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Credit Cards

Credit cards are a type of loan and when you borrow money from the issuing bank you agree to terms and conditions, such as when you will pay and how much you will pay.  Many credit cards use "fancy" offers and language to market to consumers.  It is vital to read and understand the terms they are offering before you sign any forms.  (See Risk Management - Contracts for more information on how to read a contract). 

Terminology

A good first step to developing credit card skills is to understand what the terminology means.  In the link below, the Federal Reserve Board provides information about what certain information by law, must be stated in the disclosure box on any credit card solicitations or applications. 

Build Your Credit Card Skills

It is never too early to build - or too late to refresh - your credit card skills.  This interactive tool helps first time credit card users to highlight potential hidden costs in credit card offers:

Credit Card Comparison

Evaluate why you need a credit card and for what you plan to use it.  Compare terms and conditions to determine which card (loan) you can afford based on your budget.

Credit Card Statement

Your credit card statement should accurately reflect the terms of your credit card (loan).  You should review your monthly statements to ensure it is accurate, and that there are no errors.  The mouseover feature in the tool below explains how to read your credit card statement. 

Fair Credit Billing Act

The Fair Credit Billing Act covers issues with:

  • A charge for something you didn't buy.
  • An amount charged that is different from the actual amount.
  • A charge for something that was delivered and you did not accept.
  • A charge for something not delivered per the agreement.
  • Math/calculation errors.
  • Payments not credited to your account.

According to The Federal Reserve Board website, if you think your credit card bill has an error, take the following steps:

  • Write to the credit card company within 60 days from the billing statement date with the error.
  • Provide the company in writing:

    - Your name and account number;
    - That you believe the bill contains an error;

    - Why you believe it’s wrong, and;
    - The date and amount of the error (the “disputed amount”).

  • You do not have to pay the “disputed amount” or any minimum payments or finance charges that apply to it.
  • But you should pay all other items on the bill.
  • Mail your dispute to the address for “billing inquiries” listed on the bill.
  • If there is an error, you will not have to pay any finance charges on the disputed amount and your account must be corrected.
  • If there is no error, the credit card company must send you an explanation and a statement of the amount you owe. The amount will include any finance charges or other charges that accumulated while you were questioning the bill.

For more information, go to:  http://www.federalreserve.gov

Credit Card Rights

You have certain rights a credit card consumer.   The federal agency which monitors consumer laws is the Federal Trade Commission.  The state agency which oversees consumer credit card laws is the Maryland Attorney General's Office.

Test Your Knowledge

For each of the following situations, hold your mouse over an answer to reveal your federally enforced legal rights.

  • A hospital mistakenly sent your bill to your last address. You moved five years ago so the bill was not forwarded to your current address.  A debt collector calls you to ask you to pay the bill. You reply that you have no idea to what bill he is referring. The debt collector will not share any information with you and simply repeats, "Just pay your bills."

    Do you have to pay the money without knowing which bill was overdue?

Try again! After making contact with you, the debt collector is required to inform you of the amount of the debt, the name of your creditor and the fact that the debt will be considered valid unless you dispute it within 30 days.

From the Fair Debt Collection Practices Act

  • Your ATM card has been stolen sometime within the past seven days. You report it to your bank. The bank says you are responsible for the $350 that was withdrawn from your checking account.

Are you responsible for the $350?

If you report your ATM card within two days of discovering the loss your losses are limited to $50. If you wait up to 60 days you can be liable for up to $500. If you wait longer than 60 days you could lose all the money that was taken from your account. Note: If you contact your bank regarding the charge they will sometimes reduce or waive the charges to your accounts. Try again!

From the Electronic Fund Transfer Act

  • Ann, a 70 year old depending on Social Security, applies for a credit card at a national store and is denied the card. When she asks why the card was denied the store says it is because of her dependence on Social Security.

Can credit be denied due to her use of a public assistance program?

Try again! You cannot be discriminated against because of sex, marital status, color, race, religion, national origin, age, or reliance on income from public assistance program. Your ability to repay the money you borrow is the only criteria that can be used.

From the Equal Credit Opportunity Act

  • You are applying for a mortgage for the house you are buying in Maryland. When you ask your lender for your credit score they give it to you.

Can they do this?

Consumers can ask for their credit score but you will have to pay for it. Sometimes if you are applying for a mortgage you can get the credit score for free from the lender. Try again!

From the Fair and Accurate Credit Transactions Act

  • You suspect there is a mistake on your credit card bill. This is a charge you don't remember making. You write the card issuer a letter disputing the charge. The credit issuer charges you interest on the amount you have not paid and are disputing.

Can they charge you interest on an amount you are disputing?

Try again! If you are disputing a credit charge your creditors are prohibited from reporting your account as delinquent. This applies to credit cards, revolving charge accounts and overdraft protection.

From the Fair Credit Billing Act

  • As a Maryland resident you have requested two free copies of your credit report from each of the three credit reporting agencies.

Can you do this?

All consumers can receive a copy of their credit report free from each of the three main credit reporting agencies once every 12 months. As a resident of Maryland your are also entitled to receive a free copy from each of the three credit reporting agencies each year. Go to the Credit Report section to learn how. Try again!

From the Fair and Accurate Credit Transactions Act

From Maryland State Law

  • When you are being interviewed for a new job you are told that the company will request a copy of your credit report.

Can a potential employer see your credit report?

The answer is both “yes” and “no.” Employers may look at credit reports only with permission from the potential employee. Often, the request for permission is one part of an employment application. The answer is both “yes” and “no.” Employers may look at credit reports only with permission from the potential employee. Often, the request for permission is one part of an employment application.

From the Fair Credit Reporting Act

  • You think you have been the victim of identity fraud and you want the credit bureau to put an alert on your file to prevent someone else from opening accounts in your name. They refuse your request.

Can they refuse to do this?

Try again! If a consumer thinks they are victims of Identity Theft or are military personnel on active duty away from home, they have the right to place an alert on their files. Creditors must proceed with caution when granting credit when alerts appear on accounts.

From the Fair and Accurate Credit Transactions Act

  • When you review your credit report you find several accounts that you closed in writing over a year ago. You want to correct this bad information.

Should you contact the credit reporting agency to fix the problem?

You have the right to review your credit report and correct wrong information. You have the right to have the credit bureau reissue corrected reports to lenders who received the incorrect report within the last six months, or to employers who received one in the past two years. The credit bureau is also required to send this information to the other two major reporting agencies. Try again!

From the Fair and Accurate Credit Transactions Act

  • Before signing the application for a car loan you ask to be shown the total cost of your loan including the finance costs (interest). The salesman refuses and tells you it's just a number and that the loan will be paid off in just 60 months.

Can the lender hide the total amount of the loan?

Try again! Lenders must state the total finance costs of a loan. Lenders must also state the cost of borrowing money in terms of annual percentage rate.

From the Truth in Lending Act

 

Next: Credit Report

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This site is brought to you by Towson University's Financial Services, DECO EEOL and the Maryland Coalition for Financial Literacy with a grant from the BRAC Higher Education Investment Fund, administered by the Maryland Higher Education Commission.

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If you borrow $1,000 from a credit card lender, and have a 10% interest rate, and only pay the 2% monthly minimum payment, it will take you:

• 10.4 years to pay off this debt.

If you pay this debt off at a 10% rate (pay more than required minimum payment ), it will only take you:

• 3 years to pay off this debt.

For more information, see:

Adventures in Education Credit Card Repayment Table


  

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New Credit Card Laws

February 22, 2010

The Credit Card Accountability Responsibility and Disclosure (C.A.R.D.) Act of 2009 will provide many protections from abusive credit card practices. Unless otherwise noted, these provisions are effective Feb. 22, 2010.

• For more information, go to:

Consumer Action

 

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