What Are Credit Card Terms and Conditions?

Terms and conditions for a credit card are the formal statement of rules and guidelines that govern the relationship between a credit card issuer and a credit cardholder.

Key Takeaways

  • A credit card's terms and conditions officially document the rules and guidelines of the agreement between a credit card issuer and a cardholder.
  • Common terms and conditions include the fees, interest rate, and annual percentage rate carried by the credit card.
  • Terms and conditions of a credit card should be available before a consumer makes an application and should also be mailed to the consumer with the new card.

Types of Credit Card Terms and Conditions

Terms and conditions for a credit card spell out the fees and interest charges you could incur as a cardholder. This document provides the credit card’s annual percentage rate (APR) for purchases, the APR for balance transfers, the APR for cash advances, and the penalty APR. It also states how long the grace period is and what the minimum interest charge is if you carry a balance. And it will include the annual fee as well as the fees for balance transfers, cash advances, foreign transactions, late payments, and returned payment.

If the credit card has a rewards program, the terms and conditions, or sometimes a separate document, will explain the basic rules of the rewards program, including the types of transactions that earn rewards—for example, purchases—and the ones that don't—balance transfers, for instance. If the credit card has a promotional offer, such as a sign-up bonus or low introductory rate, the terms and conditions will also describe how to qualify for the offer. 

In addition to providing dollar amounts and percentages for fees and interest rates associated with a credit card, the terms and conditions also describe how the credit card company will calculate your balance, meaning whether they will be using the daily balance including current transactions method, for example. The terms and conditions document also explains what actions will trigger the penalty APR, such as missing the minimum payment deadline. And it describes how the company will apply payments to your account, including options such as applying payments to your lowest APR balances first, up to the minimum payment due, then applying payments to the highest APR balance.

The document containing a card’s terms and conditions sometimes goes by a different name, such as disclosures; rates, rewards, and cost information; or pricing and terms.

Example of Credit Card Terms and Conditions

Here is one example of the terms and conditions a credit card agreement may include.

The Citi Simplicity credit card's terms and conditions have information on interest rates and interest charges, which includes the APR for purchases, balance transfers, cash advances, and how to avoid paying interest on purchases (this describes the grace period without naming it). Fees are also covered: the annual fee, transaction fees (for balance transfers, cash advances, and foreign purchases), and penalty fees for returned payment.

In addition, there are sections concerning identity verification (required by the U.S. government to help fight the funding of terrorism and money laundering), which includes your authorization allowing the Social Security Administration to verify your Social Security number); communications with the credit card company; credit report authorization; how your credit limit will be determined; how to add an authorized user; and more.

Special Considerations for Credit Card Terms and Conditions

All of a credit card’s terms and conditions should be available when the consumer applies for the card. It will also be mailed to you when you're issued a new card.

Be sure to read the terms and conditions carefully before applying and again upon receiving the new card to make sure you fully understand any fees and interest charges you might incur. You should also read the terms and conditions to make sure you understand how to qualify for any promotions and rewards associated with the card. Credit card companies can change the terms and conditions of their card agreements, but they generally have to give consumers 45 days' advance notice for significant changes.

The CARD Act's Effect on Credit Card Terms and Conditions

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 helped standardize the terms and conditions of credit cards. It made the language, terms, and disclosure of penalties and fees much more transparent and understandable, both in the initial card agreements and in monthly statements. It also mandated the use of Schumer boxes—named for Sen. Charles Schumer, D-N.Y.—easy-to-read tables that allow consumers to see important information at a glance and to compare different cards' terms.