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Contract agreement: Getting to know the fine print

Credit cards have become an essential part of everyday life for many people. Which is great! You can’t beat the convenience of a credit card. Along with that convenience though comes responsibility. Credit card contracts are legally binding contract agreements between the credit card issuer and you, the cardholder. No matter what contract you’re signing, you need to understand the terms and conditions. The amount of money involved in a credit card contract makes it particularly important to understand the contract before signing on the dotted line.

Why understanding your contract agreement is essential?

You must understand your contract agreement in order to avoid unexpected fees. Credit card companies charge significant fees. Late payment fees, over-limit fees, and cash advance fees are the main ones to watch out for. These fees add up quickly if you’re unaware of them. By reading and understanding the contract agreement, you can ensure to avoid these fees.

Credit card contracts include vital information about your card. Terms and conditions, interest rates, balance transfers, and rewards programs are all there. Understanding these terms will help you make the best possible decisions about how to use the credit card. For example, marketing buzzwords can make a balance transfer offer look good, but the terms and conditions will tell you if it’s really worth it.

What makes up a contract?

Credit card contracts are legal agreements. They define the terms and conditions of the relationship between the credit card issuer and the cardholder over a period of time. In order to be legally binding they must include the following elements:

  • List the effective date and parties (preamble)
  • Explain the context of the agreement and the purpose of the contract (recitals)
  • Express the required elements
  • Define industry terms
  • Each party’s responsibility
  • Terms of payment
  • Contract duration and end
  • Representations and Warranties
  • Boilerplate language
  • Other specifics
  • Signatures or electronic signature

The most important parts to pay attention to

The length of these contracts alone can be enough to stop people away from reading them in full. While it really is best to read it all the way through, the sections below are the key sections you should pay close attention to;

Interest rate

Read through the interest rate section carefully! You should be aware of the current interest rate. Pay attention to introductory rates, and how the interest rate may change over time.


It’s important to be aware of any fees the company charges. These include annual fees, late payment fees, and over-limit fees. Any standard contract agreement will include a breakdown of all of them. It’s best to familiarize yourself with them so you can avoid unknowingly amassing sneaky fees.

Credit limit

Cardholders should be aware of their credit limit and how to have it adjusted. They should also be aware of any fees charged for going over their credit limit.

Reward program terms

If your credit card offers a rewards program, be aware of how the program works. Learn how rewards are earned, and how they are redeemed. Marketing departments use the rewards program to pull you in, but the fine print will tell you how to actually benefit from them.

Grace period

Make yourself aware of the grace period. Any fees charged if you do not pay your balance in full by the end of the grace period will be listed here.

Best way to read over the contract agreement

Reading a credit card contract can be a daunting task. There are several strategies that can make it more manageable.

Start with the key provisions

Begin by focusing on the most important part of the contract: the interest rate, fees, and credit limit. This will give you a good sense of the costs and benefits of the credit card.

Read the entire contract

While it may be tempting to skip over the fine print, be sure to read the entire contract in full to understand all the terms and conditions. Skimming can lead to missing out on vital information that will cost you money.

Take notes

While reading the contract, take notes to help you remember important details. It’s also a good opportunity to clear out the “legalize”, by writing key points in plain language.

Look up unfamiliar terms

Credit card contracts include legal jargon and technical terms that are difficult to understand. If you come across a term you don’t understand, look it up or ask for clarification from the credit card company.

Compare with other options

Before signing up for the card, compare the terms and conditions with similar credit card options to ensure you’ve found the best deal.

What is boilerplate language?

Boilerplate language is a standardized legal language used in many types of contracts, including credit card contracts. It may be difficult to read, but it is important to pay attention to, as it can have significant implications.

Boilerplate language in a credit card contract includes provisions such as arbitration clauses. These clauses require you to resolve disputes through arbitration rather than through court. Another common clause is a class action waiver. These can prevent you from joining a group that’s filing a lawsuit against the credit card company.

Boilerplate language can be difficult to understand. It is important to read it carefully and seek legal advice if you are unsure about any of the terms and conditions.


Understanding your contract agreement is essential for your financial peace of mind. It will help you avoid unexpected fees and charges. It will also help you make informed decisions when using your card and manage your debt effectively. When reading the contract:

  • Pay close attention to key terms
  • Read the entire contract
  • Take notes
  • Look up unfamiliar words
  • Compare similar cards
  • Don’t ignore the boilerplate language

With a little bit of effort, you can fully understand the contract and what you’re signing up for. This will allow you to make the best decisions possible for your financial future.

Need help getting out of debt after signing a bad contract agreement? Our Credit Counsellors are here to help.

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