Credit Cards

Using Credit Wisely

Part II

Credit Card – Info You NEED TO KNOW – Interest RatesIMPORTANT WEBSITE: http://www.federalreserve.gov/creditcard/default.htm#

Interest RatesOne of the most important things to understand about your credit card is its interest rate.

An interest rate is the price you pay for borrowing money. For credit cards, the interest rates are stated as a yearly rate, called the annual percentage rate (APR).

On most cards, you can avoid paying interest on purchases if you pay your balance in full each month.

Where do I find my APR?To see an example of where your APRs might be located on communications from your credit

card company, take a look at our sample credit card offer and billing statement. Or, use our consumer credit card agreements search to find the interest rates offered in a credit

card issuer's consumer credit card agreements.Use the credit card repayment calculator to figure out how long it may take you to pay off your

specific balance with your current APR.One credit card may have several APRs. Here are some common APR terms you should

know: Different APRs for different types of transactions. Your credit card will always have a

purchase APR--the amount of interest you will pay on purchases. For many cards, you only have to pay interest on purchases if you carry over a balance. Your card likely will also have a different--often higher--APR for cash advances or balance transfers.

Credit Card – Interest RatesIntroductory APR. Your card may have a lower APR during an introductory period and a higher

rate after that period ends. Under Federal law, the introductory period must last at least six months, and the credit card company must tell you what your rate will be after the introductory period expires. For example, your introductory rate may be 8.9 percent for six months and then go up to 17.9 percent.

Penalty APR. Your APR may increase if you trigger one of the penalty terms, for example, by paying your bill late or making a payment that is returned.

Typically, your APR(s) will be fixed or variable: A Fixed-rate APR is set at a certain percent and cannot change during the period of time

outlined in your credit card agreement. If your company does not specify a time period, the rate cannot change as long as your account is open.

A Variable-rate APR may change depending upon an index that is outside of the credit card company's control, such as the prime rate or Treasury bill rate. The credit card application and agreement will tell you how often your card's APR may change.

Card issuers may offer combinations of fixed and variable rates--for example, a fixed-rate APR that becomes a variable rate after your introductory period ends. Read your credit card agreement carefully to understand when or if your APR may change.

Last Update Date: June 15, 2010Home | Consumer Information

Credit Cards - FeesFeesMany credit cards have fees. You will want to read your credit card agreement

carefully to make sure you understand all the fees associated with your card. You can use the Federal Reserve's consumer credit card agreements search to find general examples of the type and range of fees a credit card may have. Here are some common fee terms to look for:

An application fee is charged when you apply for a credit card. An annual fee, membership fee, or participation fee is a charge for having the card.

Some companies charge the entire fee once a year. Others charge a portion of the fee each month.

A set-up fee is charged when you open a new credit card account. A cash advance fee is charged when you use your credit card to get cash. It may be

a flat fee (for example, $3) or it may be a percentage of the cash advance (for example, 3 percent of the total amount of cash you requested, including any ATM fees).

A balance-transfer fee is charged when you transfer a balance from one credit card to another. It may be a flat fee (for example, $3) or it may be a percentage of the transfer (for example, 3 percent of the amount transferred).

A late-payment fee is charged if your payment is received after the due date.

Credit Cards NEW RULES – FEBRUARY 2010

The Federal Reserve's new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010:

What your credit card company has to tell you When they plan to increase your rate or other fees. Your credit card company must send you

a notice 45 days before they can increase your interest rate; change certain fees (such as annual fees, cash advance fees, and late fees) that apply to

your account; or make other significant changes to the terms of your card.

If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations.

For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).

The company does not have to send you a 45-day advance notice if you have a variable interest rate tied to an index; if the index goes up, the company does not

have to provide notice before your rate goes up; your introductory rate expires and reverts to the previously disclosed "go-to" rate; your rate increases because you are in a workout agreement and you haven’t made your

payments as agreed.

Credit Cards NEW RULES – FEBRUARY 2010

How long it will take to pay off your balance. Your monthly credit card bill will include information on how long it will take you to pay off your balance if you only make minimum payments. It will also tell you how much you would need to pay each month in order to pay off your balance in three years. For example, suppose you owe $3,000 and your interest rate is 14.4%--your bill might look like this: New balance $3,000.00 Minimum payment due $90.00 Payment due date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.

Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

If you make no additional charges using this card and each month you pay. . . You will pay off the balance shown on this statement in about. . . And you will end up paying an estimated total of. . . Only the minimum payment 11 years $4,745 $103 3 years $3,712(Savings = $1,033)

New rules regarding rates, fees, and limits No interest rate increases for the first year. Your credit card company cannot increase your rate

for the first 12 months after you open an account. There are some exceptions: If your card has a variable interest rate tied to an index; your rate can go up whenever the index

goes up. If there is an introductory rate, it must be in place for at least 6 months; after that your rate can

revert to the "go-to" rate the company disclosed when you got the card. If you are more than 60 days late in paying your bill, your rate can go up. If you are in a workout agreement and you don't make your payments as agreed, your rate can

go up.

Credit Cards NEW RULES – FEBRUARY 2010

Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.

Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee. If you opt-in to allowing transactions that take you over your credit limit, your credit

card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.

Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.

Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account. If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your

cosigner must agree in writing to the increase. Changes to billing and payments

Credit Cards NEW RULES – FEBRUARY 2010

Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition: Your due date should be the same date each month (for example, your payment is always

due on the 15th or always due on the last day of the month). The payment cut-off time cannot be earlier than 5 p.m. on the due date. If your payment due date is on a weekend or holiday (when the company does not process

payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).

Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception: If you made a purchase under a deferred interest plan (for example, "no interest if paid in full by

March 2012"), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.

No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.

For information on protections under the Federal Reserve's other credit card rules, read What You Need to Know: New Credit Card Rules Effective Aug. 22.

Disclaimer: Credit cards issued primarily for business or commercial purposes generally are not governed by the consumer protections in the Truth in Lending Act or the amendments to that act in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.

Credit Cards NEW RULES - AUGUST 2010

More new rules from the Federal Reserve mean more new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on August 22, 2010:

Reasonable penalty fees Let's say you are late making your minimum payment. Today: Your late payment fee may be as high as $39, and you likely pay the same

fee whether you are late with a $20 minimum payment or a $100 minimum payment.

Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless: One of your last six payments was late, in which case your fee may be up to $35; or Your credit card company can show that the costs it incurs as a result of late payments

justify a higher fee. In addition, your credit card company cannot charge a late payment fee that is

greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.

Additional fee protections

Credit Cards NEW RULES - AUGUST 2010

No inactivity fees. Your credit card company can't charge you inactivity fees, such as fees for not using your card.

One-fee limit. Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase If your credit card company increases your card's Annual Percentage Rate (APR), it must tell

you why. Re-evaluation of recent rate increases Today: Your credit card company can increase your card's APR with no obligation to

re-evaluate your rate increase. Under the new rules: If your credit card company increases your APR, it must  re-evaluate

that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

This set of rules is the latest in a series of regulations that implement the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act). For information on protections under the Federal Reserve's other credit card rules, read What You Need to Know: New Credit Card Rules Effective Feb. 22.

Disclaimer: Credit cards issued primarily for business or commercial purposes generally are not governed by the consumer protections in the Truth in Lending Act or the amendments to that act in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.

KINDS OF CREDIT CARDSThe type of credit card you choose or are approved for will depend on your individual situation.

Your card may be standard--also called traditional--with few features, or it may have one or more of these common options, depending on your card agreement:

Premium cards offer high credit limits and often have additional features like product warranties, travel insurance, or emergency services. They may also offer rewards, such as cash back or frequent-flier miles. Read the terms of the card carefully to find out if there are any additional fees associated with the features, or to estimate how much you need to spend to get a reward.

Affinity cards offer rewards that benefit groups and organizations. For example, a charity may offer a card and may receive a portion of the revenues from that card to fund its work. Read the terms of the card carefully; you may decide it would be more beneficial to get a different card and donate directly to the organization.

Retail cards are credit cards associated with a retail store. A salesperson at the store typically will ask if you would like to apply for the card. They may offer you a discount to apply for the card, such as ten to twenty percent off of your initial purchase. Depending on the type of card, you may be able to use the retail card at locations other than the one where you received the card.

Secured cards typically require a cash security deposit. The larger the security deposit, the higher the credit limit. Usually, secured cards are used to build credit by those who don't have a long credit history, or those who have had credit problems in the past.

KINDS OF CREDIT CARDS

You can use the Federal Reserve's consumer credit card agreements search to get an idea of the types of credit card terms and conditions that companies offer. If you need a copy of your personal credit card agreement, contact your credit card issuer--the Board's credit card rules require that they provide it upon request.

Last Update Date: June 15, 2010

CREDIT CARD BILLING

http://www.federalreserve.gov/creditcard/flash/readingyourbill.html

CEREDIT CARD - DISCLOSURE BOX

http://www.federalreserve.gov/creditcard/flash/offerflash.html

CEDIT CARD – PAY IT OFF

http://www.federalreserve.gov/creditcardcalculator/

CREDIT CARD PROTECTION LAWS

There are many Federal laws in place to protect your rights when you interact with your credit card company. Here are some of these important laws and protections you should know:

The Credit CARD Act (2009) provides many consumer credit protections. For example, your credit card company generally cannot increase the rate on your existing balance and must tell you forty-five days before increasing the rate for new transactions. The Act also places new limits on fees and rate increases and requires consistency in payment dates and times. See Truth in Lending Act. To learn more about your rights under the CARD Act, read the summaries of the Federal Reserve Board's new credit card rules, "What You Need to Know: New Credit Card Rules Effective Feb. 22" and "What You Need to Know: New Credit Card Rules Effective Aug. 22."

The Consumer Credit Protection Act (1969) is an umbrella consumer protection law that includes the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, and the Truth in Lending Act.

The Equal Credit Opportunity Act (1974) prohibits discrimination in credit transactions on the basis of certain personal characteristics, such as race, color, religion, national origin, sex, marital status, age, because you receive public assistance, or because you've exercised your rights under the Consumer Credit Protection Act.

The Fair Credit Billing Act (1974) requires that a credit card company promptly credits your payments and corrects mistakes on your bill without damage to your credit score. It also lets you dispute billing errors on your credit card and withhold payment for damaged goods. See Truth in Lending Act.

CREDIT CARD PROTECTION LAWSThe Fair Credit and Charge Card Disclosure Act (1988) requires a lender offering you a

credit card to tell you about certain terms on the card, such as the APR, the amount of any annual fee, and whether you have an interest-free period to pay your bill before any interest charges are added. See Truth in Lending Act.

The Fair Credit Reporting Act (1970) protects you against inaccurate or misleading information in credit files maintained by credit reporting agencies. It requires that you must be told what's in your credit file and have the ability to correct any errors.

The Fair Debt Collection Practices Act (1977) details the rules a debt collector must follow when trying to collect a debt from you. It prohibits collectors from engaging in abusive debt-collection practices, such as calling you outside of the hours of 8:00 a.m. to 9:00 p.m. local time or communicating with you at work after they have been advised that this is unacceptable or prohibited by the employer.

The Truth in Lending Act (1968) requires that lenders use uniform methods for computing the cost of credit and for disclosing credit terms so you can tell how much it will cost to borrow money. It also limits your liability to $50 if your credit card is lost, stolen, or used without your authorization, and it prohibits the unsolicited issuance of credit cards. The Fair Credit Billing Act and the Fair Credit and Charge Card Disclosures Act were later additions to the Truth in Lending Act, as are many provisions of the Credit CARD Act. You can find more information on consumer regulations in the Federal Reserve Consumer Help's list of Consumer Protection Laws or the Board's list of regulations.

Last Update Date: June 15, 2010Home | Consumer Information

Credit Card - FeesAn over-the-limit fee is charged if you make a purchase that takes your balance over your credit

limit. Under new Federal Reserve Board regulations, you must authorize your credit card company to allow you to go over your limit or the company cannot charge you this fee. If you don't authorize your credit card company to permit you to exceed your credit limit, your transaction will most likely be rejected. For more information on this change, read our guide to the new credit card regulations.

A credit-limit-increase fee is charged if you ask for and receive an increase in your credit limit.Did you know?Federal law limits the total fees charged during the first year after you open an account to 25% of

the initial credit limit. For more information on your credit rights and protections, visit Credit Protection Laws or read our guide to the new credit card rules.

Your credit card may also offer insurance or debt coverage, often with an associated fee. You should read your agreement carefully to make sure you understand the services offered and any fees.

Common services that may have fees include:Insurance to cover your payments if you become unemployed or disabled, if you die, or if you

encounter other situations outlined in your insurance policy. Debt suspension coverage that puts your payments on "hold." You will still need to pay back the

debt after your situation ends. Debt cancellation coverage that cancels your debt, so you won't have to pay back any of your

debt when your situation ends.Last Update Date: June 15, 2010

Lost or Stolen Credit Cards

If your credit card is lost, stolen, or used without your authorization, you do not have to pay for any unauthorized charges greater than $50 under the Truth in Lending Act.

Call your credit card company as soon as you know you've lost your card or that your card number has been used without your authorization.

Keep a list of the customer service phone numbers for your cards in your files and carry it with you when you travel, so you have the numbers for all your cards in one place if your wallet or purse is lost or stolen. You can also check your monthly statement or your credit card company's websites for a customer service number to call.

5 Tips To Using Credit CardsPay on time. Paying your credit card account on time helps you avoid late fees as well as penalty interest

rates applied to your account, and helps you maintain a good credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates. Know the date your payment is due. If your bill is due at an inconvenient time of the month--for example, if it's due on the 10th and you get paid on the 15th--contact your credit card company to see if they will change your billing cycle to fit your cash flow.

Watch the PSA Stay below your credit limit. If you go over your credit limit on your card, your card issuer could charge a fee and increase

your interest rate to a higher penalty rate. To avoid this, keep a record of your spending or check your balance online. Also, be aware that some merchants (for example, hotel and car rental companies) put a "hold" on your credit card based on their estimate of the amount you will charge. This can reduce your available credit until the final charge is processed. See Credit and Debit Card Blocking.

Avoid unnecessary fees.

5 Tips To Using Credit CardsCredit card companies not only charge late payment and over-the-limit fees, but also fees for

cash advances, transferring balances, and having a payment returned. Some companies charge a fee when you pay your bill by phone. Pay attention to the transactions that trigger these fees. If you need a cash advance, withdraw enough so that you don't have to take a second cash advance--and incur a second fee--later in the month. Read your credit card agreement to learn more about the fees that your credit card company charges.

Pay more than the minimum payment. If you can't pay your balance in full each month, try to pay as much of the total as you can.

Over time, you'll pay less in interest charges--money that you will be able to spend on other things, and you'll pay off your balance sooner. See the Federal Reserve's Credit Card Repayment Calculator to determine possible repayment timelines.

Watch for changes in the terms of your account. Credit card companies can change the terms and conditions of your account. They will send

you advance notices about changes in fees, interest rates, billing, and other features. By reading these "change in terms" notices, you can decide whether you want to change the way you use the card. For example, if cash advance fees increase, you may decide to use a different card for cash advances. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that credit card companies are not required to send you a notice about raising your interest rate. Interest rates are listed on your monthly bill. Read your bill carefully and take note of any changes.

Billing Errors

Billing ErrorsIf you believe your credit card company has made a billing error, or

you are unsatisfied with a purchase, you have certain protections under the Fair Credit Billing Act. Examples of billing errors are:

a charge for something you didn't buy; a purchase by someone not authorized to use your card; an amount on your bill that is different from the actual amount

you paid; a charge for something that you did not accept on delivery; a charge for something that was not delivered according to the

agreement; arithmetic errors; and payments not credited to your account.

Billing Errors

If you think your credit card bill has an error, contact your credit card company within 60 days of receiving the bill with the error. Some companies may accept e-mail; others will require that you put your dispute in writing. Be sure you have the following information available:

your name and account number; a description of the billing error; and the date and amount of the charge you dispute.

If there is an error, you will not have to pay interest charges on the disputed amount. Your account must be corrected.

If there is no error, the credit card company must send you an explanation and a statement of what you owe.

General Complaints

If you have a complaint, first try to resolve it directly with the store or your credit card company.

If you are unable to resolve the problem, you may want to file a

complaint with the federal agency responsible for enforcing consumer credit laws at your credit card company. If you are uncertain which agency regulates your company, use this guide to regulators from the Federal Reserve Consumer Help center. To contact the appropriate regulator visit Federal Agency Contacts.

To see a sample complaint letter or e-mail message, visit the Federal Citizen Information Center's Consumer Action Website.