At least once per year, usually in the fourth quarter or the first quarter, credit card companies will send out what is called a "change of terms notice" to their cardholders. This letter will document the changes to your credit card agreement ranging from potential increases in fees to new clauses. Because these changes can be drastic, it is vital that you read the letter in full to understand the amendments being made to your credit card agreement. In this article, we will look at some of the typical changes.

Rising Annual Percentage Rates
Many credit card companies will use this notice to raise the annual percentage rates (APRs) that they charge on outstanding balances. This can be a substantial change because it increases your borrowing costs, especially if you tend to run balances from month to month.

In fact, to provide some perspective, suppose that a person carries a stable $10,000 balance over the course of a year and is under contract to pay 18% per annum in interest charges ($1,800), which, if not paid, are tacked on to the amount owing. Now suppose that that person's rate is raised to 23% per annum - the amount of interest added to the balance will jump to $2,300. That's an almost 28% increase in annual payments. (Note that credit card companies compute their interest in a variety of manners and this is just a simplistic look at the effect of changes to APR.)

So, keep an eye peeled for this in the fine print. If you see that the rate has increased substantially, it may be wise to transfer the balance to a card with a lower APR if you can.

Cash Advance Charges
Credit card companies have a tendency to use changes of terms notice as an opportunity to initiate or raise fees for other services.

For example, because cash advances have become so popular in recent years, some credit card companies are now charging a transaction fee every time you take a cash advance on your card. Depending on how often you use cash advances, it is important to keep an eye on this amount as it is money out of your pocket. Also, be sure to check for an increase in interest charges being levied on cash advances. Note that these rates may differ from the APR being charged for other balances.

Surprise Clauses
Even if a company doesn't change the APR it charges on its customers' balances, it may include a new clause in the revised agreement. For example, such a clause might say that if the customer is late making payments on two occasions over a rolling 12-month period, the company has the ability to raise the interest rate being charged on outstanding balances by a certain percentage.

While that might sound benign, in some cases that percentage might actually be huge! For example, one major credit card company that instituted this policy in 2008 would, in this situation, change the APR on the customer's outstanding balance from 23.99% to 32.24%.

Changing Benefits
These days, many of us use credit cards that help us pay down our mortgage or rack up sky or cruise miles, and that's a good thing. After all, why not earn back some money on your charges, right?

The trouble is that credit card companies may use a change in terms notice to alter those deals and give you less credit for each dollar you charge. They may also change how you can access these points from when you are able to use. As miles/benefits are typically a major reason for going with one card over another, make sure you keep an eye out for these kinds of changes.

Notification of Information Sharing
Some credit card companies may use a change in terms notice to let their customers know that they will be sharing your information with other service providers and/or telemarketers. That is, unless you opt out.

If you don't want the company to share your personal stats with others you may have to send in a letter requesting that it not be done, or fill out and send in a form letter. In short, be on the lookout for this change because failing to opt out may mean getting a mailbox full of junk mail and receiving a plethora of courtesy phone calls right around the dinner hour.

Changes in Dispute Deadlines
If a customer receives his or her monthly credit card bill and notes an error on it, it is usually possible to call the company and have it corrected. That is, provided the customer alerts the company to the error within a certain period of time, which may range between 30, 60 and 90 days. With that in mind, some credit card companies may use this opportunity to restructure their dispute deadlines and reduce the amount of time a customer has to alert the company of a mistake.

To be clear, such revisions do not preclude individuals from taking credit card companies to court in order to get them to make a valid correction. However, given that "fair" warning was in the notice, it will be tougher to prevail should the case head to trial. Also, no one likes the hassle, or the costs, of going to court. So keep an eye out for these changes.

The Bottom Line
Be sure to review any notice you receive from your credit card company regarding changes to the terms of your agreement. The company may make dramatic changes to the rates being charged on outstanding balances or cash advances. Additionally, new fees may be levied, and/or the company may also change other provisions of the agreement.

Related Articles
  1. Credit & Loans

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  2. Credit & Loans

    How To Read Loan And Credit Card Agreements

    The devil is always in the details! Find out what you're signing yourself up for.
  3. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  4. Stock Analysis

    Best Stocks to Buy for Around $1 (NXTD, MBII)

    Watch for strong technical indicators and other positive information when considering the purchase of any stock trading in the $1 range.
  5. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  6. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  7. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  8. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  9. Investing

    Amazon Financing Now in the U.K.: Is America Next?

    Amazon has unveiled a great credit product in the U.K. Will America be the next country to have access to this financing option?
  10. Credit & Loans

    Why You Should Use Your Credit Card For Purchases

    Responsible credit card users who always pay off their monthly balances should use their cards to buy everything.
  1. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  2. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  3. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  4. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  5. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  6. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
Trading Center