How to Read Credit Card AgreementsCredit card agreements are supposed to be a comprehensive guide to your card’s benefits and limits, answering any questions you may have about the way your card works. However, there’s a big problem: many of them are quite difficult to read, averaging nearly 5,000 words in length and written with a level of complexity that over half of American adults can’t understand. It’s completely reasonable to need help understanding card agreements, so we’re here with some tips to help make navigating them a bit easier. For ways to get to the information you care about quickly, as well as specific parts of card agreements to watch out for, read on.

The Schumer box

The first place to look when you’re reading an agreement is the Schumer box, named after former representative Charles Schumer who sponsored the Truth in Lending Act that made the boxes a legally required part of all credit card agreements. Schumer boxes contain information about your card’s APR, annual fee, all fees related to transactions (such as balance transfer fees and late fees), your card’s grace period and how your card provider calculates your overall balance. They’re designed to clearly and cleanly show some of the most important details of a card. Even the size of the typeface used in Schumer boxes is regulated so card providers can’t make them smaller and harder to notice. Often, credit card agreements have their Schumer boxes near the beginning, right after the table of contents, though some put them on the last few pages.

Schumer boxes are helpful, but if it’s the only thing you look at in a card agreement, you’ll probably miss some very important information. For instance, credit card rewards aren’t covered in Schumer boxes, and sometimes figures listed in Schumer boxes have asterisks next to them that require further investigation to suss out. To get the full picture of your credit card, you’ll have to venture into the rest of the agreement.

The fine print

Apart from the Schumer box, credit card agreements aren’t standardized at all, so card providers can structure them in any way they want. This is unfortunate, since it means there’s no one way to read a card agreement, unless you want to go through the whole thing from beginning to end. Even still, there are ways to find the information you want out of a card agreement quickly, as well as some common elements you’ll want to watch out for.

The Find command: When you’re reading credit card agreements on a computer, you can use the Find command to search for specific pieces of text within a document. You can access the Find command by hitting Control + F on a PC or Command + F on a Mac, and it lets you quickly navigate to the parts of the card agreement you care about. Be aware that the Find command searches for exactly the word or words you type in and leaves out any synonyms and related results. For example, if you search an agreement for the words “penalty APR,” but the agreement uses the phrase “default rate” instead of penalty APR, your search won’t find anything.

Wiggle words: Many credit card agreements are littered with the word “may,” as opposed to “will” or “will not,” to give the credit card provider more discretion in its decisions. If you see a sentence like “if you remove an authorized user, we may close your account and open a new account with a different account number,” expect the card provider to make a decision based on what works in its own favor, not what works in yours. You should also look for the phrase “up to” when reviewing numbers, as this indicates the figure is a maximum value rather than a fixed amount. If you see a card that says it issues credit limits up to $25,000, don’t be surprised if the credit limit you receive is far below that.

Limiting clauses: There are a few specific clauses to look for, as they can dramatically alter how your card works and what rights you have. The first is the arbitration clause, which forces you to forgo the court system and use arbitration if you have a legal issue with the card provider. The Consumer Financial Protection Bureau has found that arbitration tends to favor financial institutions when compared to class-action lawsuits. Some credit card agreements allow you to opt out of their arbitration clauses by following a set of instructions listed in the card agreement.

Another thing to look for is the payment allocation clause, which explains how your minimum payments are distributed across different types of debt (e.g., balance transfer debt, purchase debt, cash advance debt and deferred interest debt) based on the APR, something that used to be entirely at the issuer’s discretion. For instance, if you had $1,000 of 0% APR debt and $1,000 of 10% APR debt, issuers used to be able to state in the payment allocation clause that your minimum payments go toward paying off the 0% APR debt first, and only when get through all of your 0% APR debt would you start paying down the 10% APR debt. Luckily, thanks to the Credit CARD Act of 2009, card issuers can only determine how the minimum payment is applied — it’s often applied to the lower interest debt — and any excess payment, meaning any amount paid over the minimum, must be applied to the highest APR debt first. After the high APR debt is paid off, any excess payment will then be applied to the next highest APR balance and so on.

The last clause to keep an eye out for is the deferred interest plan, which can initially seem like a 0% intro APR promotion but has an undesirable twist. Deferred interest plans give you 0% APR for a certain amount of time, but they require you to pay off your balance by the end of the deferred interest period. If you don’t, you suddenly owe all of the interest you would’ve incurred at the card’s normal APR since your account opened. We should note that 0% intro APRs do not work like this, as we’ve explained here. As such, if you’re choosing between a deferred interest plan and a 0% intro APR opportunity, you should opt for the latter.

Credit card agreements may be long and needlessly complicated, but they’re the most comprehensive resource you have for understanding exactly how your card functions. To learn more about how to get the most out of your credit cards, follow our credit cards blog.