Correction of Billing Errors and Other Rregulations of the Fair Credit Billing Act

This important piece of legislation is designed to give consumers a method of dealing with the errors in — or disputes about — billing that are almost certain to occur from time to time in credit card accounts. The difficulties can arise for any number of reasons. The company may fail to credit you for a payment you have made. It may charge you for an item bought on someone else’s card. It may fail to credit you for an item you returned. Sometimes, such errors can be corrected informally, through a phone call to the credit card company. But a phone call will not trigger the safeguards that the law provides, and for this reason wise consumers stick scrupulously to the procedures the legislation outlines.

First, the law permits you to withhold payment for any item while it is the subject of a dispute, and also to withhold payment of any minimum fees or finance charge that may be associated with it. But you are required to pay all other charges, and should. Then, the law requires you to write a letter to the company that issued the card, directing it to the office listed on your bill as the one authorized to deal with inquiries and complaints. The letter — which should be sent separately from your payment — should include your name, account number and date and should clearly and specifically describe the problem about which you are complaining, indicating the item you question, the amount of money involved and why you believe the company is in error in making the charge.

The law requires that the company receive this letter no later than 60 days after your bill was mailed to you; if you delay sending the message until nearly the end of that 60-day period, it might be advisable to send it by certified mail, requesting a return receipt. The company cannot threaten your credit rating or dispute your account because you question a bill, and it must acknowledge your letter in writing within 30 days and inform you of its decision no later than 60 days thereafter. If the decision is in your favor, your account must be corrected to reflect this fact. The charge — and any fees you may have paid in connection with it — must be removed or the credit entered. If the decision is not in your favor, the company must send you a letter providing you with proof– a copy of the sales receipt, for example — that the company is correct, together with a statement of what you owe, which may include any finance charges that have accumulated and any minimum payments you did not make during the period of the dispute.

If you find the company’s decision unacceptable, the law gives you at least 10 days to write again. But it also gives the company the right to report you as a delinquent and to take action to collect. Even then, however, you have the right to disagree in writing, to obtain from the company the name and address of every firm to which your delinquent status has been reported and to enter your side of the story in your credit record. When the matter is finally settled, the company must report the outcome to every organization that has received information about it.

If the error concerns a charge for goods not yet delivered, the credit card company cannot conclude that there is no mistake in the billing until the goods have actually arrived. If you fail to reach a satisfactory solution, contact your state banking commission if the card was issued by a bank in your state. Otherwise, write to your state attorney general’s office.

How To Optimise Your Credit Card Expenses?

Although most credit card accounts carry the same annual interest rates, they do not all calculate monthly interest charges the same way. Consequently, consumers may find themselves paying differing amounts in interest on the same purchases.

For example, if the interest is calculated on the basis of the consumer’s average daily balance, a cardholder who owes $200 at the beginning of the 30-day billing cycle and pays $100 on the 15th day will be charged interest on $150 (15 days at $200 plus 15 days at $100, divided by 30). This means that average daily balance accounts should be paid as early in the month as possible, since this reduces the amount on which interest is owed.

On the other hand, if it is calculated on the basis of the adjusted (or unpaid) balance, that same cardholder will pay interest only on the $100 owed at the end of the cycle. In this case, therefore, cardholders can safely wait to the end of the cycle to pay their bills — provided, of course, that they are careful not to make purchases at that time.

The third method of calculation, based on the previous balance, is illegal in some states and, in any event, undesirable for consumers, since it charges consumers the amount owed when the cycle opens — in this case, $200.

What Is A Debit Card?

Debit cards are less common than credit cards, but an increasing number of banks and savings institutions offer them now. You can use debit cards like credit cards in making purchases. However, unlike credit cards, which bill you later for the amount you have been charged, debit cards transfer your money immediately and directly out of your account with the bank.

With a debit card you can draw on a checking account, a savings account, and, with some, a personal line of credit extended by the bank as an overdraft privilege — you can even draw from a predetermined loan that is secured by your home or other property as collateral.

Debit cards are being used more and more in such places as department stores and supermarkets. Instead of having to cash a check with the manager’s approval, or using the store’s own charge card, a clerk inserts your debit card in a point-of-sale terminal and types in the information, and the amount is immediately deducted from your account at the bank.

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What Is A Bank Credit Card?

Credit cards, whether issued by banks or other institutions, are another form of revolving credit. These cards entitle their holders to a predetermined maximum against which they may borrow, and the principal repaid is automatically restored to the credit line.

You can use a credit card to pay for goods and services from participating stores, restaurants, airlines and the like and can also borrow cash against it. Interest rates on bank-card purchases tend to be high, and the rates for cash advances even higher. Business institutions that accept credit cards pay a fee to the issuer — the bank, for example — to help defray the cost of credit card transactions, while on a cash advance the customer must bear the entire cost.

Thousands of banks around the country offer major credit cards and until recently, most of them were issued without charge. Many customers made use of their cards to purchase goods and services and then, by paying in full during the first billing period, avoided all interest charges. In effect, these people were taking out short-term, interest-free loans.

As this practice defeated the banks’ purpose in issuing credit cards — to encourage purchases on credit so that the bank could earn interest — many institutions began charging membership fees of $15, $20 or more a year for the use of their cards. Some banks have waived fees in order to attract new customers, and others offer cards free of charge to those who maintain accounts with the bank. Because the interest rates on credit card purchases may vary from one institution to another, it is a good idea to check with a number of banks before deciding to sign up for a credit card.

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If you lose your checkbook and a check is forged in your name, you are generally not liable; it is the responsibility of the bank to know the depositor.

Of course, it is in your own best interest to report the loss immediately to your bank. There are some special circumstances under which you might have trouble. For example, a skilled forger who has a sample of your signature may conceivably withdraw your entire balance. Informing the bank promptly will save you problems and, possibly in some limited circumstances, loss of funds.

Make certain to check the next monthly statement that you receive to discover whether you have been charged for a forged check.

Lost or misplaced bank credit cards or department store charge cards should be reported as soon as the loss is discovered. While the original card holder may be liable for a maximum of $50 (per card) — card issuers buy insurance against a thief’s shopping sprees or purchase of a first class flight to some distant pleasure island — it is nevertheless to your benefit to have those accounts closed and new registration numbers issued to you (and anyone else authorized to charge purchases on those accounts). If there have been charges which you did not make, you will have to go through the burden of having the billing corrected, including having to demonstrate that the purchases were not in fact made by you. To the extent that credit card issuers bear losses due to forged credit card purchases, there may be increased fees associated with procuring credit cards for all customers. And finally, there is a civic responsibility to report crime to appropriate officials.

It is important, therefore, to have an up-to-date list of your credit card numbers in a safe place other than the wallet or purse in which you carry your credit cards.

Holders of several cards may wish to purchase credit card insurance. For a modest fee, the insuring company retains the list of all of your account numbers and immediately notifies all of the issuers once you call to report a loss or theft. These companies also supply warning labels to paste on your credit cards, which, it is hoped, will deter a thief from making criminal use of the accounts.

A bank customer standing in line one evening to buy some theater tickets, discovered, when he got to the window, that his wallet was missing. In the jostling crowd, a professional pickpocket, Jimmy the Lift, had deftly removed the wallet, which contained several credit cards and a bank electronic fund transfer (EFT) card and personal identification number (PIN). The victim immediately called the credit card companies to notify them of the loss, but did not call the bank, on the assumption that it was closed.

Jimmy the Lift, being conversant with electronic banking, made his first stop at a nearby branch of his victim’s bank. He let himself into the bank’s 24-hour vestibule with the card, then withdrew $300, the maximum permitted in cash withdrawals at one time.

The next morning the victim called the bank as soon as it opened for business. Because he notified the bank within 48 hours of his loss, his personal liability was limited to $50 and the bank restored the remainder of $250 to his account.

Not so alert, or fortunate, was another of Jimmy’s targets, who also lost his EFT card and PIN to Jimmy’s educated hands. Unlike the first victim, this man neglected to notify his bank, and Jimmy made off with his savings as well as $1,000 from his automatic line of credit. Moreover, because the victim did not look at the bank statement on which these withdrawals appeared, but simply filed it away for examination several months later, he could not recover any of the stolen money. Since more than 60 days had by then elapsed between the time the bank sent him the statement and he reported the error, his liability was unlimited. (See discussion of Electronic Funds Transfer Act)

Moral: Never carry both your EFT card and your PIN together in your wallet or purse, and notify your bank immediately if your card has been stolen or misplaced.

The proliferation of automatic teller machines (ATM’s) prompted criminals to find ways to put them to their own use. One New York City bank, for example, placed pairs of ATM’s in the lobbies of its branches, along with a telephone linked to a clerk who answered questions about the new machines. A depositor wanting to use an ATM would often find another “customer” already present, talking on the phone. Before the depositor finished his transaction, the other person would say that the clerk had just told him the depositor’s ATM was malfunctioning, but the other was working. Unsuspecting, the customer would take his card from the first ATM and move over to the other.

The phone user would then surreptitiously watch the customer punch his personal identification number into the second machine and make a note of it. When the depositor had completed his transaction, the thief would say that the clerk wanted the depositor to insert his card in the supposedly malfunctioning ATM so that bank officials could figure out what was wrong. In complying, the depositor would activate the ATM — enabling the thief, once the depositor left, to use the victim’s identification number to withdraw money from his account.

This scam cost New York bank patrons many thousands of dollars before it was discovered. At first the bank refused to ‘ take responsibility, contending that it was up to its customers to exercise due caution in the use of the automatic tellers. New York State’s Attorney General disagreed and threatened suit against the bank under the Electronic Funds Transfer Act. The bank finally agreed to make restitution to the victims, and to pay interest on the funds fraudulently withdrawn. The bank hastened to adjust the machines so that it was no longer possible to work the scam. But all banks in the United States may not have taken this precaution, so beware…

The most common fallacy : Cheap credit cards is an easy way to borrow money.

At the first glance, inexpensive credit cards seem to be an easy way of borrowing. But for some people they can be a far too easy way to get money and, in despite of common sence, a very costly one. It is quite a usual practice that credit card issuers apply interest rates three times as high as the bank’s current annual interest rates.

How do banks calculate interests on credit card accounts?

This point turns to be fairly confusing, particularly when you are trying to choose between competing offers from credit card issuers. One and the same credit card may deal with as many as three or four different interest rate quotations. First of all, your credit card account will be charged monthly on the outstanding balance. On average, the interest you have to pay every month fall between 0.75 and 1.5 per cent. It sums up to the annual interest rate spread of 9 to 18 per cent. Though you can find credit cards with both cheaper and more expensive interest charges most of them will vary within this narrow range.
Sometimes the issuers of cheap credit cards apply very low or zero introductory interest rates. Low rates are used as an enticement to attract new customers and are usually valid only for a short term. Not longer than for one year. Be very careful with such appealing proposals for the next reasons. As a rule the attractive introductory rates don’t cover the transfer of outstanding balances from other credit cards until you have paid them out. And once the introductory period is over the interest rate may grow dramatically.

What other hidden gimmicks may credit cards conceal?

Credit card issuers may charge various annual or monthly fees. Depending on the banking institution, these fees can range from nothing to more than $150 a year. Some credit cards issuers may offer you lower interest rates for higher fund turnover. In other words, the more money you spend on the card, whether you pay it off or not, the lower interest rate you will be charged. All these altering charges can be quite confusing. It brings certain difficulties determining the resulting annual percentage rate (APR) quotation, the legally required percentage rate specification which is designed to show you the factual cost of borrowing. So not always you know exactly how much you will pay for the conveniences of credit card utilization.

Credit card is a small piece of plastic that holds information in a magnetic strip or microprocessor, used by banks or other business institutions in financial activities for deferring payment. I.e. credit card allows card holder to purchase goods and services and pay for them later, often with interest.

Would you like to know how credit cards work, how interests are charged and how much you should pay off each month? Whether cheap credit cards make sense for borrowers and how the most reliable credit card issuers provide you with profound consumer protection.

Credit cards, debit cards, charge cards. What are their pros and cons?

Credit cards, even so-called ‘cheap’ ones, are a form of potentially open-ended borrowing. The card issuer will set you a maximum credit limit and you may spend as much as you like up to that limit, provided that you pay a minimum amount off each month. Only credit cards can provide you with a credit for an extended term. A debit card, on the other hand, will be linked to your bank account, usually your checking account. The cost of anything purchased with this card or any money withdrawn from the bank can be taken from your account instantly. You might find it more convenient to visualize a debit card as a plastic cheque! When using a charge card, you can make purchases and in some cases withdraw cash using the card, i.e. charge these costs to the card account. However, you will be required to settle down all payments each time you are sent a statement of your account, usually monthly.

Store cards and affinity cards. What are they?

Store card is a credit card issued by a particular retailer offering credit in its chain of stores. The main reason to have a store card is the situation when a retailer does not accept other credit cards. In general terms you should beware of store cards, they can and sometimes do charge up to a third as much as standard credit cards.

Unlike to store cards affinity cards are not tied to a particular store but rather to a particular, usually charitable, cause. This means that a donation will be made to the charity when you are issued with the card and whenever you make a transaction on the card a small donation will also go to the charity.

Credit card charges. How much may your credit cards cost?

It is a matter of course that most credit cards will require a recurring minimum payment of $10 or a small percentage, about 3% or 5% of the outstanding balance on your credit card account. Beware that some credit card providers stipulate an even lower minimum payment of just 2.25% or the total of charges (interest, insurance, handling fees etc) plus $10, whichever is lower. But it is most likely that this is not a way for you to save money. Usually, it happens so that the less you pay off, the more interest you are charged.

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