Things You Should Know About Credit Cards

An educated consumer is the best consumer

Interest Rates

There are no laws concerning maximum credit card interest rates in most of the states in America. A 1978 Supreme Court decision ruled the states that do have interest rate laws can only regulate any card issuers that are based in their state. For example, if the state you live in has regulations in place, but your credit card is issued from a state such as Delaware, which has no interest rate ceiling, then your state government has no power to enforce the rules. This is why most major credit card companies are based in states that don’t have any usury laws and interest rate caps. The credit card issuers based in these states can legally charge any interest rate they like, as long as the rate is listed in the cardholder agreement and the customer agrees to it.

In the early 1980s, most states capped interest rates between 12 and 18 percent. Current rate caps are generally maxed at 18 to 24 percent. If you have a good credit rating you may qualify for a lower rate, but you’re going to have to ask for one, so don’t be afraid to do so. You should also be aware that many companies will offer you a low introductory rate to get your business, but after a certain amount of time, this rate will automatically rise. You should shop around to see who offers the best deal. Check the offers in your mailbox and search online.

Disputing a Credit Card Purchase

If you pay for an item with a credit card and it’s damaged or inferior quality, you may be in luck. Credit card purchases are protected under the Fair Credit Billing Act, which allows the customer the right to refuse payment for damaged merchandise. Under this act, you first have to make a concerted effort to resolve the dispute with the seller before requesting your credit card company to reverse the charge and credit your account.

By law, the transaction needs to take place in your home state or within 100 miles of your home address. It must also be for over $50. However, few card issuers enforce these two rules as they like to keep their customers. You need to contact your credit card company and notify them about the disputed purchase amount within 60 days of receiving the bill to be protected under the Fair Credit Billing Act. The issuing company will contact the merchant, and if the company sides with the customer, a refund will be processed. If the company sides with the merchant, the customer must pay for the item, plus finance charges.

Cash Advances

Many people have gotten into a staggering amount of debt by taking cash advances on their credit cards because they didn’t realize these transactions usually incur higher interest fees than regular purchases. Most cash advances are charged an upfront fee between two and four percent of the amount borrowed. In general, cash advances don’t have a grace period and interest is charged as soon as the money comes out of the bank machine. Most credit card companies also require you to pay off the balance for your regular purchases before you can pay off the higher-interest cash advance.

By law, the customer must be made aware of any fees and charges applied to cash advances. This information is usually on the back of your monthly statements. Credit card companies say the fees are higher for cash advances because these transactions cost more to process than regular purchases, and the frequency of default on cash advances is high.

Late Payments

Making your credit card payments on time won’t necessarily protect you from higher interest rates if you are late paying your other bills. A credit card company can automatically raise your interest rate if you're late with other payments, such as your phone, car and house. This practice is called the universal default clause. The logic behind this procedure is that the bank now has reason to believe the risk of not being repaid has increased.

There is also no limit on the amount a credit card company can charge you for making a late payment. In 1996, the U.S. Supreme Court lifted the regulations on late penalty charges. After the court's decision, the fees for late charges, over-the-limit credit card usage and returned checks typically doubled and tripled, reaching $30 or more.