What You Need to Know About
Credit and Debit Card Billing Issues
Credit cards can offer numerous benefits to consumers, including a convenient way to pay for purchases, the ability to build a credit history, and the potential for rewards. But to make the most of your credit cards, it helps to be an informed consumer.
This guide will help you shop for and use credit cards.
- Comparing Credit Cards
- Understanding the Cardmember Agreement
- Consumer Protections on Credit Cards
- Credit Card Billing Errors and Your Liability
- Additional Resources
Comparing Credit Cards
Each credit card offers different terms and benefits, so it is important to shop around to find the best one for you. Federal law requires creditors to disclose important rate and fee information to you before you apply for a credit card, which makes it easier for you to compare cards. Consider these things when shopping:
- Annual Percentage Rate (APR): The APR represents the annual cost—both interest and fees--of the credit card. A credit card may charge different APRs for purchases, balance transfers from another card, and cash advances. The higher the APR, the more expensive the cost of using the card to finance purchases. In addition, some credit cards offer introductory rates, which are special low interest rates that will increase once the promotional period ends.
- Fees: These can include annual fees, balance transfer fees and cash advance fees (in addition to any interest you might pay), foreign transaction fees, and penalties for late payments or returned payments. When shopping for a card you should determine if these fees will change over time. For example, some cards will waive an annual fee for the first year but will charge it in later years.
- Rewards: These programs can be complicated, with specific eligibility rules. Know what you need to do to qualify for rewards, which might include meeting spending requirements, and how much you would have to spend to accumulate enough points or miles to get what you want. Also understand what you need to do to maintain your reward points, since they can sometimes expire if an account is closed or considered inactive.
Again, this information must be disclosed to you before you apply for a credit card.
Understanding the Cardmember Agreement
Opening a credit card means entering into a contract with the credit card company, so you want to make sure you understand the terms you are agreeing to and choose a card that has the best terms and rewards for you.
The terms and rewards also will be outlined in the Cardmember Agreement, which you will get when you get your card in the mail. (More information about credit card programs is included in this March 2019 FDIC Consumer News article). If you cannot find the agreement, contact your credit card company for a copy.
Opening a credit card and making on-time monthly payments is a good way to build positive credit history. (Learn more about credit reports and credit scores in the June 2019 FDIC Consumer News article.) In addition, if you do not pay your account on time or you go over your designated credit limit, the lender may charge you a fee.
The credit card company may take action on your account based on the overall credit history on which the credit score is based. This may include lowering your credit limit, closing your account or suspending your charging privileges based on your credit score even if you have paid your account with them as agreed. If you have questions regarding what is happening with your account, contact your financial institution.
Consumer Protections on Credit Cards
Federal laws provide important protections for credit card users. These include:
- If your card is lost or stolen, your losses may be limited to $50 as long as you notify your issuer promptly. You may not be responsible for any charges if you report your loss before your credit card is used.
- Your issuer generally must provide a 45-day advance notice of any interest rate increase, fee increase, or any other significant changes in account terms.
- Your issuer cannot permit you to go over your credit limit and then charge you a penalty fee for having done so unless you explicitly agree to it (or “opt-in”).
- To opt-in, you must tell your credit card issuer that you want it to allow transactions that will take you over your credit limit. If you do not opt-in, your credit card company may refuse to process any transaction that puts you over your credit limit.
- Your issuer must show you the cost of credit as a dollar amount and an annual percentage rate (APR), and disclose terms in a meaningful and uniform manner.
- If you fall behind on your credit card payments, debt collectors may not use abusive, unfair, or deceptive practices to collect money from you.
- Lenders, servicers, debt collectors must provide accurate information to credit reporting agencies. Credit reporting agencies must also report accurate information you. Once a year, you may request a free copy of your credit report from each agency by telephone, mail, or at annualcreditreport.com.
Credit Card Billing Errors and Your Liability
If you use a credit card, you may have experienced some type of billing error, such as an unauthorized charge, a charge listed on your monthly account statement with the wrong date or amount, charges for goods that weren’t delivered as agreed, or failure to post payments or other credits. Federal law provides a means for correcting these types of account errors as long as the financial institution involved is notified in a timely manner.
The Truth in Lending Act (TILA) provides a process for disputing billing errors for open-end credit, such as credit cards. In order to take advantage of these protections, you must notify the lender of any billing errors by:
- Providing the notice in writing,
- Enabling the lender to identify your name and account number,
- Stating why you believe there is a billing error,
- Stating the type, date, and amount of the error, and
- Sending the notice in a timely manner so that the lender receives it, at the address specified for billing inquiries, no later than 60 days after the lender sent the first billing statement reflecting the error.
Once you properly notify the lender about an error on your statement, it must acknowledge that it received this notification within 30 days, unless the problem has been resolved. The lender must investigate and resolve the issue within two complete billing cycles (but in no event later than 90 days) after receiving the billing error notice.
While the lender conducts its investigation into the billing error:
- You may withhold payment of the disputed amount and related charges. However, any part of the bill not in question, including finance charges on undisputed amounts, must be paid in accordance with account terms.
- The lender may not take legal or collection action on the disputed amount.
- The lender may not report your account as delinquent, accelerate your debt, restrict your account, or close your account.
If the lender confirms there is a billing error on your account, it must send you a written explanation of the corrections made to your account. In addition to crediting your account for the disputed amount, the lender must also remove all finance charges, late fees, or other charges related to the error.
If the investigation reveals no error occurred, the lender must send you a written explanation of the amount you owe, and you are responsible for paying the disputed amount, plus any finance charges that accumulated during the investigation.
You may request copies of relevant documents used in the lender’s investigation. If you disagree with the results of the investigation, you may write to the lender within 10 days after receiving the explanation, and you may indicate that you refuse to pay the disputed amount. The lender may begin collection procedures and may report your account as delinquent to credit reporting agencies, but it must also note that you disagree with the amount owed.
In addition to the consumer protections associated with billing errors, TILA also contains special credit card provisions that limit your liability for unauthorized use of a credit card. If you realize that an unauthorized user has made purchases with your card, notify the card issuer right away – in person, by telephone, in writing, or through a mobile app if available. Doing so limits your liability to $50. If you wait, you could be held responsible for much more.
