Understanding Credit Card Terms and Conditions

When applying for a credit card what we tend to do is quickly glance at the credit card terms and conditions page and then focus more on the attractive offer page to read about the perks and benefits. It is true to say that all benefits and rewards often come with certain limitations and so is the case with credit cards. If you need to know everything about your credit card including the fees, benefits, restrictions etc, you need to dig deep into the card’s terms and conditions.

Important Credit Card Terms and Conditions

People often ignore the terms and conditions associated with a credit card because first they don’t understand it and second they don’t want to put in the effort to decode a document full of financial jargons. So, here we have explained the 9 significant parts of a credit card MITC (Most Important Terms & Conditions). A credit card MITC could be a 10-page long document but you don’t need to read every page of it. Given below are the terms you surely need to know about:

Cardholder Agreement

A cardholder agreement is a legal document that establishes a contract between the cardholder and the issuer and outlines the obligations both have towards each other. The MITC which includes fees and charges related to the card is, in fact, a part of the cardholder agreement.

Introductory Offers

Your credit card may come with some introductory offers like extra discount with select brands for the first year, no charges on balance transfer for 6 months and the like. These are offered by the card issuers to attract the customers but there are some underlying conditions for those introductory offers which may be related to spending restrictions or offer period. You must read the MITC (Most Important Terms & Conditions) document to know the terms related to the introductory offers.

Interest Rate/Finance Charges/APR

If you fail to pay the full amount as mentioned in your credit card statement within the monthly deadline you would attract interest or finance charges on the outstanding amount.

For example, if the total amount payable for the month is Rs 20,000 and you choose to pay only Rs 10,000, the balance amount (i.e. Rs.10,000) would attract interest generally ranging from 35-45% per annum. Given below are the finance charges on some popular credit cards:

 Foreign Transaction Fee

Whenever you use your credit card to make payment in a foreign currency, you will be required to pay a foreign exchange mark-up fee.

For example- With your HDFC Regalia Credit Card, you made a payment of $150 and the foreign exchange mark-up fee is 2% and the value of $1 on the day of payment was Rs. 70.

This transaction will cost you-

• Dollar Conversion into INR ($150*70) = 10,500
• Mark-up Fee of 2% on Rs.10,500 = 210
• GST on the Foreign Exchange Mark-up Fee @18% = 37.80
• Total amount of transaction = 10,747.5 (Rs.10,500 + Rs.210 + Rs.37.50)

The foreign exchange mark-up fee on credit cards in India may range from 1.75% to 3.5%. The table below shows foreign currency mark-up charges on some popular credit cards:

Late Payment Charges

Late payment charges are applicable when you are not able to pay the minimum amount due on or before the due date. Banks usually offer a 3-day grace period after your due date and if you pay within the grace period, the late fee will be reversed.

Cash Advance 

Credit Card issuers allow you to withdraw cash from ATMs using your credit card. This is known as Cash Advance. Cash limit is only a portion of the total credit limit. There are two important points to note about cash advance:

• A cash withdrawal fee will be charged every time you withdraw cash from an ATM
• Cash advances attract finance charge (interest) from the very first day making it an expensive form of borrowing

Here is the cash advance fee charged by some of the leading banks in India:

Though it is not recommended to withdraw cash from your credit card, you must know the charges associated with it in case you have to withdraw.

Suggested Read: Reasons why you should avoid credit card cash advance

Bill Payment Terms and Conditions

It is extremely important to pay your credit card bills on time and in full. And to do that, you must be well-acquainted with a few terms that you can also find on the credit card MITC document.