Credit Card Basics

What You Need to Know About Managing Your Credit Cards

Practical money skills are an important part of managing life. By handling your personal finances wisely, you can enjoy peace of mind, financial security, buying power, and freedom that will enhance the rest of your life-Practical Money Skills for Life.

Understanding and Managing Your Credit Cards

Using a credit card is a big responsibility. While it has many benefits, misuse of a credit card can give you a lot of problems if you don't take it seriously and manage it properly. This pamphlet explains basics about credit cards and your credit rights, and defines common credit terms to help you exercise these rights.

When You Have Credit, You Have Rights

Credit cards are "pay later" financial products that draw from a credit line-money made available by your financial institution-and may give you a grace period to pay. You can use your credit card to make purchases, get cash advances, and guarantee hotel, airline, and auto rental reservations.

Each month, your card Issuer sends a bill showing what you owe. To keep interest low, pay off your balance quickly. And, to maintain a good credit history, always make at least the minimum payment due by the due date.

The Right to Have a Credit Card

The Equal Credit Opportunity Act legally protects you against unfair discrimination when you apply for a credit card. Your financial institution's decision about issuing you a card must be based only on your credit history-or sometimes that of a spouse or former spouse-and other personal financial information about you.

You may not be denied a card based on your age (providing you are at least 18 years old), racial background, sex, marital status, religion, national origin, or participation in a public assistance program.

The Right to Know What Your Card Will Cost

The Truth-In-Lending Act legally requires your card Issuer to disclose what interest and fees can be charged to your account as well as when and how these charges will be applied. This disclosure appears in your cardholder agreement and on the back of your monthly statement. Review the disclosure carefully. If you have questions, contact your card Issuer.

The Right to Dispute a Purchase or Billing Error

If you are dissatisfied with a credit card purchase or find a possible error on your billing statement, you have the right to file a dispute. Always be sure to put everything in writing-including your account and transaction details-and keep these legal requirements in mind:

• Purchase Disputes. The Truth-In-Lending Act limits disputes to goods and services that cost more than $50, have been purchased in your home state or within 100 miles of your mailing address, and are not yet paid. Notify your Issuer of the dispute only if you cannot first resolve it directly with the merchant.
• Billing Errors. The Fair Credit Billing Act requires that you report the error to your Issuer in writing within 60 days after you receive the first bill. The Issuer must reply within 30 days and then either correct the error or explain it to you in writing within two billing cycles. During the investigation, you are not required to pay the disputed amount.

The Right to Zero Liability Fraud Protection

When you use your Visa® card to shop online, in a store, or anywhere, you're protected from unauthorized use of your card and account information. With Visa's Zero Liability policy,* your liability for unauthorized transactions is $0-you pay nothing! That translates into worry-free shopping, ultimate security, and complete fraud protection.

The Right to an Accurate Credit Report

The Fair Credit Reporting Act guarantees you access to the information in your credit history so you can make sure it is correct. To order a copy of your report, contact any of the three national credit bureaus:

Equifax P.O. Box 105873 Atlanta, GA 30348 1-800-685-1111 www.equifax.com

Experian P.O. Box 2104 Allen, TX 75013-2104 1-888-397-3742 www.experian.com

Trans Union P.O. Box 390 Springfield, PA 19064-0390 1-800-888-4213 www.tuc.com

You may be charged a small fee for the report. However, you have the right to a free copy if you were denied credit within the last 60 days. You are also entitled to know the names of anyone else who received your credit report.

Tips for Keeping Your Credit Cards in Control

• Always follow the 20/10 Rule of Credit. Never borrow more than 20% of your annual net income, and never let your monthly debt payments be more than 10% of your monthly net income.
• Know the difference between needs and wants. You can lower your monthly expenses by avoiding purchases you can do without.
• Always try to make more than the minimum payment due on your credit card bill. Low minimum payments are designed for convenience, but not for quick payment of your balance.
• Never let your credit card reach its spending limit. Always keep part of your credit available for emergencies and other unplanned expenses.
• Know what your purchase will really cost. Remember that, if you charge a purchase to your card and don't pay it off right away, you'll end up spending more than the original price.

* U.S.-issued cards only. Visa's Zero Liability policy does not apply to commercial card or ATM transactions, or to PIN transactions not processed by Visa. See your Cardholder Agreement for more details.

Credit Terms You Should Know

• Annual Percentage Rate. The APR for your credit card is what it costs you yearly to use your card and pay balances in installments, based on when the purchases are made. APRs vary widely from one card Issuer to another. Read your cardholder agreement for details.
• Interest Computation Method. Credit card interest is calculated differently than that for most other kinds of loans. Interest can be charged by the day or by the month. If you don't pay your bill in full, the interest on your unpaid balance will become part of the balance on the next month's bill. As a result, your interest will increase.
• Grace Period. This is the time you have to pay your bill without having to pay interest on your new purchases. However, this interest-free period goes into effect only if you paid the previous month's bill in full.
• Outstanding Balance Computation Method. If you carry a balance after the grace period ends, new purchases can be included in the total balance, and interest on these purchases will begin to add up immediately.
• Finance Charge. This term applies to any charge associated with having credit-for example, interest, service fees, and transaction fees.