Blogging for Change

You need to read your credit card agreement

by Jesse Campbell on
9/19/2016
in Using Credit

According to a recent analysis from CreditCards.com, credit card agreements are unnecessarily difficult to read. Despite efforts from the Consumer Financial Protection Bureau to get card issuers to make their agreements shorter and simpler, these contracts are still considered by many to be needlessly complex. As a result, nearly 75 percent of card holders admit to not reading their credit card agreements.

Per CreditCard.com’s analysis, most credit agreements require an 11th grade reading level. This is a real problem, because half of American adults read at a 9th grade level or below. This dense, wordy prose, combined with excessive length (one cited contract was over 15,000 words long – the average novel is only 80,000 words long), makes reading these agreements a time-consuming chore. The average credit card agreement, in fact, takes appropriately 20 minutes to read in full.

And yet it’s vitally important that you do read your credit agreements! These agreements contain information that can help you make smarter choices with your money and your credit. Most importantly, failing to read your agreements can end up costing you a significant amount of money. Among other things, these agreements define:

Account fees and charges – What fees will you be charged and how will your interest be calculated? These are questions that your agreement can answer. Understanding your potential fees (including when those fees are triggered and how they might be avoided) and charges can help you use your credit card more effectively and save you money over time.

Your rights as a consumer – What actions can you take if charges are incorrectly attributed to your account? If you find an error on your monthly statement, your agreement should explain the path to remedying the situation.

What to expect if your account goes into default – The card issuer has the right to take certain actions should you fail to make payments on your account. Those potential actions should be spelled out in the agreement.

Simply put, the more you understand about your credit agreement, the less likely you are to take an action that unnecessarily costs you money. So while these agreements can be a chore to read through, it’s important that you make the effort.

For more help understanding your credit card agreement, be sure to check out our explanation of common credit contract terms.

The above information is not intended as legal advice. For legal advice, consult an attorney.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

Recommended Articles

Retired man and his dog
Take Control of Your Credit
Your credit is much too important to leave to chance. If you have questions about your credit report and credit score, consider scheduling a one-on-one credit report review.
Learn More
Learn more
  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.