Using Credit and Charge Cards
This information comes from our friends at Nolo Press. For more information or to order this book, visit Nolo's site at http://www.nolo.com.There are approximately two billion total credit and charge cards held by American adults (an average of nine cards per person). Buying on credit has become an indispensable part of the American economy. But buying on credit can be very expensive--the interest rate on bank credit cards averages about 17%; on gasoline company and department store cards, it's over 20%. Only charge cards (also called travel and entertainment cards), such as American Express and Diners Club, don't generally impose interest.
My credit card debt is consuming my life. How can I cut credit card costs?
If you have more than one card, pay down the balances with the highest interest rates and then use (or obtain) a card with a low rate. Because there is great competition among credit card issuers, you might get a rate reduction simply by calling your current bank and asking.I can't afford the minimum payment required on my statement. Can I pay less?
Most card companies insist that you make the monthly minimum payment, which is usually 2%-2.5% of the outstanding balance. If you can convince the card issuer that your financial situation is desperate, the issuer may cut your payments in half. In some cases, the issuer may waive payments altogether for a few months. This courtesy is usually extended only to people who have never been late with payments.Bear in mind that paying nothing or very little on your credit card should be a temporary solution only. The longer you pay only a small amount, the quicker your balance will increase due to interest charges.
My checking account and credit card are from the same bank; can the bank take money out of my checking account to cover my missed credit card payments?
No. A bank that takes money out of a deposit account to cover a missed credit card payment violates the federal Truth in Lending Act. You can sue for damages--the amount taken out of your account and any other damages you suffer, such as lost interest or bounced check fees.I plan to cancel all my credit cards but one. Any advice on which one to keep?
If you don't carry a monthly balance, keep the card with no annual fee, but make sure it has a grace period. If you carry a balance each month, get rid of the cards that come with the worst of the following features:- High interest rates.
- Unfair interest calculations. Avoid cards that charge interest on the average daily balance, not the balance due. Here's why. Let's say you pay $1,200 of your $1,500 balance in January. A bank using the average daily balance will charge you in February interest on the $1,500 average daily balance from January, not on the $300 you still owe.
- No grace periods. This means you pay interest from the time of purchase until the time of payment even if you pay your balance in full.
- Nuisance fees. Get rid of cards with late payment fees, over-the-limit fees, inactivity fees, fees for not carrying a balance or for carrying a balance under a certain amount, or a flat monthly fee that's a percentage of your credit limit.
My wallet was stolen. Will I have to pay the charges the thief made using my credit cards?
No. Federal law limits your liability for unauthorized charges made on your credit or charge card after it has been lost or stolen. If you notify the card issuer within a reasonable time--usually 30 days--after you discover the loss or theft, you're not responsible for any charges made after the notification, and are liable only for the first $50 for charges made before you notified the card issuer. Rarely will a card issuer even charge you the $50.I purchased an item using my credit card and it fell apart. Can I refuse to pay?
Maybe. Under federal law, you must first attempt in good faith to resolve the dispute with the merchant. If that fails, you can withhold payment only if the purchase was for more than $50 and was made within the state you live in or within 100 miles of your home. (This limitation applies only if you used a card not issued by the seller, such as a MasterCard. There is no $50, 100-mile or in-state limitation if you use the seller's card, such as your Sears card.)The 100-mile limitation is easy to calculate when purchases are made in person. But if you order through the mail or over the telephone, the law is unclear as to where the purchase took place. You can claim that the purchase was made in the state in which you live (even if the catalogue company is on the other side of the country) because you placed the order. You have to hope the seller doesn't fight you.
My credit card billing statement has an error. What should I do?
Immediately write a letter to the customer service department of the card issuer. Give your name, account number, an explanation of the error and the amount involved. Enclose copies of supporting documents, such as receipts showing the correct amount of the charge. You must act quickly--the issuer must receive your letter within 60 days after it mailed the bill to you.Under the federal Fair Credit Billing Act, the issuer must acknowledge receipt of your letter within 30 days, unless it corrects the bill within that time. Furthermore, the issuer must, within two billing cycles (but in no event more than 90 days), correct the error or explain why it believes the amount to be correct. If the issuer does not comply with these time limits, you don't have to pay $50 of the disputed balance.
During the two-billing-cycle/90-day period, the issuer cannot report the amount to credit bureaus or other creditors as delinquent. The issuer can charge you interest on the amount you dispute during this period, but if it later agrees that you were correct, it must drop the interest accrued.
Must I give my phone number when I use a credit card?
Several states, including California, Delaware, Georgia, Kansas, Massachusetts, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island and Wisconsin, bar merchants from recording personal information when you use a credit card. Furthermore, merchants agreements with Visa and MasterCard prohibit them from requiring a customer to furnish a phone number when paying with Visa or MasterCard. Nevertheless, many still ask.For More Information About Credit and Charge Cards
To request a list of banks issuing cards with low interest rates, send $5 to Ram Research's Cardtrack, Box 1700, Frederick, MD 21702, or $4 to Bankcard Holders of America, 524 Branch Drive, Salem, VA 24153. You can also visit Ram Research Online at http://www.ramresearch.com. BHA's list also includes banks issuing cards with no or low annual fees. For BHA's list of gold cards with low interest rates and annual fees, send $5 and request the gold card list.
The Federal Deposit Insurance Corporation, 550 17th St., NW, Washington, DC 20429, 202-393-8400, http://www.fdic.gov, publishes free pamphlets, including Fair Credit Billing.
The Federal Trade Commission, 6th & Pennsylvania Ave., NW, Washington, DC 20850, 202-326-2222, http://www.ftc.gov, publishes free pamphlets, including, Billing Errors, Fair Credit Billing, Lost or Stolen Credit and ATM Cards and Solving Credit Problems.
