These days, credit cards are – for better or for worse – a fact of life. Using credit cards responsibly can help you build up your credit score and make future opportunities possible, such as getting approval for a mortgage or car loan. Irresponsible credit card habits can haunt you for many years by limiting your options when seeking to buy a car, buy a home or simply rent. It is important to understand how credit works and how to use it effectively to improve your personal financial outlook.
If you are new to credit cards, the Federal Trade Commission offers a great tutorial on how to build and maintain good credit.
Reading the fine print. Even with new laws that require credit card companies to clearly explain credit offers and monthly statements, it can be difficult to understand what you are signing up for when you apply or begin making payments. Explore the interactive features below provided by the Federal Reserve to learn more about what the language of credit cards means.
Your rights. The Federal Credit CARD Act of 2009 offers significant new protections for consumers. The law requires that credit card companies give you important information before and after you open an account. The law also requires that:
- Fees cannot be hidden, and you must be given a reason for each fee.
- The terms of the agreement (like the interest rate and grace period) must be written in plain language.
- Promotional interest rates must last for at least 6 months.
- If your interest rate is going to be raised you must be notified 45 days in advance.
Card statements must list all account charges and activity. Check each statement carefully, and if you see unauthorized charges contact your credit card company immediately.
If your card is lost or stolen or used without your authorization, your liability is limited to $50. Contact your credit card company immediately if your card has been stolen or if you believe you may be a victim of identity theft. Learn more about identity theft in Oregon from the Department of Consumer and Business Services.
Debit cards and gift cards. Debit cards and pre-paid gift cards are not credit cards, even if they have a credit card company's logo on it. If your debit card is lost or stolen contact the issuing bank immediately. If you report it lost or stolen before any unauthorized transactions are made, you will not have to pay for any unauthorized debits. If you report it lost or stolen within two days, your liability is limited to $50. If you report it lost or stolen after two days but before 60 days, you can be liable for up to $500. After 60 days, you can be responsible for the entire amount.
Smart Consumer Tip: Keep a photocopy of the front and back of all credit and debit cards in a safe place. If your wallet is lost or stolen, you will have all of the information you need to call the company and report the card missing.
More from the Federal Reserve Board
Learn more from the Federal Trade Commission
Smart Consumer Tip: Negotiate for a lower interest rate or reduced fees. Interest is the price you pay for borrowing money. The interest rate on a credit card is called the annual percentage rate (APR). Your interest rate may change over time due to the end of a promotional interest rate period, late payments, or if your card has a variable interest rate.
Credit cards also come with a number of fees and potential fees. It’s very important to be aware of what they are and how you can avoid them. Fees can be charged when you apply for or open an account, get a cash advance, transfer a balance, charge more than your credit limit (under new regulations you must permit your credit card company to allow you to go over your limit), or on an yearly basis (known as annual, membership or participation fees).
According to Consumer Reports, cardholders who contact their card companies to negotiate a lower interest rate succeeded more than 50 percent of the time. 79 percent who tried were successful in persuading their card issuer to waive a penalty fee.
Information For Businesses
Applicable State Law: