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Credit Cards

Financial Applications Text



Using credit cards is both a convenience and a responsibility. There is a great

temptation to overspend. Cards can be lost or stolen. The Truth-in-Lending Act protects you if your card is lost or stolen. If this happens, notify the creditor who issued the card immediately. You may be partially responsible for charges made by unauthorized users of cards you lose. The maximum liability is $50. You are not responsible for any charges that occur after you notify the creditor. If the card number, and

not the actual card, is stolen, you are not responsible for any purchases. It is the responsibility of the person selling the merchandise to make sure the purchaser is actually the card owner. The Truth-in-Lending Act also requires all creditors to disclose key information about the credit card fees in the same exact format so consumers can easily read it and compare credit cards. This information is in a box on the credit card bill called the Schumer Box (after Senator Chuck Schumer, who sponsored the legislation). On the left is an example of a Schumer Box. Cardholders receive a

monthly statement of their purchases and any payments they made to the creditor. The Fair Credit Billing Act protects you if there are any errors in your monthly statement. It is your responsibility to notify the creditor about the error. You do not have to pay the amount that is disputed or any finance charge based on that amount until the problem is cleared up. If you find yourself unable

to meet payments required by a creditor, notify that creditor immediately. The Fair Debt Collection Practices Act

prohibits the creditor from harassing you or using unfair means to collect the amount owed. As you can see, you need to be knowledgeable to responsibly use credit and charge cards.

What Information Does a Credit Card Statement Give You?

Credit cards can be used when making purchases in person, by mail, by phone, online, and more. In most situations you get a receipt for each transaction, but it can be difficult to keep track of the transactions over a billing cycle. A billing cycle is a predetermined amount of time set by the credit card

company that is used for calculating your credit card bill. This cycle can be adjusted by the company based on your creditworthiness. For example, a college student with little or no track record of being able to keep up credit card payments may initially be given a 21-day billing cycle. A seasoned credit card holder who has proven to be financially responsible might get a longer billing cycle. Throughout your billing, the credit card company takes an accounting of

your credits and debits. You may choose to get information about your account online at your convenience, or wait till the company generates that information in the form of a credit card statement at the end of your billing cycle. You should read the statement carefully and verify the charges. All credit card companies have a process through which the credit card holder can dispute errors on the statement.

Jane Sharp has a FlashCard revolving credit card. At the end of a 30-day

cycle, Jane receives her FlashCard statement listing all of her purchases and the payments the company has received during that 30-day cycle.