Consumer Protection

Credit Cards


Credit cards are nothing more than pre-approved loans. When you charge something on a credit card, the bank issuing the card lends you the amount of the charge and you repay the loan as you have promised in the agreement you signed to open the account.

Credit cards are not free:

  • Credit cards offer the convenience of a revolving line of credit, with applicable interest charges. Shop for the lowest interest rate. Some credit cards are offered with interest rates as high as 30 percent or more. If you do not promptly pay the full balance when using such a credit card, the interest charges you will incur will continue to increase.
  • Some credit cards are initially offered with an attractive interest rate that is only an “introductory” rate, and the interest rate increases significantly after a short period of time. If you maintain a balance, you will get stuck with high interest costs.
  • Some credit cards charge annual fees as much as $100 or greater.
  • Remember, the more you spend on interest and fees, the less you have to buy the things you want and need.
  • Credit cards may also have cash-advance fees.
  • Late payments will incur additional fees.

Tips:

  • It is best to pay off your balance every month. If you do not, you will be paying interest on any remaining balance which will greatly increase the effective cost of the items you have purchased with the card.
  • Do not get hooked on minimum payments. It will cost you more and take you longer to retire debt.
  • Shop for the lowest interest rate and lowest annual fee.
  • Do not run up a balance on a “teaser” rate card. An attractive interest rate offer may be temporary, and the permanent rate may be more than you can afford.
  • Avoid late payment penalties by always paying at least the minimum balance on time.
  • Think twice about signing up for “over-the-limit” protection. It may sound good, but it can be very expensive, especially on smaller transactions. It is better to have the transaction rejected so that you can choose a less expensive form of payment.
  • Be cautious about disclosing your account number over the telephone unless you know you are dealing with a reputable company.
  • Never put your account number on the outside of an envelope or on a postcard.
  • Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.
  • Never sign a blank charge slip.
  • Save your receipts to check against your monthly statements.
  • Cut up or shred old credit cards – cutting through the account number – before disposing of them.
  • Open monthly statements promptly and compare them to your receipts. Report mistakes or discrepancies as soon as possible to the address listed on your statement. Under federal law, the card issuer must investigate errors if you report them within 60 days of the date the statement was mailed.
  • Keep a record of your account numbers, expiration dates and telephone numbers of each card issuer so you can quickly report a loss.

CARD Act protections

Federal law now provides additional protections to consumers. The Credit Accountability, Responsibility and Disclosure (CARD) Act provides the following additional protections for consumers:

  • Low advertised interest rates, known as “teaser” rates, must remain in effect for at least six months after the card is issued.
  • Card issuers must periodically review rate increases and must reduce the rate if a higher rate is unfounded. In this case, however, exceptions are allowed for cards in which the rate is variable based on an existing independent index or where the rate increase is due to the expiration of a promotional rate.
  • In most cases an increased rate cannot be applied to an existing balance.
  • Payments must be applied first to the balance with the highest interest rate.
  • Issuers may not charge processing fees for payments made online, over the phone or by mail. However, the issuer may charge a fee for expedited processing.
  • The issuer must mail the monthly statement at least 21 days prior to the payment due date.
  • Penalty fees, including late fees and over limit fees, must be reasonable and balanced as determined by the Federal Reserve.
  • Fees to obtain a credit card cannot exceed 25 percent of the initial credit limit.
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