CLOSE UP:LEGAL PROTECTION FOR CARDHOLDERS

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The Fair Credit Billing Act of 1974 offers cardholders significant protection against billing errors made by the card issuer or the merchant and limited recourse if you are dissatisfied with the goods or services you have charged on your card.

Billing Errors

Billing errors for which the issuing bank is responsible include failure to record payments that you made and mathematical errors made in totaling your charges or calculating the finance charge.

Billing errors for which merchants are responsible include charges for items you did not order or never received; items delivered to the wrong address, in the wrong quantity, or so much later than promised that the bill arrived before the item; and items that turned out to be different from what you had ordered. Seguir leyendo CLOSE UP:LEGAL PROTECTION FOR CARDHOLDERS…

LOSS AND FRAUDULENT USE

Although MasterCard and Visa report annual losses of about $250 million resulting from the counterfeiting, theft, or fraudulent use of their cards, your personal responsibility as a cardholder is strictly limited.

If your card is lost or stolen, you are expected to report its loss promptly to the issuing bank through the 24 hour telephone hotline number the bank provides.  If you report the loss before a finder has made any use of the card, you are not responsible for any charges.  If unauthorized use has been made before you report the loss, you will waive the charge.  If, however, unauthorized use of your card was made without actual presentation of the card—as in the case of a telephone order—you are not liable for any amount.  Because if these limits, the various credit card insurance policies, which cost several dollars a year, may not be worth buying.

Although loss of a card will do you no major harm financially, it can inconvenience you seriously, because as soon as you report the loss, the bank cancels your card and may take as long as two weeks to set up a new account for you.  In the interim, your card is unusable, even if is should turn up at home or be returned by the finder.  For this reason, and to protect yourself against other unauthorized uses, we suggest you take the following precautions: Seguir leyendo LOSS AND FRAUDULENT USE…

The Dangers of Plastic Money

As we have noted, charge cards offer some conveniences at relatively low cost to cardholders who consistently pay the charges in full each month.  But for those cardholders who are less orderly in managing their finances they can be extremely hazardous.  The issuers of MasterCard and Visa write off $1.9 billion annually in uncollectible charges, dramatic evidence of the overspending and the very serious indebtedness that cards can produce.  The vast proportion of personal bankruptcies precipitated by the irresponsible use of charge cards provides further proof of the danger of their uncontrolled use.

There are several reasons why a charge card can easily lead its holder into financial difficulties.  Purchasing an item with a piece of plastic does not give the buyer pause, as it might if he or she had to use actual cash or determine the bank balance before writing a check.  The card makes impulsive—and unnecessary—buying  all too easy, allowing many to disregard budgetary restraints and to use the card for restaurants, travel, and clothing they cannot afford. Seguir leyendo The Dangers of Plastic Money…

SHOPPING FOR CHANGE CARDS

When shopping for charge cards, you should weigh several factors:

Interest rate    The finance charges should be you be your first consideration. To get the best rate, shop around by telephone to compare rates in your area.  Keep alert for articles in newspaper and personal finance publications that list especially low rates.  Some estate banking authorities and consumer organizations periodically survey credit card rates.

Annual rate      Most, though not all, banks that issue credit cards levy an annual fee, as do the major T & E companies.  Department store and oil company charge cards usually cost nothing but have, of course, very limited acceptance.

Some cards advertised as free, however, are in fact not free at all.  Although they make no annual charge, some levy a prepayment fee on accounts that are paid in full each month and some charge the cardholder $1.50 for each month in which the card is used—in short, an $18 annual fee collected in installments. Seguir leyendo SHOPPING FOR CHANGE CARDS…

CONVENIENCE AND ITS COSTS

A major convenience of a charge card is that it allows you to buy merchandise, meals, and even theatre without carrying a substantial amount of cash in your wallet or purse.  The cash you would otherwise have to carry would be subject to theft or loss.  Even if it were not lost or stolen, it would lose the interest it could be earning in a savings account until your monthly payment is due.

Merchants who might balk at accepting your personal check have no hesitation about allowing you to use your charge card, thus giving you at least two or three weeks before you have to pay for you purchase.  Charge cards can also permit you to take advantage of special sales that you encounter when your checking balance is low or you are not carrying enough cash. Seguir leyendo CONVENIENCE AND ITS COSTS…

YOUR PERSONAL CHARGE CARD PORTFOLIO

The typical cardholder carries seven cards, which probably were accumulated haphazardly rather than selectively and which undoubtedly duplicate one another to some extent. Cardholders who use this entire collection actively may find themselves writing more checks than necessary and risking more difficulties should the cards go astray. You should keep the number of cards to a minimum and make certain that each card meets particular needs or provide specific advantages not available with the others.

Because spending patterns vary widely, it is impossible to suggest a typical portfolio. But, in general no more than three or four cards should adequately serve your needs.

Both MasterCard and Visa are so popular and so widely accepted that there is no need to carry both of them. Seguir leyendo YOUR PERSONAL CHARGE CARD PORTFOLIO…

Debit Cards

Although a debit card is neither a credit nor a T & E card, it is often confused with a charge card because it is similar in appearance and can be used in the same situations. A debit card offers you no credit whatever. Instead, the moment the merchant processes your transactions, the charges is electronically deducted from the card’s associated checking account balance. The only advantage offered by this type of card is that it frees you from having to write personal checks and persuade merchants to accept them. On the other hand, if your checking account earns interest, this instant deduction will lose you interest for the two or three days that are required for a personal check to clear.

Premium Cards and Secured Credit Cards

Premium Cards 

For many, a charge card of any once served as a status symbol, but as the cards proliferated, their symbolic value dropped.  Premium cards are supposed to bring it back.  American Express has a premium gold and platinum card, both of which have more stringent eligibility standards.  MasterCard and Visa also offer premium cards.  Because these cards impose higher annual income requirements—from $20,000 to as high as $100,000—displaying them conspicuously may advertise the cardholder’s affluence, but they offer few advantages to justify the typically higher annual fee.  Generally they carry a lower interest rate on unpaid balances (presumably because their cardholders are good credit risks), but since most high income cardholders pay off monthly balances right away, the lower interest rate offers little actual savings.

Secured Credit Cards

For people who have not established a credit rating or have one that is inadequate to  qualify them for any charges card, some banks provide what is known as secured of credit card.  Under this arrangement, the applicant deposits sum of money–$2,000, for example Seguir leyendo Premium Cards and Secured Credit Cards…

Travel and Entertainment Cards

Travel and entertainment (T&E) cards—issued primarily by American Express and also by Diners Club and Carte Blanche—generally do not offer cardholders a credit arrangement and require payment in full (except for travel-related charges) at the end of each billing period.  The issuers of T & E cards derive their income from a substantial annual membership fee (ranging from $35 to $250) and commission from participating merchants.

Traditionally, T & E cards were used primarily for travel and entertainment expenses by business who needed to keep separate records for business expenses.  Self-employed individuals also have found them in helpful in calculating their tax deductions.  Today of course, T & E cards are being used for all kinds of purchases.  American Express has also recently introduced Optima, a credit card that does offer installment payments at a relatively low rate of interest, but applicants for his card must also hold the regular American Express Card. Seguir leyendo Travel and Entertainment Cards…

CHARGE CARDS

In this series we will start talking about charge card and how you can use it to manage your money effectively.

Although advertisements try to convey the impression that a charge card will enhance your social status and give you access to glamorous and exotic restaurants and resorts, the fact is that it is hardly an admission ticket to membership in the elite class.  American  carry more than 500 million charge cards in their wallet (with more than $104 billion owed on them), and the annual income requirements for the most widely used cards may run as low as $5,000.  Stripped of their glamour, the advertisements for charge  cards are really selling credit – in a sometimes insidious and most expensive form.  Far from constituting an elite group, many card holders are severely pressed to meet either the minimum payments on their monthly credit card statements or the entire balance due on their charge bill.

In addition to credit, however, a charge card offers you convenience—at relatively low cost if, like some 50 percent of all card holders, you pay your monthly bill in full.  Whether they pay these bills in full or use their cards as a source of credit, all cardholders can enjoy this convenience, but it comes at a price –often an exorbitant price for the credit users.

Many cards also offer extras—discounts at some retailers extended warranties on items purchased with the card, and car insurance.  Those add-ons are largely marketing gimmicks designed to distract attention from the important dollars and cents elements of every charge card: interest rates, fees, retailers acceptance, and terms and conditions of the credit card agreement. Seguir leyendo CHARGE CARDS…