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Always Read Contract Terms and Conditions

Susan Weber
Bill Hardekoph, CEO

Always read contract terms and conditions on a credit card. Bill Hardekoph, CEO of, a consumer education website designed to help consumers search for the best credit card, points out which terms can change and cause a drastic increase in your monthly credit card payment. He gives practical tips on what to look for in a credit card and tips on how to select the terms that best fit how you use your credit card.

Interview with Bill Hardekoph of

Why should a cardholder always read contract terms and conditions?

It's up to you as the consumer to do your homework and fully understand the terms of a credit card. If the offer is for a zero percent APR credit card, you should know how long the zero percent APR will last and what the APR will be after the promotional period. It could increase to a much higher rate than other credit cards.

If the offer is for cash back or rewards, know the limits of the offer:

  • Do you have to redeem the rewards by a certain period of time?
  • Do you earn rewards or cash for all purchases? An offer may only apply to purchases at specific types of retailers like gas stations and supermarkets - it may not apply for big ticket items like automobile tires or an airline ticket.
  • How do you earn the highest cash rewards? Some offers are based on a graduated scale and you only receive the highest percentage of cash back if your purchase is for a very specific amount of money. For example, one business card cash reward advertises up to a 5 percent cash reward. However, the 5 percent is only paid for new purchases of between $2,000 and $2,500. All other purchases earn 1 to 1.25 percent.

Can a card issuer change a card from a fixed APR to a variable APR?

Yes. If you sign up for a fixed rate credit card, the rate may change and the account may not always be a fixed rate account - the card issuer can increase your APR and change the terms of your card to a variable rate account. Credit card issuers are starting to add a phrase such as "if market conditions dictate, rates can change at any time for any reason." Market conditions are usually not defined in the terms and conditions, so the card issuer has total freedom to change the terms and conditions whenever they want.

What is a Default APR?

With the Default APR, the card issuer can raise your APR if you are late on one payment or you do anything that makes them think you might be a credit risk. For example, your 12 or 14 percent APR can increase to 28 or as much as 34 percent. The Default APR can be applied at any time and it can stay on your account for at least 12 billing periods.

Can a card issuer change the Minimum Payment Due?

Yes. For example, they might increase the minimum payment due from 2.5 percent to 5 percent. This would double the monthly payment due. In some ways, this is good for the consumer because it forces them to pay off their credit card debt faster. However, it also puts a strain on consumers who can't afford the large increase in their credit card payment.

How much advance notice does a card issuer have to give before changing a term?

The terms and conditions can increase at any time. The card issuer has to give at least 15 days notice. Many give more than 15 days notice, but we might not see it because it is printed on a stuffer that we throw away when we receive our billing statement. The current terms and conditions are always on the card issuer's website, but many people don't read them.

What if you don't want to keep the card with the new term(s)?

Call the card issuer and say "My APR went from X to Y percent. I'm getting competitive offers at APRs below this new rate on your card. I've been a good customer for X years. What can you do for me?" You may be surprised how many times they will lower the rate if you are a good customer and have a history of paying your bill on time. They want you to stay as a customer - it costs them too much to get a new customer.

If the card issuer is not willing to work with you by providing better terms, you should:

  • Pay off the balance of the credit card.
  • Send the card issuer a certified, receipt requested letter telling them you are closing your account because of the new rate. Put on the letter the words "Closed by Customer." Keep a copy for your file, along with the notification of receipt by the card issuer that you received from the post office.
  • Close the account.
  • Get a new card from a different card issuer.
  • If your credit score takes a hit because you closed your account, contact the credit bureau and send them a copy of the letter you sent to the card issuer as an explanation of why you closed the account.

Any tips?

Yes, a cardholder needs to do their research:

  1. Consumers need to always read contract terms and conditions BEFORE they sign up for the cards.
  2. Cardholders should review the terms and conditions on their credit cards two to three times a year to see what has changed.
  3. Don't be afraid to call the credit card issuer to request a lower interest rate.
  4. Make sure your credit card still fits your needs. If it doesn't, get a different type of credit card. If you travel a lot, look for a credit card with travel rewards. If you like to read, look for a card with bookstore rebates.
Always Read Contract Terms and Conditions