Cardholder Agreement

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DEFINITION of 'Cardholder Agreement'

A printed booklet a credit cardholder receives that contains all the "fine print" about the card's terms. The cardholder agreement ordinarily describes the annual percentage rate (APR), how minimum payments are calculated, and the rights of the cardholder when disputes arise. It includes the terms for all the fees that the cardholder may be charged, including annual, balance transfer, closed account, late payment and over-the-limit fees, as well as any additional penalties that may be assessed.

The cardholder agreement describes the rights and obligations of a credit card holder and credit card issuer. The card member agreement defines the key terms used in the agreement, such as “credit access line,” “authorized users” and “amendments.” It then spells out how the card holder may use the card and how the card issuer will handle different types of transactions. The credit card issuer will send the credit card holder a cardholder or card member agreement when it sends a new credit card or when it changes the agreement. The card holder can also view or request the agreement online or call the card issuer to ask for a copy.

INVESTOPEDIA EXPLAINS 'Cardholder Agreement'

The cardholder agreement is mandated by Federal Law under the Truth-in-Lending Act (TILA). The credit card issuer is required to disclose the terms accurately and without misleading statements. Courts have ruled for consumers when the issuer made exaggerated claims in its advertising that it did not fulfill, even though the cardholder agreement stated the less-than-advantageous terms.

Cardholder agreements vary by issuer, but in general, they contain the following information. The agreement states that you can use your credit card account to buy goods and services, to transfer a balance, to get a cash advance, to pay for recurring transactions and to make foreign purchases. It states that the issuer is not required to honor every transaction you attempt and that it can close or suspend your account. It explains your payment obligations, including how the grace period works, how to make a payment, your obligation to make at least the minimum payment on each statement and how your payments will be allocated.

The cardholder agreement also explains how to avoid incurring late fees, over-the-limit fees, returned payment fees, the penalty APR and having your account sent to collections. It tells you what to do if you find a mistake on your statement, if you’re dissatisfied with a credit card purchase, if your card is lost or stolen, if your account is closed or suspended or if you want to transfer a balance. It also lays out how the card issuer may communicate with you, how it will monitor and report on your credit file and which state’s laws govern the agreement. In addition, the cardholder agreement explains how the issuer calculates interest charges on your balance and describes your billing rights as a card holder.

Finally, the cardholder agreement includes an interest and fees table that shows the APR you will pay if you carry a balance on purchases, the APR you will pay if you transfer a balance to your card, the penalty APR and when it applies, the annual fee and all other fees and interest charges that you could incur as a card holder.

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