Department of Commerce and Consumer Affairs

3/15/13 [OCP]

Before applying for a credit card or accepting an offer of one, learn what credit terms and conditions apply. A credit card usually involves a charge for the convenience of borrowing, plus other costs. Consider the following when you shop for a credit card.

The ANNUAL PERCENTAGE RATE is expressed as a yearly rate. The card issuer must also disclose the periodic rate used to figure the finance charge on your outstanding balance for each billing period. Some credit card plans allow the APR on your account to vary as interest rates or other economic indicators change. These plans are commonly called “variable rate” plans.

A “FREE or GRACE PERIOD” allows you to avoid finance charges, if you pay your balance in full before the “due date” shown on your statement. If there is no grace period, the finance charge will be computed from the date you use your credit card to the date you pay the bill.

ANNUAL FEE. Most credit card issuers charge an annual membership or other participation fees.

Credit card plans may involve other costs such as a fee for using your card to obtain cash advances, failing to make a payment on time, or going over your credit limit. Some credit cards charge a flat monthly fee whether you use the card or not.

The method used to compute your balance can make a significant difference. The three common methods of calculating finance charges are: AVERAGE DAILY BALANCE, ADJUSTED BALANCE, and PREVIOUS BALANCE. Look for this information on the back of the credit card statement or ask the credit card company about its method before submitting your application for credit.

Credit terms differ, so shop around for the card that is best for you. If you plan to pay off your bills in full each month, the annual membership fee and other fees will be more important. If you expect to pay for what you’ve charged over time, the annual percentage rate and the balance computation method are more important considerations.

Card issuers are permitted to mail you applications for credit cards and to ask you by phone whether you want to receive a card, and will send you one if you say yes. But, federal law prohibits them from sending you credit cards you did not request. Renewal and substitute cards may be sent without you asking.

Federal law offers the following protection to consumers who use credit cards:

• The card issuer must credit your account on the day your payment is received, unless the payment was not made according to the creditor’s requirements or a delay in crediting your account will not result in a charge.
• The card issuer must promptly correct errors on your bill.
• The card issuer should give you a statement of rules when you open the credit card account and again at least once a year.

Keep your credit card receipts to compare with your bills. Notify the card issuer in writing within 60 days after receiving the bill, if you find an error. Send your notification letter to the address specified for “billing error” and include your name, your account number, the amount of the suspected error, and the reason you believe there is an error. The card issuer must look into the problem and contact you within two billing cycles and no later than 90 days after receiving your notification letter. During the investigation, you do not have to pay the amount in question.

If you receive credit for returned merchandise or paid more than you owed on the credit balance, you can request a refund if the balance amount is over $1. To obtain your refund, write to the card issuer. The refund must be sent to you no later than 7 business days after receiving your request. If a credit balance remains on your account for more than 6 months, the card issuer must make a good faith effort to refund the credit balance.

Federal law protects you if your credit card is used without your authorization. According to the law, you can be held liable only for $50 of any unauthorized charges per credit card. And, if you report the loss before the card is used, you will not be held responsible for any unauthorized charges. If your credit card is stolen and is used before you report it missing, the most you will owe for unauthorized charges is $50 per card. This is true if your credit card is used to gain unauthorized access to your credit account at an automated teller machine. To minimize your liability, always report the loss of your credit card as soon as possible in writing.

If you have a problem with the merchandise or services that you charged and was unsuccessful in your good faith effort to work out the problem with the seller, you have the right to withhold payment for the merchandise or service if you meet several conditions. The card you used must not have been issued by the seller of the merchandise or service in question, the purchase must be over $50, and it must have occurred in your home state within 100 miles of your billing address. If you don’t meet these conditions and you cannot withhold payment, you may want to file an action in small claims court to settle your dispute with the seller.