Skip the fine print, skip vital information

Fees, catches and extras buried in terms and conditions

By Helen Fowler

Like "Eat leafy greens" or "Clean as you go," the advice to "Always read the terms and conditions" is something many of us let slide when getting a new credit card. But we do so at our own peril. Hidden in that small print are the fees, catches and extras that card issuers don't always want to advertise.

"No one ever reads the small print, that's the problem," says Richard Peel, founder and director of Northamptonshire-based financial advisory firm AFP Services. "The information is there, but it's not in your face."fine-print

Research commissioned in 2011 by investment specialist Skandia backs Peel up. The research suggests the majority of consumers don't bother to read terms and conditions. This is unfortunate, because, while eye-catching images and giant text will tell you all about 0% rates on balance transfers, legal technicalities spelling out hefty fees are hidden in the small print.

There are, however, some protections for consumers seeking out this information. "There are requirements regarding prominence and the comparative size of certain text (e.g., APR) in advertisements," wrote Giles Mason, senior press officer at the UK Cards Association, in an email.

In addition to ads, the Consumer Credit Act 1974 covers most credit card agreements too. Under this law, the lender must give you a written copy of the agreement, setting out the nature of the agreement and the parties to it.

You'll need to sign your application form at least once, according to Mason, to confirm you accept the terms and conditions.

"However, the nature of the product being offered may mean more signatures are required." Both parties must sign the agreement and you must receive a copy of the agreement either at the date of signing or within seven days.

Per Section 6 of The Lending Code, the contract information that should be made available to you before you take out a  card includes, but is not limited to:

1.       An explanation of how interest is calculated and charged;

2.       Details of how monthly payments are applied to outstanding balances;

3.       An explanation of recurring transactions;

4.       Details of charges for the day-to-day running of the account, including, but not limited to: any annual fee, dormancy fee, over-the-limit fee, overseas transaction fee, cash withdrawal fee, balance transfer fee;

5.       The difference between being the principal cardholder and an additional cardholder;

6.       The interest rates applicable to different types of transactions (such as purchases, balance transfers, credit card cheques or cash transactions);

7.       Sufficient details to enable you to pay on time.

If your agreement doesn't include all of this information and you have problems paying, the lender may not be able to take action to get its money back without the permission of a court.

If you find something in your contract you consider unfair, you have the right to challenge it. A law called the Unfair Terms in Consumer Contracts Regulations says companies cannot use unfair terms and conditions. So, you're not bound by a standard term in a contract if that term if judged to be unfair.

However, only a court can decide whether a term is unfair. You can report an unfair contract term to your local trading standards department or the Competition and Markets Authority.

The card industry defends itself against such charges.

"Transparency is key and the card industry has made great strides to help consumers clearly see what they borrow and what they repay," says Mason. "As part of a wide range of improvements made in 2011, credit card providers clearly display all features and charges in their summary box, which is included in all marketing material and on every statement."

See related: Retailer refusing a refund? A credit card may help, FCA takes over consumer credit regulation

Published: 11 April 2014