Credit with Binding Arbitration

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Credit with Binding Arbitration


Updated: September 27, 2018

The content is accurate at the time of publication and is subject to change.

What other tricks, apart from the confused items of the fine print, do creditors use to make most profit of consumers? We all know of the sudden bounce of interest rates or penalty fees. Most of us have suffered from the unpleasant change of the payment due date and so have had to make late payment fees. The predatory practice of Universal default has also added up to the unfair methods of collecting more funds.

The abusive policies of some credit card issuers are not going to be eliminated, at least in the nearest future. So every applicant or current credit cardholder needs to know how to protect themselves, especially when it concerns such a point in the credit card agreement as binding arbitration clause.

Mandatory arbitration clauses are found in almost every sphere of life these days, especially in the services sector. As the credit card industry is an ever growing field providing people with financial services, the arbitration seems unavoidable here. Who profits most through the arbitration - the credit card company or the customer - is a most burning issue.

In fact, mandatory arbitration clauses tied to a credit card agreement are designed to infringe upon the cardholder's interest and to screen the credit company. Nevertheless, it is harder and harder to find a credit card without a binding arbitration agreement especially if it is a major credit company's product.

Well, what is it about the arbitration hearing that puts a credit card holder at a great risk? The binding arbitration clause is worked out and pushed forward by the creditors themselves. So, when a customer wants to file a dispute with a credit company, be it late payment disputes or identity theft or whatever, he or she cannot address the court.

Instead, the credit issuer chooses and hires the arbitrator themselves at independent companies such as American Arbitration Association and some others. It's not difficult to guess that such an arbitrator get money primarily for protecting the company's policies and interests.

So, is a customer who applied for credit card with a binding arbitration clause doomed to failure in the arbitration process when it is conducted by the private arbitrator? Most likely he or she will lose, and it makes more sense to simply exclude the very possibility of falling under the arbitration clause.

What can you, as a lawful credit cardholder, do protect your rights? There are countless credit card applications out there offering competitive rates and enticing programs but each of them hides a serious trap - the fine print.

If you make it out right to see that you are subject to a binding arbitration agreement, you'd better give it up and look for an offer without such a clause. Despite the fact that the binding arbitration clause won't be turned down by the biggest issuers, there are smaller banks and credit unions that do not include the clause.

If for all that you still signed up for a credit card with the clause, your major task is to learn to be faultless. We mean you need to pay your bills in full and always on time and never exceed your credit limit.

You are strongly recommended to closely watch credit card terms changes and fix them in a comparison table with the previous terms. This way, you will be more educated and there won't be a need to file dispute with the creditor.

Do you hate the changes? Then close this very card and switch over to another company, which is your legal right. Educate yourself about credit cards and learn your rights, only then the binding arbitration clause will not affect your material wellbeing as well as your peace of mind.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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