AICCCA Warns Be Aware of Credit Card Agreement Terms


Fairfax, VA - March 15, 2007 - Last week, hearings were conducted by the Senate Permanent Subcommittee on Investigations to review fees, interest rates, grace periods and other terms included in credit card agreements.

"Credit cards can be a useful financial tool as long as consumers understand the terms under which they are bound when using the card," said David Jones, president, Association of Independent Consumer Credit Counseling Agencies. "Consumers can run into problems when they do not realize how a particular action can affect the cost of using credit cards."

To help consumers understand the common terms associated with credit card agreements, AICCCA offers the following tips:


Understand universal default. Most card issuers include in the card agreement a clause entitled universal default. It allows the card issuer to increase your interest rate to the default rate (usually 29 percent or greater) for any number of reasons spelled out in the agreement - the most likely being a late payment to that creditor or any of your other creditors. As a result of the hearings, Citigroup announced that it will no longer increase interest rates if an account holder makes a late payment on another creditors account. To help avoid getting hit with this clause, make on time payments to all creditors.

Always make payments on time. Adding a late payment fee to your credit card balance could be the equivalent of an additional 35 percent in your annual percentage rate. For example, a credit card with a $1,000 balance and an APR of 15 percent would have a finance charge for the month of $12.50. If you were to add a late fee of $29 for that month you would be paying the APR equivalent of 50 percent.

Take advantage of grace periods. Place new purchases on a credit card with no balance and make sure it can be paid in full by the due date. Check your card agreement to ensure you have a standard grace period for new purchases and as long as you carry no balance and pay the balance due in full by the payment due date, you can avoid paying interest charges.

Know your credit limit and stay below it. Paying the minimum amount due will not always keep you from going over your credit limit. Review your credit limit and try to stay below 50 percent of the total at all times. Doing so will improve your credit score and keep you from being hit with expensive over the limit fees.

Avoid making new purchases on card with transferred balances. The low interest rate that applies to your transferred balance does not necessarily apply to new purchases. Unless you have the same low interest rate for new purchases, your payments will go first towards paying the balance with the lowest interest rate and your purchases will accrue interest at the higher rate until you pay the entire balance.


Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call 866-703-TRUSTAICCCA (866-703-8787) or visit www.aiccca.org.