Frequently Asked Questions

What is a secured credit card?
Why are credit card issuers willing to give me credit?
What are charge cards?
Can I use a credit card to get cash from an ATM?
What are ATM cards?
What are debit cards?
What happens if my credit card gets stolen?

More ...

What is a secured credit card?
The main difference between secured and unsecured credit cards is that a secured card requires you to open and maintain a savings account as security for your line of credit. An unsecured card does not - good personal credit will help you get an unsecured card. If you do not have a good credit getting a secured credit card may be a place to start. If you get a secured card, make sure that your credit card company will send reports to the rating agencies so that good credit habits will begin to show on your credit report. The required savings deposit for a secured card may range from a few hundred to several thousand dollars. When you get a secured card, your credit line is a percentage of your deposit, typically between 50 and 100 percent. Check if the bank will pay interest on your deposit. In addition, you also may have to pay application and processing fees. Before you apply, be sure to understand the total fees associated with the card and if and how they will be refunded if you’re denied a card. A secured card can require an annual fee, a monthly fee and usually has a higher interest rate than an unsecured card.

Why are credit card issuers willing to give me credit?
Credit cards are very profitable to their issuers. The biggest profit maker is the high rate of interest - interest on credit cards alone accounts for 3/4 of the profits earned by banks that issue credit cards. Also, many companies charge an annual fee for issuing a credit card, and most companies charge late fees, ATM fees, over-the-limit fees and other miscellaneous charges. Credit card companies also profit by charging merchants and service providers a fee each time a customer uses the company's credit card in the merchant's establishment.

What are charge cards?
Charge cards, also called travel and entertainment cards are different from credit cards. Charge cards, such as American Express and Diners Club, have no credit limit. You can usually charge as much as you want, but you are required to pay off your entire balance when your bill arrives. Charge card companies make their profits by charging very high annual fees and by charging merchants fairly high fees each time a customer pays using the company's charge card. If you don't pay your charge card bill in, you'll get one month's grace, when no interest is charged. After that, you'll be charged interest and if you don't pay after about three months, your account will be closed and your bill sent to the collections department.

Can I use a credit card to get cash from an ATM?
Many people use their credit or charge cards to obtain cash advances. Cash advances are generally more expensive than standard credit card charges. Most banks charge a transaction fee up to 4% for taking a cash advance. They also charge interest from the date the cash advance is posted, even if you pay it back in full when your bill comes. Finally, the interest rate is often higher on cash advances than it is on ordinary credit card charges so check your credit card agreement carefully.

What are ATM cards?
ATM cards are issued by banks, essentially to give bank customers flexibility in their banking hours. In most areas, with an ATM card you can withdraw money, make deposits, transfer money between accounts, find out your balance, get a cash advance and even make loan payments at all hours of the day or night.

What are debit cards?
Debit cards combine the functions of ATM cards and checks. Debit cards are issued by banks, but are used at stores, not at the banks themselves. When you pay with a debit card, the money is automatically deducted from your checking account. Many merchants accept ATM cards as debit cards, but many merchants resisted. So now, banks typically issue a combined ATM/debit card that looks just like a credit card and can be used in places where credit cards are accepted. The money you spend comes out of your checking account immediately. Many banks and merchants charge transaction fees for using debit cards.

What happens if my credit card gets stolen?
In response to consumer complaints about the possibility of unlimited liability, Visa and MasterCard now cap the liability on debit cards at $50, the maximum for unauthorized charges on your credit card bill. And some banks don't charge anything if unauthorized withdrawals appear on your statement. Also, a number of states have capped the liability for unauthorized withdrawals on an ATM or debit card at $50.

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Credit Card Advice

Chances are you’ve gotten your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer
expires." Before you accept, shop around to get the best deal.

Credit Card Terms
A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost. So it’s wise to compare terms and fees before you agree to open a credit or charge card
account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application. You also may want to ask about these
terms when you’re shopping for a card.

Annual Percentage Rate

The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements.

The card issuer also must disclose the "periodic rate" — the rate applied to your outstanding balance to figure the finance charge for each billing period.

Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators — called indexes — change. Because the rate change is linked to the index’s performance, these
plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you’re considering a variable rate card, the issuer must also provide various information that
discloses to you:  that the rate may change; and how the rate is determined — which index is used and what additional amount, the "margin," is added to determine your new rate. 

At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change.

Free Period

Also called a "grace period," a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a credit card gives you a free period is especially
important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your credit card or from the date each transaction is
posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you’ll have enough time to pay.

Annual Fees

Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; "gold" or "platinum" credit cards often charge up to $75 and sometimes
up to several hundred dollars.

Transaction Fees and Other Charges

A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit card limit. Some
charge a monthly fee whether or not you use the card.

Balance Computation Method for the Finance Charge

If you don’t have a free period, or if you expect to pay for purchases over time, it’s important to know what method the issuer uses to calculate
your finance charge. This can make a big difference in how much of a finance charge you’ll pay — even if the APR and your buying patterns remain relatively constant.

Examples of balance computation methods include the following.

Average Daily Balance. This is the most common calculation method. It credits your credit card account from the day payment is received by the issuer. To figure the balance due, the issuer totals the
beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash
advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."

Adjusted Balance. This is usually the most advantageous method for card holders. Your balance is determined by subtracting payments or credits received during the current billing period from the balance at
the end of the previous billing period. Purchases made during the billing period aren’t included.

This method gives you until the end of the billing cycle to pay a portion of your balance to avoid the interest charges on that amount. Some creditors exclude prior, unpaid finance charges from the previous
balance.

Previous Balance. This is the amount you owed at the end of the previous billing period. Payments, credits and new purchases during the current billing period are not included. Some creditors also exclude
unpaid finance charges.

Two-cycle Balances. Issuers sometimes use various methods to calculate your balance that make use of your last two month’s account activity. Read your agreement carefully to find out if your issuer uses
this approach and, if so, what specific two-cycle method is used.

If you don’t understand how your balance is calculated, ask your card issuer. An explanation must also appear on your billing statements.

Other Costs and Features
Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than
the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many cards do not permit a grace period for the amounts due — even if they have a grace
period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are
definitely major considerations.

You’ll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan’s services and features. For example, you may be interested in "affinity cards" —
all-purpose credit cards sponsored by professional organizations, college alumni associations and some members of the travel industry. An affinity card issuer often donates a portion of the annual fees or
charges to the sponsoring organization, or qualifies you for free travel or other bonuses.

Special Delinquency Rates. Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. These rates sometimes exceed 20
percent. Information about delinquency rates should be disclosed to you in credit card applications or in solicitations that do not require an application.

Receiving a Credit Card
Federal law prohibits issuers from sending you a card you didn’t ask for. However, an issuer can send you a renewal or substitute card without your request. Issuers also may send you an application or a
solicitation, or ask you by phone if you want a card — and, if you say yes, they may send you one.

Cardholder Protections
Federal law protects your use of credit cards.

Prompt Credit for Payment. An issuer must credit your account the day payment is received. The exceptions are if the payment is not made according to the creditor’s requirements, or the delay in crediting
your account won’t result in a charge.

To help avoid finance charges, follow the issuer’s mailing instructions. Payments sent to the wrong address could delay crediting your account for up to five days. If you misplace your payment envelope, look
for the payment address on your billing statement or call the issuer.

Refunds of Credit Balances. When you make a return or pay more than the total balance at present, you can keep the credit on your account or write your issuer for a refund — if it’s more than a dollar. A
refund must be issued within seven business days of receiving your request. If a credit stays on your account for more than six months, the issuer must make a good faith effort to send you a refund.

Errors on Your Bill. Issuers must follow rules for promptly correcting billing errors. You’ll get a statement outlining these rules when you open an account and at least once a year. In fact, many issuers
include a summary of these rights on your bills.

If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you
didn’t accept, or for an item that wasn’t delivered as agreed. Of course, you still have to pay any part of the bill that’s not in dispute, including finance and other charges.

If you decide to dispute a charge: 

Write to the creditor at the address indicated on your statement for "billing inquiries." Include your name, address, account number, and a description of the error. 
Send your letter soon. It must reach the creditor within 60 days after the first bill containing the error was mailed to you. 

The creditor must acknowledge your complaint in writing within 30 days of receipt, unless the problem has been resolved. At the latest, the dispute must be resolved within two billing cycles, but not more than
90 days.

Unauthorized Charges. If your card is used without your permission, you can be held responsible for up to $50 per credit card.

If you report the loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your credit card before you report it missing, the most you’ll owe for unauthorized
charges is $50.

To minimize your liability, report the loss as soon as possible. Some issuers have 24-hour toll-free telephone numbers to accept emergency information. It’s a good idea to follow-up with a letter to the issuer
— include your account number, the date you noticed your card missing, and the date you reported the loss.

Disputes about Merchandise or Services. You can dispute charges for unsatisfactory goods or services. To do so, you must: 

have made the purchase in your home state or within 100 miles of your current billing address. The charge must be for more than $50. (These limitations don’t apply if the seller also is the card issuer or
if a special business relationship exists between the seller and the credit card issuer.) and, 
first make a good faith effort to resolve the dispute with the seller. No special procedures are required to do so. 

If these conditions don’t apply, you may want to consider filing an action in small claims court.

Shopping Tips
Keep these tips in mind when looking for a credit or charge card. 

Shop around for the plan that best fits your needs. 
Make sure you understand a plan’s terms before you accept the credit card. 
Pay bills promptly to keep finance and other charges to a minimum. 
Hold on to receipts to reconcile charges when your bill arrives. 
Protect your cards and account numbers to prevent unauthorized use. Draw a line through blank spaces on charge slips so the amount can’t be changed. Tear up carbons. 
Keep a record — in a safe place separate from your cards — of your account numbers, expiration dates and the phone numbers of each issuer to report a loss quickly. 
Carry only the credit cards you think you’ll use. 


For Help and Information
Questions about a particular issuer should be sent to the agency with jurisdiction.

National Banks
Comptroller of the Currency
Compliance Management, Mail Stop 7-5
Washington, DC 20219

State Member Banks of the Reserve System
Consumer and Community Affairs
Federal Reserve Board
20th & C Streets, NW
Washington, DC 20551

Federal Credit Unions
National Credit Union Administration
1776 G Street, NW
Washington, DC 20456

Non-Member Federally Insured Banks
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth Street, NW
Washington, DC 20429

Federally Insured Savings and Loans, and Federally Chartered State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552



Credit Card Fraud Information

Credit and charge card fraud costs cardholders and issuers hundreds of millions of dollars each year. While theft is the most obvious form of fraud, it can occur in other ways. For example, someone may use
your card number without your knowledge.

It's not always possible to prevent credit or charge card fraud from happening. But there are a few steps you can take to make it more difficult for a crook to capture your card or card numbers and minimize
the possibility.

Guarding Against Fraud
Here are some tips to help protect yourself from credit and charge card fraud.

Do: 

Sign your credit cards as soon as they arrive. 

Carry your credit cards separately from your wallet, in a zippered compartment, a business card holder, or another small pouch. 

Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place. 

Keep an eye on your credit card during the transaction, and get it back as quickly as possible. 

Void incorrect receipts. 

Destroy carbons. 

Save receipts to compare with billing statements. 

Open bills promptly and reconcile accounts monthly, just as you would your checking account. 

Report any questionable charges promptly and in writing to the credit card issuer. 

Notify credit card companies in advance of a change in address. 

Don't: 

Lend your credit card(s) to anyone. 

Leave credit cards or receipts lying around. 

Sign a blank receipt. When you sign a receipt, draw a line through any blank spaces above the total. 

Write your account number on a postcard or the outside of an envelope. 

Give out your account number over the phone unless you're making the call to a company you know is reputable. If you have questions about a company, check it out with your local consumer
protection office or Better Business Bureau. 

Reporting Losses and Fraud
If you lose your credit or charge cards or if you realize they've been lost or stolen, immediately call the issuer(s). Many companies have toll-free numbers and 24-hour service to deal with such emergencies. By
law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card.

If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchase(s) in question.

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