Credit Cards

The Four Main Reasons Why Everyone Has a Credit Card:

At Least Three

Examine offers from at least three credit card companies before choosing a credit card. Sites like, and can give you more information on choosing the right card for you.

Credit cards are nearly everywhere these days. Here's why:

  1. Credit cards eliminate the need to carry wads of cash around.
  2. Credit cards are handy for emergencies like when your car breaks down on the road.
  3. Paying with a credit card gives you options: you can buy online, through the mail and by phone.
  4. Using credit cards instead of cash also gives you protection against shoddy or undelivered merchandise. You may withhold payment on most unsatisfactory purchases and services as long as you've tried to solve the problem with the merchant and you tell the credit card issuer, in writing, why you are withholding payment. The credit card company will investigate your claim.


Types of Credit Cards

There are three main categories of credit cards. Within these categories, credit card companies offer a variety of options that you need to examine carefully:

  1. Regular (unsecured): a regular bank credit card that doesn’t require a security deposit. These cards have varying credit limits but usually the limits are somewhat lower than on premium cards.
  2. Secured. These are for people trying to establish credit or with past credit trouble; a secured card requires you to make a deposit in a bank account to guarantee there is money available to pay the bill. The amount of your deposit will determine the credit limit (usually 50-100% of the amount on deposit). Secured cards often carry higher interest rates than unsecured cards. That’s part of the price you pay plus application and processing fees.  But don’t despair: many websites offer unsecured cards to people trying to build a credit history.
  3. Premium cards (gold, platinum, titanium): people with good credit can get cards that generally have higher credit limits than regular credit cards and offer features like product warranties, travel insurance or emergency services


Factors To Keep in Mind When Choosing a Card

A few questions to ask about any card you’re applying for:
  • Does it have a minimum finance charge?
  • How does the APR change over time?
  • What charges apply for:
    • Annual fee
    • Cash advances
    • Balance transfers
    • Late payments
    • Being over the credit limit on your card

A dizzying array of factors affects what your credit card costs you in interest and fees. We're going to hit the high points here, and offer a link to sites that provide "best card" recommendations. These main factors include:

  • Annual Percentage Rate (APR)
  • Grace Period
  • How the card company calculates your outstanding balance
APR = Annual Percentage Rate:

The interest the credit card charges when you carry over a balance, transfer a balance from another card, or get a cash advance. APRs can vary greatly, from as low as 4% to as high as 21%. Obviously, you want to shop for the lowest APR you can find, and consider the following factors:

  • Do different APR rates apply for different card transactions?
  • Does the APR differ depending on your outstanding balance?
  • Does the APR increase if you make late payments?
  • Does the APR change after a low introductory period?
  • Is the APR variable, meaning does it change when some other interest rate such as the prime rate or the Treasury bill rate fluctuates?
Grace Period

A grace period is simply the number of days you have to pay your bill in full before finance charges kick in, usually 20-25 days. This does not apply if you carry a balance over from month to month.

How the Credit Card Company Calculates Your Outstanding Balance

Different card companies have different methods for calculating your balance each billing cycle, which can have a huge effect on how much you're paying for your credit. Visit <> for details on these factors. Go to the section entitled, "Managing Cash and Choosing Credit," then look under subheads "Shopping for Credit" and "Calculating APR." You can also find information about the different types of credit cards and credit card fees at <>.


What if My Credit Card is Lost or Stolen?

Lost Credit Card?

If you can't find your card but think it will turn up most credit card issuers will put a hold on the card until you determine whether canceling it is necessary.

Federal law protects you: Under federal law, you are not responsible for more than $50 worth of charges someone makes on a lost or stolen credit card. Here’s what you should do:

  • Immediately report the loss or theft by calling the toll-free number on your monthly statement.
  • Keep numbers handy just in case: It’s a good idea to keep a list of your account numbers and the credit card companies' phone numbers in one place, and carry the list with you when you travel.

Some card companies, like American Express, offer fraud protection that includes monitoring unusual activity on your card and calling you to make sure the payments are authorized.

Check out the Trusty Guide to Identity Theft (coming soon) to get tips to protect yourself and learn what do if you lose your card.


What if I Find a Billing Error on My Credit Card Statement?

Common errors include:
  • A charge for something you didn't buy
  • An incorrect charge amount for something you did buy
  • A charge for something delivered that you didn't accept
  • A charge for something you ordered but was not delivered
What to do?
  • Write to the credit card company within 60 days of the statement date
  • Use the address for "billing inquiries"
  • Along with your name and account number, tell the company the date and the "disputed amount" and why you think it's incorrect
  • Pay the rest of your bill

The company will mount an investigation and get back to you no later than 90 days after you notified them of the error.

The federal Fair Credit Billing Act requires you to notify creditors in writing about billing errors. It’s probably best to send a certified letter with return receipt requested to keep track of this important correspondence.
If there was an error, the company must correct your account. If there was not an error, the company will send you an explanation and a bill for what you owe, including any finance and other charges that apply.

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