Personal Finance Credit Cards

Types of Credit Cards Bank card – Visa, MasterCard Store card – Macy’s, Kohl’s, Boscovs Travel and Entertainment – American Express

Shopping for a Credit Card Determine the best use of a card as a personal money management device – Pay bill in full each month and avoid interest – Repay bill over time and pay interest Costs and features of credit cards – Annual Percentage Rate (APR) – Grace Period – Annual Fee – Late payment fee and other fees – Minimum monthly payment – Balancing computation method for finance charge – Credit limit – How widely card is accepted – What services and features are available

Shopping for a Credit Card (cont’d) Calculating finance charges Comparing the costs and features of credit cards Reading a credit application – Interpreting features and costs Before signing – Know the details of the contract Shopping for a credit card – Compare costs and features

Reading a Credit Card Statement What it looks like How to read one

Dealing with billing errors Fair Credit Billing Act Steps to take – You can challenge a billing statement for errors such as charges for unauthorized purchases, charges for items never delivered, failure to credit a payment, etc – You must notify the creditor of a disputed item within 60 days – Creditor must investigate and, within 2 billing periods, either correct the mistake or explain why the charge is not in error – You cannot be billed for or forced to pay the disputed amount until the creditor has finished the investigation

Dealing with billing errors (cont’d) If it is determined that you are responsible for the bill, you must be given the usual amount of time to pay it. Your credit history is protected during the dispute process Creditor must supply customers with a statement of their rights at the time the account is opened and at least twice a year thereafter.

Other Credit Card Protections Prompt credit reporting – Your account must be credited on the day your payment is received Refund of credit balances – If requested, card issuer must send refund within 7 business days of receiving your request Unauthorized charges – If you are the victim of identity theft or card fraud, you will typically not be held responsible for the charges under the card’s zero-liability program Disputes about merchandise or services – In some circumstances you have the right to dispute payment for merchandise or services

How you can Protect Yourself Keep records of – Card number – Phone number to call if lost or stolen – Until bill arrives, receipts for purchases and returns – Receipts for merchandise ordered that has no yet arrived but appears on your bill – Record of telephone orders and confirmation #

How to protect yourself (cont’d) Protect yourself against fraud – When using card, keep it in sight – Never give # over the phone if you did not initiate the call – Report lost or stolen cards immediately – Carefully read the bills before paying. Compare amount on receipts to amounts on bills. – Keep receipts, shred when not needed – Destroy unused credit card soliciations – Shop only on secure websites – Don’t write down your pin and carry it with your card

Summary of credit card do’s and don’ts Shop around Look at various sources Read contract carefully Don’t rush into signing anything Once signed, get copy of contract Know the penalties for missed payments Figure out the total price when paying with credit Pay bills in full or at least make the largest payments you can comfortably can Don’t be misled into thinking small payments will be easy.

Advantages of using credit cards Ability to obtain needed items Use of card builds credit history Quick source of funds in an emergency No extra charge if bill is paid in full each month Consumer protection

Disadvantages of using credit cards Credit cards are loans that charge interest if not paid in full Fees might be charged for late payments or going over spending Can encourage impulse buying and unnecessary purchases Need to establish creditworthiness before getting card

What to do if you’re denied credit If you think the reasons for the denial are valid – Ask the creditor if you can provide additional info or arrange alternate credit terms – Apply to another creditor whose standard may be different – Do the things you need to do to improve your creditworthiness (pay on time, increase income, reduce spending) and then reapply

What to do if you’re denied credit (cont’d) If you are not sure whether the reason for the denial is valid – Ask the creditor to explain why you were denied – Review your credit history – If you find your credit history contains errors, take steps to correct the errors

What to do if you’re denied credit (cont’d) If you believe the reason for the denial is invalid and that the creditor has discriminated against you – Notify the federal enforcement agency whose name you were given by the creditor. The federal enforcement agency will investigate and report back to you. – If you can afford it, hire an attorney to file suit against the creditor. If the court determines the creditor did discriminate, the creditor will be required to pay you actual damages plus punitive damages

Cost of Credit Use Cost of Credit calculator at practicalmoneyskills.com