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Message #607 Credit card holder rights

mp3 #607 Credit Cards, Your Rights as a Card Holder (mp3 file)

Credit cards and charge accounts are open-ended forms of credit. Most stores will establish a credit line and set a limit on the amount you can charge using your credit card. Charge accounts are often called revolving charge accounts. If you pay for your purchases with a credit card, the store will send you a monthly bill. If you pay the total amount of your bill each month before the next billing date (the day the store figures your bill), you can avoid any additional charges under most plans. Three of the most common types of credit cards are:

1. Single-purpose cards -- issued by all kinds of businesses (such as gasoline company credit cards). You pay nothing for the card. Having the card encourages you to shop at that place of business. If you don't pay promptly by the end of the next billing period, you will be charged interest on the outstanding balance owed. This means the company figures out how much you owe that month and multiplies that number by the applicable interest rate. This amount of money will be added to your bill.

2. Bank credit cards (such as visa or MasterCard) -- the bank checks your credit rating, and if it is good, you will be issued a card. You may use the card at any business participating in the plan. The shop turns the charge slips back to the bank. The bank then pays the bill. In essence, the bank is making you a loan. The bank will send you a statement, which lists your purchases descriptively on your bill. Descriptive billing states the seller, date, and amount you spent but does not describe the actual item. You should be sure to keep your own receipts in order to check them against the bank's "descriptive" statement. If you don't pay promptly by the next billing period, you will be charged interest. Most bank credit cards charge you an annual fee for the use of the card.

Bank card billing rates are not regulated, and they can change. Billing methods will differ from bank to bank. The balance against which the charge is computed can vary up to 100% of the outstanding balance depending on what billing method is used. Different plans offer somewhat different credit terms; for instance, some will offer you a lower rate if you pledge a savings account as security for repayment and keep a certain balance on that account. Be sure to read all of the literature including the disclosure statement you are given when your card is issued, to find out which billing method your bank uses.

3. Food, travel, entertainment, or multipurpose cards (such as diner's club, carte blanche, American Express)—anyone can apply for these cards but they are used mostly by businesspeople. Holders pay a yearly fee. No interest is usually charged if your bill is paid before the start of the new billing cycle because these cards are charge cards and the card company does not "loan" you any money (although you can consider the annual fee a finance charge).

You should know three important things about the cost of credit before you decide whether to charge an item or pay cash. One is the finance charge, the amount of money paid to obtain credit. Another is the method by which the finance charge is computed (such as declining balance, average daily balance, previous balance) as will be explained. The third is the "APR" annual percentage rate (the percentage cost of borrowing), which provides a method of comparing credit costs regardless of the dollar amount borrowed or the period of time over which payments are made. If you do not pay your entire balance during each payment period, usually 25 to 30 days after your bill has arrived, you will pay up to 21% yearly interest on the unpaid balance. If you pay the entire balance before the next billing date each month, you will not pay interest.

A rule of thumb--try to keep the total of your debt payments to no more than 20% of your take home pay. When buying with a retail credit card, always read the receipt to be sure that the information on it is correct. Keep your sales slips for items you have charged in order to know how much you will owe at the end of the month.

The federal truth-in-lending act requires that credit card issuers explain to the credit applicant the period of time that may pass before a finance charge is charged on an outstanding balance. The method of figuring the finance charge must also be disclosed--and there are several. This information is contained in a written statement you will receive at the time you open your account.

The most common method -- and the least favorable to you is the previous balance method. If an unpaid balance remains at the end of the billing period, the interest charges are determined using the previous month's unpaid balance. No payments made during the billing period are subtracted from the unpaid balance.

The most favorable billing method for you is the declining balance method. All credits and payments are subtracted from the amount owed the previous month. The interest charge is determined using the balance that remains after your payments are subtracted. Lastly, all new charges are added, giving you a total unpaid balance for the new billing period.

Visa and master card compute your interest charges using another common billing method -- the average daily balance. Using this method, the unpaid balance is determined daily. These totals are added together and divided by the total number of days in the billing period. The result is the average daily balance by which the interest charges are determined. New purchases are added to the unpaid balance after the interest charges have been determined.

Often, the store from which you purchase an item on credit still owns the item until you finish paying for it. To determine if this is so, read the statement you receive when you first open the account, and anything you signed when you purchased the item. If you do not pay according to the terms of the credit card contract, the store can legally take back or repossess your purchase.

Under the federal Fair Credit Billing Act, retailers have been made more responsible for the quality of merchandise credit card holders purchase.

1. Current law provides that you may withhold payment of any balance due on defective merchandise or services purchased with a credit card, provided you have made good faith effort to return the goods, or resolve the problem with the merchant.

2. Certain restrictions regarding this law apply to the third party credit or bank cards. In transactions involving these cards the purchase (a) must have cost more than $50 and (b) must have been made within your state of residence or within 100 miles of your home, whichever distance is greater.

3. This law also gives you legal protections against billing errors. If you have a complaint about your statement, express it in writing by sending a letter that reaches the creditor within 60 days after the bill was mailed to you. You should also keep a copy of the letter. The creditor has 90 days to acknowledge that your complaint has been received, and another 90 days to resolve it. If the creditor fails to correct a billing error within 90 days, or to follow the rules set forth in the resolution process, you may sue for damages (including treble damages) and, if you win, you can recover your attorney fees.

If your complaint is unresolved and the creditor has not complied with the Fair Credit Billing Act, you can sue for actual damages plus twice the amount of any finance charges. If your case is more than $100 and less than $1,000, you are also entitled to court costs and attorney's fees in a successful lawsuit. Such a suit can also be brought in small claims court, as long as your claim is no more than $5,000.

4. Creditors are required to send you your billing statement at least 14 days before your payments are due. Check your statement to make sure you are being allowed the required time to make your payment. Any notice of a credit or refund should also be included. Your billing statement will give the address you should write about any billing complaints.

5. Another provision of the Fair Credit Billing Act applies if you don't make your purchases with a credit card. Hotels, restaurants and merchants that honor third-party credit cards may give discounts of up to 5% to cash paying customers. However, they may not add an extra charge for using a credit card. Merchants who honor credit cards and also give cash discounts must post a sign that is easily visible explaining the cash discount practice.

The Truth-In-Lending Act has several other provisions related to credit cards.

Credit card issuers may not mail you a credit card unless you have requested it verbally or in writing. However, credit card suppliers can send you your renewed card or a substitute one without your request.

You should immediately report to the card issuer any loss or theft of your credit card or any unauthorized purchases that may appear on your monthly statement. If your card has been lost or stolen, or if there are unauthorized charges on your monthly statement, you are never responsible for more than $50 of charges. In some cases you are not responsible for any of these unauthorized charges. The truth-in-lending law says that you are responsible for the first $50 if the card issuer: (a) notifies you of such a policy before the card is lost or stolen; (b) informs you about how to report a lost or stolen card; and (c) provides a method for you to be identified as the correct user of the credit card (usually by either having your signature or photograph of the card).

Even if the card issuer has followed the above regulations, you will not be responsible for any charges made by another person if you notify the credit issuer immediately after you lose your credit card and before the charges are made. Always make a list of your credit cards and keep it in a safe place. Then, if a card is lost or stolen, you will have a record which includes its identifying number.

Dishonest people may be able to charge purchases on your credit card account, even without using your credit card itself, especially when they make purchases over the telephone, or through the il. All that these dishonest people may need if the information already printed on your credit card -- your name, your credit card number, and your card's expiration date. Merchants may also ask you to write your billing address and telephone number on the charge slips that you sign.

To avoid unauthorized use of your credit card information, you can protect yourself in the following ways:

1--When you shop by telephone or mail, deal only with reputable stores or mail order houses. Never give your credit card information to anyone who telephones you, to solicit your business.

2--When you use your credit card at a store, don't let your card out of your sight. A dishonest store employee could run your card through the machine more than once. If the sales person makes an honest mistake, and has to run your card through a second time, make sure that the first charge slip is torn up, or given to you. Be sure to get your credit card back from the sales person, when your purchase transaction is completed at a store. If a store insists on your telephone number, you may give your work number instead of your home number. If you want to be extra-careful, you may ask the sales person to tear up, or give to you, the carbon paper used between the copies of the charge slips, because the carbon paper also contains all of your credit card information.

3--when you receive a new credit card in the mail, sign the card right away, and destroy your expired card by cutting it up. When you throw away your copies of your charge slips, be sure to tear them up, instead of throwing them away intact.

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