Most countries require financial institutions that offer consumer credit cards to provide full disclosure to customers regarding the cost of credit, payment terms, interest rates and other pertinent information. For most institutions, a cardholder agreement serves to meet full these disclosure requirements. Typically provided to customers upon opening a new credit card account, the cardholder agreement clearly states the terms of the account, including payment amounts, billing cycles, institutional policies, fee schedules and various penalties.
Specific lending, credit and consumer protection laws vary from country to country. Such regulations provide in-depth terms under which creditors can issue, manage and charge for credit. They also cover the rights, obligations and remedies available to both creditors and borrowers.
Considering that disclosure is one of the primary objectives of a cardholder agreement, the term "agreement" can appear misleading. Careful consumers must fully understand the nature of a cardholder agreement to understand its implications. Unlike traditional contracts, no signature is required to validate a cardholder agreement. Restrictive or seemingly unfair policies disclosed in a cardholder agreement can have binding implications just as if part of a signed contract.
To illustrate the importance of reading and understanding such disclosure documents, one might consider some examples. Without reading, a consumer might be unaware that an agreement includes a short clause that indicates legally binding acceptance on the part of the borrower, with no signature or other act of confirmation required. This clause typically states that usage of the credit card in question constitutes acceptance of the terms set forth in the cardholder agreement. The terms generally are then enforceable under contract law.
Although certain terms of a cardholder agreement are enforceable in certain courts, other terms might be deemed unenforceable, depending on the jurisdiction. If a particular practice, fee or other account term is outlined in the agreement, but the borrower's jurisdiction has laws strictly outlawing such practices or fees, it might not be an enforceable component of the agreement. Voiding specific sections of an agreement, however, does not necessarily void the entire agreement.
