that is open 24 hours a day to help you. There are no excuses when it comes to understanding credit card payments, interest, and penalties. If you do not read the terms and conditions you have no one to blame for your errors but yourself.

The terms of most card contracts are usually listed on the issuing companies website, which allows you to read them carefully before you submit your application. While it will not be a fun read, it is worth the time it will take to accomplish. You can compare the different regulations to see which one is the most fair and which will suit your spending habits. Once you have the plastic, you will already know the rules, so that you can obey them and not wind up frustrated or deep in debt.

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Credit Cards Comparison

Rates last updated September 23rd, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards CreditCardFinder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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