Credit Card Arbitration Explained

Credit card arbitration is a subject that every credit card holder should have some working knowledge of. Here are the basics of credit card arbitration and how it can impact you as a credit card holder.

Credit Card Arbitration

When you sign the documents that are required in order to get a new credit card, you are most likely signing an arbitration agreement. This means that if there is a dispute between you and the credit card company, you will go through the arbitration process. Therefore, you will not be able to sue the credit card company if anything goes wrong. Instead, you will make your claim to a third-party arbitrator that will settle the dispute.

Stacked Deck

At first glance, this may not seem like a bad situation to be in. However, if you decide that the credit card company has wronged you, you will most likely change your mind quickly. In most cases, regardless of what your claim is, the arbitrator will rule in favor of the credit card company. Most of these arbitrators stay in business because of their dealings with the credit card company. Therefore, they are not going to bite the hand that feeds them and issue a stern ruling against them. Basically, you are going up against a judge that will almost always rule in favor of the credit card company. This means that you are essentially fighting a losing battle from the very beginning. According to a recent study by the National Arbitration Forum, 94 percent of the cases that were brought against credit card companies ended up going in favor of the company and not the consumer.

Forcing You into Arbitration

The bad part about all of this is that you really do not have a choice of whether to go to arbitration in the event of a dispute if you want a credit card. Most companies will make you agree to attend arbitration if there is a dispute. Otherwise, they will no longer extend a credit card to you. There is usually an arbitration agreement in the documents that you sign before you ever are approved for a credit card.

How Arbitration Is Different

Although the credit card company wants you to believe that arbitration is the same thing as going to court, there are several key differences between them. One of the main differences is in the way that appeals are handled. With a regular court system, if you do not agree with the decision that is issued, you can choose to appeal the case to a higher court. With arbitration, this is not the case. The decision made by the original arbitrator is the final decision, and there will be no appeals made.

Another key difference is in the area of court costs for the consumer. With a typical court system, much of the cost is paid for by tax dollars, and therefore, your court costs will be low. However, with an arbitrator, you might find yourself with a bill for hundreds or thousands of dollars to pay for court costs.


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