CHOOSING CREDIT CARDS
A credit card lets you buy things and pay for them over time. Using a credit card is a form of borrowing: you have to pay the
money back.
When you are shopping for a credit card, it’s wise to compare fees, charges, interest rates, and benefits. Some credit cards that
look like a great deal at first glance may lose their appeal once you read the terms and conditions of use and calculate how the
fees could affect your available credit and your payment.
What You Need to Know
Credit card issuers generally must disclose the important terms of use regardless of whether they require you to complete an
application.
beyond your credit limit.
before your account can be activated, and it must appear on your account statements. Your card issuer also
must disclose the “periodic rate” – the rate the issuer applies to your outstanding balance to determine the
finance charge for each billing period.
card (Card Issuer A) to another (Card Issuer B). Each offer is different – and the terms can be complicated.
The FTC at Work
Most legitimate credit cards are issued by banks, which are outside the FTC’s jurisdiction. But the FTC can prosecute promoters
who deceptively market credit cards. FTC enforcement actions typically deal with hard-core credit card frauds – for example,
advance-fee credit card scams or scams marketing cards as general credit cards (like Visa or MasterCard) when the cards are
good only for purchases from certain catalogues. In the last 10 years, the FTC has brought 50 cases alleging that fradulent
marketers charged advance fees but didn’t provide consumers with credit as they had promised. In some cases, defendants
promised credit cards; in others, they promised unsecured loans. Visit the Federal Reserve Board to find contact information for
federal banking regulators.
A credit card lets you buy things and pay for them over time. Using a credit card is a form of borrowing: you have to pay the
money back.
When you are shopping for a credit card, it’s wise to compare fees, charges, interest rates, and benefits. Some credit cards that
look like a great deal at first glance may lose their appeal once you read the terms and conditions of use and calculate how the
fees could affect your available credit and your payment.
What You Need to Know
Credit card issuers generally must disclose the important terms of use regardless of whether they require you to complete an
application.
- Fees
- Many credit card issuers charge membership and/or participation fees. Issuers use a variety of names for these fees,
including “annual,” “activation,” “acceptance,” “participation” and “monthly maintenance.” These fees may appear monthly,
periodically, or as one-time charges: they can range from $6 to $150. What’s important is they can have an immediate
effect on the credit that’s available to you. For example, a card with a $250 credit limit and $150 in fees leaves you with
$100 in available credit.
- Transaction Fees and Other Charges
beyond your credit limit.
- Annual Percentage Rate
before your account can be activated, and it must appear on your account statements. Your card issuer also
must disclose the “periodic rate” – the rate the issuer applies to your outstanding balance to determine the
finance charge for each billing period.
- Grace Period
- A grace period lets you avoid finance charges if you pay your balance in full by the date it is due. Knowing whether a card
gives you a grace period is important if you plan to pay your account in full each month. Without a grace period, the card
issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your
account.
- Balance Computation Method for the Finance Charge
- If you don’t have a grace period – or if you plan to pay for your purchases over time – find out how the issuer calculates
your finance charge. Which method is used to compute your balance can make a big difference in how much of a finance
charge you’ll pay – even if the APR and your buying patterns stay pretty much the same.
- Balance Transfer Offers
card (Card Issuer A) to another (Card Issuer B). Each offer is different – and the terms can be complicated.
The FTC at Work
Most legitimate credit cards are issued by banks, which are outside the FTC’s jurisdiction. But the FTC can prosecute promoters
who deceptively market credit cards. FTC enforcement actions typically deal with hard-core credit card frauds – for example,
advance-fee credit card scams or scams marketing cards as general credit cards (like Visa or MasterCard) when the cards are
good only for purchases from certain catalogues. In the last 10 years, the FTC has brought 50 cases alleging that fradulent
marketers charged advance fees but didn’t provide consumers with credit as they had promised. In some cases, defendants
promised credit cards; in others, they promised unsecured loans. Visit the Federal Reserve Board to find contact information for
federal banking regulators.
CREDIT CARDS
USING CREDIT CARDS
Using credit cards wisely can help you avoid a credit calamity.
What You Need to Know
Whether you’re using your credit card to buy a laptop or a box of laundry soap, you have rights and responsibilities under the
law.
once a year while your account is open. A summary of these rights is often included on your billing
statement.
loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your
card before you report it missing, the most you’ll owe for unauthorized charges is $50. If the thief uses your
card number, not your card, you have no liability for the unauthorized charges.
effort to resolve the dispute with the seller, the charge is for more than $50, and you made the purchase in
your home state or within 100 miles of your current billing address.
account or write your issuer for a refund if it’s more than a dollar. Your card issuer must send you a refund
within seven business days of receiving your request. If you don’t ask for a refund and you don’t make any
other purchases for more than six months, the issuer must make a good faith effort to send you a refund.
Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so no one
can change the amount.
Never put your account number on the outside of an envelope or a postcard.
Always be cautious about disclosing your account number on the telephone or online unless you know the
person you’re dealing with represents a reputable company.
When you go out, carry only the cards you expect to use that day. If your wallet or purse is lost or stolen, it
minimizes your loss and the resulting headache.
Keep your receipts so you can reconcile the charges on your bill.
Keep a record – in a safe place separate from your cards – of your account numbers, expiration dates, and
phone numbers of each issuer to report a loss quickly.
Using credit cards wisely can help you avoid a credit calamity.
What You Need to Know
Whether you’re using your credit card to buy a laptop or a box of laundry soap, you have rights and responsibilities under the
law.
- Payments - Pay promptly
- Errors on Your Bill – Card issuers must follow rules for correcting billing errors promptly
once a year while your account is open. A summary of these rights is often included on your billing
statement.
- If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the
charge is being investigated
- Unauthorized Charges – If your credit card is lost or stolen, report it to the card issuer as soon as possible
loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your
card before you report it missing, the most you’ll owe for unauthorized charges is $50. If the thief uses your
card number, not your card, you have no liability for the unauthorized charges.
- Disputes about Merchandise or Services
effort to resolve the dispute with the seller, the charge is for more than $50, and you made the purchase in
your home state or within 100 miles of your current billing address.
- Refunds of Credit Balances
account or write your issuer for a refund if it’s more than a dollar. Your card issuer must send you a refund
within seven business days of receiving your request. If you don’t ask for a refund and you don’t make any
other purchases for more than six months, the issuer must make a good faith effort to send you a refund.
- Tips for Using a Credit Card Safely
Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so no one
can change the amount.
Never put your account number on the outside of an envelope or a postcard.
Always be cautious about disclosing your account number on the telephone or online unless you know the
person you’re dealing with represents a reputable company.
When you go out, carry only the cards you expect to use that day. If your wallet or purse is lost or stolen, it
minimizes your loss and the resulting headache.
Keep your receipts so you can reconcile the charges on your bill.
Keep a record – in a safe place separate from your cards – of your account numbers, expiration dates, and
phone numbers of each issuer to report a loss quickly.
RESOURCES
RECOMMENDED CARDS - When Rebuilding Credit
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