A Credit Card is a type of loan. Every loan or credit facility has its terms and conditions. The borrower has to accept the conditions and sign the loan agreement before availing the facility.
The most common answer is that the customers do not understand the language used in the agreements and also, reading them is a time-consuming process. Hence, they click on the “I accept” option and agree to all the conditions.
The loan agreement contains the terms and conditions of the credit facility. It lists out the rights of the lenders and the borrowers. It is mandatory for the banks to incorporate the rate of interest, your repayment schedules, and other factors related to the loan on the agreement.
Whenever there is a change in the terms and the conditions like the rate of interest, the EMI (Equated Monthly Instalment) amount, and so on, banks have to update the agreement and take your concurrence. People blindly affix their signatures on the dotted lines.
One must agree that these agreements are length documents containing terminologies that the average person might not understand. However, ignorance of the rules is never an excuse in any case. One should have an idea of what their Credit Card or loan agreement contains. Let us look at some critical elements that you should concentrate on before signing on the dotted line of your Credit Card agreement.
The APR is the most critical aspect of any Credit Card. The APR is the interest rate you will pay on the Credit Card balances annually in case you do not pay the amounts mentioned in the statement entirely. The APR can range from 35% to 42% per annum.
You have an interest-free period within which you have to pay the entire outstanding amount as mentioned in the Credit Card statement. On paying an amount less than the total amount due on the card, the banks have the right to charge interest on the difference amount at the specified APR from the date of actual purchase until the time of payment. Remember, when the banks start charging the APR, you forgo the interest-free periods until the time you clear your outstanding amount in full.
There are different types of APR. The most common APR is that which applies to everything you buy on your Credit Card. The concept of Balance Transfer APR applies when you transfer the balances of other Credit Cards to the present one. Some banks offer a variable APR that change with every billing cycle depending on the floating rates prevalent at that time.
While choosing between the top Credit Cards, go for the one that has the least APR.
Every Credit Card statement comes with a due date. You should pay the entire balance on or before the due date. You can opt to pay a lesser amount as well, but ensure to pay the same before the due date. Late payments attract strict penalties that can range from 500 upwards for every instance of late payment.
If you do not make any payment for a continuous period of 60 days, your card becomes a delinquent card. The banks report this fact to the credit bureaus. The delinquency reflects in your credit report and hampers your credit score. These points find a mention in your Credit Card agreement.
Specific cards come free of cost. However, most of the cards come with an issuance fee as well as an annual renewal fee. The Credit Card agreement shows these charges explicitly. The agreement also mentions the costs you incur for withdrawing money from the ATMs.
These withdrawals attract a cash advance fee as well as interest @ APR from the date of withdrawal until the time of payment. The agreement also contains details of Balance Transfer charges and so on. Reading the agreement makes you aware of these charges.
It is vital for you to know how to deal with rogue charges. Such situations can occur when someone steals your Credit Card and makes unauthorised purchases using your card. You should know what your rights are under such circumstances.
The exclusive section on the Credit Card agreement deals with such rights and privileges. It provides you with information how to file complaints, the documents you need, and the time frame restrictions, and so on. Awareness of these facts can help you deal with such rogue charges appropriately.
Banks are making their Credit Card agreements more straightforward to understand. They provide you with a glossary of terms that can help you understand the legal terminologies. The banks print the APR and other essential terms in bold to make it easy for people to understand. Read the agreement and try to understand your fundamental rights. You will find that the language is not that challenging at all.
Now, if you are thinking about, How You Can Get a Credit Card, apply for one online through MyMoneyMantra and submit the necessary documents.
Also Read: Best Credit Cards for the Shopaholic You!
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