5 things you might have agreed to without realizing when you signed up for a credit card by Mike Cetera on Jun 28, 2016, 4:28 PM Advertisement
 We know you didn't read your credit card agreement. It's OK. We did it for you. Bankrate examined the fine print on about a dozen card agreements posted on the website of the Consumer Financial Protection Bureau and on the websites of individual issuers in search of restrictions or requirements that are either must-knows, odd or should give you pause before applying for a credit card. Perhaps the most important of these clauses — mandatory arbitration — appears on about half of credit card agreements. This clause requires customers to settle disputes with the issuer through an arbitrator rather than the courts. The controversial practice could be on the way out, though, as the CFPB has proposed a 377-page rule that would ban arbitration and force card issuers to remove the language from their agreements. But there are other common rights and restrictions found in credit card agreements besides the arbitration clause that you should know about. Here are five examples. SEE ALSO: 7 5-minute habits of self-made millionaires that could help you get rich Charges for cash-like transactions What it says: Your issuer may include a clause on "cash-like transactions," which notifies you that some types of transactions will be treated as cash advances. What it means: Not all transactions are created equal. In fact, card companies try to dissuade you from making certain purchases on plastic by making them more expensive. When your credit card company slaps the cash-advance label on these purchases, it's an indication you'll be charged a higher — sometimes significantly higher — interest rate. What's more, there is no grace period for cash-advance charges, meaning the interest is tacked on instantly. The agreement for the Chase Freedom Visa card lists 8 card uses that will get treated as a cash advance: purchasing travelers checks, foreign currency, lottery tickets or casino gaming chips. Money orders, wire transfers, racetrack wagers and making a payment using a 3rd-party service also are considered cash-like transactions. "Card issuers don't want you to use your card for lottery tickets," says John Ulzheimer, a nationally recognized credit expert who formerly worked at credit companies FICO and Equifax. "In fact, most retailers won't accept anything other than cash for lottery tickets because they don't want to deal with the hassle of disputed charges if you don't like the lottery outcome."
 Penalty APR What it says: Your issuer may significantly increase your interest rate if you fail to meet certain obligations, like paying on time. What it means: The variable annual percentage rate on the Blue Cash Preferred card from American Express currently is between 13.24% APR and 22.24% APR. But if you get slapped with a penalty APR, you'll pay 29.49% APR on any new transactions. The company says the penalty APR will apply if you are late in making one or more payments or a payment is returned. American Express says it will levy the penalty rate for at least 6 months, and will keep that rate in place "until you have made timely payments with no returned payments during the 6 months being reviewed." Other credit card issuers aren't nearly as specific about how long the penalty APR will remain in place. On the Bank of America Classic Gold card, for example, the agreement states that once a penalty APR is in place it "will apply indefinitely." You'll find all this information in a display of credit card costs on your agreement called the Schumer box, named after then-U.S. Rep. Charles Schumer, the New York Democrat responsible for the legislation requiring that card terms be presented in a uniform manner. "At a minimum you need to look at the Schumer box, the box of fees, and understand the fees you're being charged," says Lauren Saunders, associate director of the National Consumer Law Center.
Closing your account What it says: Your issuer can close your account — without warning — for any reason. What it means: You shouldn't be surprised if your credit card company closes your account because you stopped paying your bills, but there are other reasons you might suddenly find yourself with a useless credit card. In the Chase agreement, the company says it may close your account for reasons having nothing to do with you. "Sometimes we close accounts based not on your actions or inactions, but on our business needs," the statement reads. Ulzheimer says this doesn't happen often, but it's not unheard of. In 2009, for example, Citibank made news when it began closing enough accounts that people began taking notice in online forums. The bank said at the time that it "decided to close a limited number of oil partner co-branded MasterCard accounts." "Some issuers realize some segments of their portfolio is simply unprofitable and want out," Ulzheimer says. "They reserve the right to discontinue your card type or program." Your account also may be closed because you're costing the issuer too much money by not using it, says Linda Sherry, director of national priorities for Consumer Action, a San Francisco-based consumer advocacy group. "I would regularly use a card that I want to keep because (otherwise) it will be closed," she says.
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