What is a 'Cardholder Agreement'

A cardholder agreement is a document that a credit card holder receives detailing the terms and agreements of the card. A cardholder agreement describes the annual percentage rate (APR) paid by the cardholder, the calculation behind minimum payments and the rights of the cardholder when disputes arise.

The agreement includes the terms for all fees, such as an annual fee, a balance transfer fee, charges for closing an account, late payment and over-the-limit fees as well as any additional penalties. The agreement also outlines policies regarding any perks, such as airline miles or cash back.

BREAKING DOWN 'Cardholder Agreement'

U.S. federal law under the Truth-in-Lending Act (TILA) and Regulation Z require cardholder agreements. These regulations mandate that credit card issuers submit their cardholder agreements to the Bureau of Consumer Financial Protection. 

The credit card issuer must disclose the terms of the card accurately and without misleading statements. In the past, courts have ruled in favor of 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. These agreements describe the rights and obligations of both the credit card holder and the credit card issuer.

What’s Inside of a Cardholder Agreement

The details of cardholder agreements vary by issuer, but in general, they contain similar information. An average cardholder agreement allows the holder to use a credit card to buy goods and services, transfer a balance, get a cash withdrawal, pay for recurring transactions and make foreign purchases. It almost always outlines fees assessed for these transactions. For example, issuers usually charge a flat fee for cash withdrawals, or for transactions in a foreign country.

Cardholder agreements also outline the terms and conditions under which the issuer can close suspend a user’s account. It explains the holder’s payment obligations, including the length of the grace period is, how to make payments and the obligation to make at least the minimum payment on each statement.

The cardholder agreement also explain how to avoid incurring late fees, over-the-limit fees, returned payment fees, and the penalty APR. This information protects the consumer from incurring extra fees and potentially damaging their credit due to a lack of information about how to stay current on their payments.

Perhaps most importantly, a cardholder agreement includes an interest and fees table that shows the APR for carrying a balance on purchase. This is the most basic cost associated with any credit card.

RELATED TERMS
  1. Additional Cardholder

    An additional cardholder is an authorized secondary user added ...
  2. New Balance

    The new balance is the sum of the previous balance, payments, ...
  3. Late Fee

    If an account holder does not make a minimum payment by a required ...
  4. Credit Card

    Issued by a financial company giving the holder an option to ...
  5. Minimum Spend

    Certain credit cards require new cardholders to charge an amount ...
  6. Charge Card

    A charge card is a type of electronic payment card that charges ...
Related Articles
  1. Personal Finance

    Credit Card Review: Citi Double Cash

    Learn about the Citi Double Cash credit card and its simple cash back program that pays a combined 2% rate on every card purchase.
  2. Personal Finance

    How the Victoria's Secret Credit Card Works: Benefits and Rewards (LB)

    Here's how the Victoria's Secret credit card works: application process, the benefits, the downfalls and the other pertinent details.
  3. Personal Finance

    3 Best Credit Cards for College Students in 2016

    Find out which credit cards are best suited to college students, based on criteria such as annual percentage rate, rewards programs and money management tools.
  4. Personal Finance

    Univision MasterCard Prepaid Card: What You Need to Know (MGI, WU)

    The Univision MasterCard prepaid card markets itself as a safe alternative to cash, but competing cards may offer better value for consumers.
  5. Personal Finance

    Credit Card Review: Capital One Venture Rewards (COF)

    Learn how the Capital One Venture Rewards card helps you earn unlimited rewards miles to pay for all types of travel expenses, such as airfare and hotel costs.
  6. Personal Finance

    Purchases You Should Always Make With A Credit Card

    Credit cards aren't always bad possessions to have. There are certain perks associated with using credit cards as we make routine or irregular purchases.
  7. Personal Finance

    Credit Card Review: BankAmericard Cash Rewards (BAC)

    Read about the BankAmericard Cash Rewards card, and learn how to start earning unlimited cash back with its simply rewards program.
  8. Personal Finance

    Credit Card or Cash: Which To Use?

    Credit cards are more convenient to use than cash, but they're not always the best choice. Here is why you should and shouldn't pay with a credit card.
  9. Personal Finance

    Store Credit Cards: Do The Incentives Pay Off?

    Check out the pros and cons behind store credit cards; they might actually help you save money.
RELATED FAQS
  1. Does the Walmart credit card have an annual fee?

    Learn about the Walmart credit card which comes with no annual fees and a 5 cent per gallon discount at participating U.S. ... Read Answer >>
  2. How is the minimum payment on a credit card calculated?

    Even when minimum payments are low, consumers should still aim to pay off credit card balances every month. Read Answer >>
  3. Can you pay off your Best Buy credit card in store?

    Learn how you can pay your BestBuy credit card in stores using cash or check. You can also pay by mail, online or over the ... Read Answer >>
  4. How can you pay your Walmart credit card?

    Learn about the Walmart credit card and how to make payments by a check, online, at Walmart and Sam's Club stores, or over ... Read Answer >>
  5. Am I Responsible for Fraudulent Charges on My Credit Card?

    If your credit card is stolen in the US, federal law limits the liability of card holders to $50, regardless of the amount ... Read Answer >>
  6. Can the Best Buy credit card be used anywhere?

    Learn how the Best Buy credit card can only be used in Best Buy stores and online to make purchases through the Best Buy ... Read Answer >>
Trading Center