One way to avoid billing errors and unjustified fees is to carefully go through your monthly credit-card statement, making sure all the transactions are legitimate and that other charges -- finance charges, late or over-the-limit charges -- are justified.
The Fair Credit Billing Act applies to credit card and charge accounts and to overdraft checking (but not to checks or debit cards). You can use this act to defend against billing errors, unauthorized use of your account, goods or services charged to your account but not received or not provided as promised, and charges for which you request an explanation or written proof of purchase. Here are some important steps to take when you encounter one of these problems:
- Write to your card issuer or creditor within 60 days after the first bill containing the disputed charge is mailed to you. (Even if more than 60 days has passed since you were billed for the item, you still might be able to dispute the charge if you only recently learned about the problem.)
- In the letter, give your name, account number, the date and amount of the disputed charge and a complete explanation of why you are disputing the charge.
- Send your letter to the address provided on the bill -- do not send the letter with your payment. (To be sure that your letter is received and that you will have a record of its delivery, you might want to send it by certified mail, with a return receipt requested.)
- If you follow these steps, the creditor or card issuer must acknowledge your letter in writing within 30 days after receipt and must conduct an investigation within 90 days. While the bill is being investigated, you don't have to pay the amount in dispute. (The creditor or card issuer is not allowed to take action to collect the disputed amount, report the amount as delinquent or close or restrict your account during this time.)
- If it is determined that there was an error or that you don't owe the amount you're being held responsible for, the card issuer must credit your account and remove any finance charges or late fees relating to the amount not owed. For any amount still owed, you have the right to an explanation and to copies of documents that prove you owe the money. If the bill is correct, you must be told in writing what you owe and why. You will owe the amount disputed plus any finance charges.
There are a number of non-profit and non-commercial organizations that provide credit information and assistance to consumers. Check out the National Consumer Law Center and U.S. Citizens for Fair Credit Card Terms.
So, now that you know all this, let's find out what it takes to qualify for a credit card in the first place.
There's no way to know if you'll qualify for a credit card without doing some research. Some of the basic things that lenders look for include:
- Good payment record - If you pay your bills on time, you'll score major points with lenders. If you have a lot of late payments, this can hurt your chances of getting a card, and, if the lender decides to issue you a card, it's probably going to have a higher interest rate.
- Control of debt load - Lenders generally want to see that you are a good credit risk and that you aren't living beyond your means. Experts say that non-mortgage credit payments each month should not exceed more than 10 percent to 15 percent of your take-home pay.
- Signs of stability, responsibility - Lenders perceive things such as longevity in your home and job (at least two years) as signs of stability. Having a respected profession doesn't hurt either.
- Lack of credit inquiries - This one is a little strange. Whenever you apply for a credit card, the lender pulls your credit report from one or more of the major bureaus as part of the approval process. Each time a report is pulled, it's marked as an inquiry and stays on your credit bureau report for two years. Lenders perceive several inquiries on your report as indications that you're scrambling for loans and may consider you a poor credit risk. So, in order to beat this system, don't allow every credit-card issuer you speak with to pull your report.
- Lack of available or unused credit - Did you know that having credit cards that you don't use -- and have a zero balance on -- can hurt your credit? The rationale here, experts say, is that if you have all this available credit lying around, you could run it up at any time (even if you never have). Get rid of the cards you don't use. Be sure to ask the credit-reporting bureaus to remove the discarded cards from your report, noting that you -- not the creditor -- closed the account.
Once you qualify for a card, or several cards, there's always the chance that you'll end up spending more than you've got. A pretty good chance, actually. The next section discusses what you can do if you find yourself in credit-card debt.