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Understanding credit card contracts

You wouldn't attempt ski diving without instruction, would you? Same goes for your credit card, experts say.

Gary Klein, consumer credit specialist with the National Consumer Law Center, and Gerri Detweiler, author of The Ultimate Credit Handbook, offer some advice about credit card contracts:

  1. Do not use a credit card until you have a good grasp of your contract. "You are best off not using the card until you understand the terms, so try to slog through that thing," says Detweiler.
  2. It's a guarantee you will have difficulty interpreting the fine print. As you read the contract, underline parts that are incomprehensible, take notes and then ask the card company for clarification. "If you don't understand the contract, the issuer needs to explain it to you," says Detweiler. "You may have to be really persistent to get your questions answered."
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  4. NEVER throw away card agreements and amendments. You will need to refer to them.
  5. When going through credit card mail, watch for red flags such as "change in terms," "notice to cardholders," or "revised cardholder agreement."
  6. Klein advises consumers to cancel cards that charge fees for paying off balances or not using the card. "Inactivity fees and fees for paying off the card balance on time are pernicious practices," he says. "They are intended to encourage people to run up a balance on the card and thereby to pay interest."
  7. Don't be afraid to call it quits with your card issuer if they raise your interest or charge you for being one day late with a payment. "Sometimes a threat to cancel will lead the lender to reverse the charge," says Klein.

-- Updated: May 5, 2004

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