Credit Card Terms and Conditions Cheat-Sheet

Image of the words terms and conditions as viewed through a magnifying glass

Credit card terms and conditions can be hard to understand but we have a helpful cheat-sheet to give you an overview of the most important terms to know. There is a recent trend among card issuers to place important card summary info in an easier to comprehend “summary box”. While these summary boxes do make it easer to understand information that used to be buried in the tiny print of the terms and conditions, knowing what these terms mean will ensure you are not caught off guard by unexpected fees and charges.

It’s sad but today most credit card companies are devious and they’ve designed everything possible into the fine print of their terms of service to catch you. When looking at any credit card offer, make sure you take a close look at the fine print.

We have outlined a few of the key pieces of information you need to check for and understand about all of your credit accounts.

The Annual Fee

Though not as common as it once was, the annual fee is still around, especially on the so-called higher status Gold and Platinum cards. Annual fees are simply an easy way to get another $39.95 to $79.95 or more from each and every customer. It may not sound like much, but it adds up when you’ve got millions of customers.

If you are applying for a card with an annual fee, you may want to keep shopping. There are plenty of cards around that have no fees when for the “prestigious”. If you already have a card with an annual fee, give the company a call you may be able to get the fee waived. We do not recommend cancelling the cards, however, as this will likely lead to a reduction on your credit score.

Late Payment Fees and Penalty Charges

Cash advance fees, late payment charges and exceeding your credit limit are the types of fees you need to pay attention to when checking out the fine print. Many cards have unjustifiably high fees and if they do you shouldn’t sign up for them. You will find all the fees and penalties listed in the terms and conditions for the card. Be sure you agree with what is being offered before accepting or applying for a new card.

Calculating Interest

Because it’s so hard to understand (they make it that way on purpose) this is often one of the most overlooked, yet important aspects hidden away in the fine print. There are basically three methods being used to calculate interest on your balances:

Adjusted Balance

Not as common as it once was but some companies are still using it. In a nutshell, you are charged interest on whatever your balance was on the day the company sent you the bill.

Previous Balance

Basically, this method is simply a horse of a different color. In this version you are charged interest on your balance as it stood at the end of the previous billing cycle regardless of how much you’ve spent or paid off since. Some consider this a tad bit easier to understand.

Average Daily Balance

This method is currently the most common and it’s also the most complicated. Using this method, your balance is added up at the end of each day in the billing cycle. It’s then divided by number of days that have transpired in that billing cycle and interest is charged in this amount. I know, clear as mud.

If your balance jumps around this method may be slightly better for you than the other methods because it keeps you from paying full interest on a balance that just happened to be large on the billing date.

You should also be paying attention to the monthly rate of interest rather than just relying on the APR. APR is an estimate of the total cost of borrowing but it’s the monthly interest plus the various fees and charge that will show you exactly how much you are paying.


Grace Period

This is extremely important for about 40% of all credit card holders because that’s the approximate number of people who pay off their balances each month. It’s also important for the remaining 60% because then you can avoid interest on new purchases for the first 30 days or so. Make sure that the card you’re looking at has a grace period on purchases, otherwise, you could end up being charged interest from the moment you buy something. On the other hand, virtually no credit card company offers a card with a grace period on cash advances or credit card checks.

Currency Conversion Fees

This only applies if you plan on using a card outside the country. If it does apply to you, take a look at what you’ll be charged for transactions made in other currencies. Some cards are much more expensive than others.

Understanding the terms and conditions of any card you own or are applying for is key to ensuring you are using the card responsibly.

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