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Frequently Asked Questions (FAQS);faqs.214



    Some banks will waive the annual fee if you tell them that you'll go
    elsewhere if you have to pay it.  Others will not.  You may want to
    ask (politely) to talk to a supervisor, since the front-line person
    may not care whether you cancel your card and may not have the
    authority to make concessions.  Don't bluff on this unless you are
    confident you can get a card elsewhere.

    One article in Usenet reported that the author called Citibank to
    cancel his Visa card because of the annual fee.  They would not
    waive the fee but said they would send him a gift certificate for
    the same amount if he kept his card.

Q205. What about application fees?

    These are extremely uncommon.  Though such fees are legal, look long
    and hard at the terms before you agree to pay an application fee,
    even if you are "guaranteed" acceptance.  You can almost certainly
    do better elsewhere.  (See the "900" numbers later in this section.)

Q206. What other fees should I be concerned about?

    Many cards assess an "over-limit fee" if you charge something that
    takes you over your credit limit.  They may or may not allow the
    charge if they assess this fee.  $5-$10 is common.

    Some cards charge a late payment fee in addition to the finance
    charges.  Again, $5-$10 is common.

    Some cards charge a transaction fee for cash advances.  This may be
    a flat amount (around $2), a percentage (1%-2% is common), or a
    combination.  These fees are in addition to the stated interest
    rate, which usually starts accruing as soon as you get the money.

    You have the right under the law to know what all these fees are
    when you apply.

Q207. Why is a grace period important?

    The grace period is the time after the billing date that you have to
    pay off the bill without paying finance charge.  (Grace periods for
    cash advances are pretty rare, since the bank would lose money on
    them.)  T&E cards typically have generous grace periods; bank cards
    usually have 25 days but a few have 30 and many have no grace
    period.  In every case the grace period runs from the date printed
    on the bill, not from the date you get the bill.

    For instance, suppose your bill is prepared on the 28th of every
    month and the grace period is 25 days.  If you make a purchase on
    July 3 it will show up on the July 28 bill and you'll have until
    August 22 (July 28 plus 25 days) to pay it off for free.  If you
    don't pay the full balance, your August bill will show a finance
    charge, and so will every bill after that until you pay off your
    full balance.

    Some banks give you a grace period only in months when your previous
    balance is zero.  Others (fewer of them all the time) give the
    stated grace period on all new purchases even if you have a balance
    from last month.  The second method can save you big bucks; be sure
    to find out how your bank does it when you apply for the card.

Q208. Why is a discount better than a rebate?

    Rebates are a percentage refund on your purchases, either by check
    or by credit to your account.  Discounts actually reduce the price
    on the bill before you pay it.  Discover offers rebates on all
    purchases.  The Ameritech Complete MasterCard gives 10% rebates on
    credit-card calls at the end of the year, where the AT&T Universal
    card gives 10% discounts on credit-card calls.  On the principle
    that it's always better to keep money in your account than to pay it
    out and get some of it back later, discounts are better than rebates
    if the numbers are otherwise equal.

Q209. What else should I watch out for in cards with rebates?

    First, when will the rebate be issued, at the end of the month or at
    the end of the year?  (Typically, it's after the end of the year.)

    Second, how is the rebate calculated?  Be sure to read the fine
    print.  For example, Discover advertises "up to 1%" rebate.  That's
    true; but the fine print shows that you get back 1% of every dollar
    you charge after $3000 a year; the first $3000 is rebated at rates
    between a quarter and three quarters of a percent.  (Confirmed by
    telephone, 1991 Oct 14, and by personal experience.)

Q210. How do I evaluate a secured card?

    Use the same criteria as for any other card.  Ask the bank some
    additional questions:  What interest is paid on the deposit?  If I
    maintain a good credit record, when could I be considered for an
    unsecured card?

    Also ask yourself if you might conceivably have need for the
    deposited funds during the required term.  If so, find out up front
    whether you can withdraw the deposit in case of financial emergency,
    and what it costs in interest and penalties to do that.

    You will want a secured card if you don't qualify for an unsecured
    one but you need credit.

    You may want a secured card even if you could get an unsecured card.
    Why?  Since a secured card represents less risk to the bank,
    interest rates may be lower than for unsecured cards.  (Two recent
    surveys showed an Illinois bank's secured card with a grace period
    and no annual fee that had the lowest interest rate in the surveys.)

Q211. Shouldn't I get as many cards as I can?

    Not necessarily.  The more cards you have, the fatter your wallet is
    and the more cards you have to keep track of.

    See section 7, "Credit bureaus and your credit rating," in part 3 of
    this list, for other reasons why having a lot of cards can be a
    problem.

Q212. Why would I want more than one of the same kind of card?

    Some people like having, say, two MasterCards or two Visas.  I don't
    see the advantages of such an arrangement.  I've heard some people
    say they charge a big-ticket item on one card and pay it off a
    little bit every month, while charging normal purchases to the other
    card and paying them off in full every month.  However, credit-card
    debt is about the most expensive way there is to finance a big item;
    you're almost certainly better off getting a loan from your bank or
    credit union.

    You might want to have a MasterCard and a Visa, or a bank card and a
    T&E card, to be able to charge at places that take one but not the
    other.  In this case, try to schedule the billing dates two weeks
    apart.  (Some card issuers will alter your billing date if you ask.)

Q213. Is a gold card worth the higher annual fee?

    Gold cards typically carry some of these perks:  collision damage
    waiver on auto rentals, travel insurance, extended warranty on
    purchases, roadside assistance, higher credit limits, frequent-flyer
    miles, and of course :-) prestige.

    Many non-gold cards also offer some or all of these.  The AAA offers
    roadside assistance.  Many standard auto insurance policies cover
    the CDW on rentals.  If you have a good record on your existing
    card, you can probably get your credit limit increased by calling
    the issuer.  There's no one answer to whether these cards are worth
    the extra money:  you have to decide what the perks and prestige are
    worth to you, and your neighbor could well come up with a different
    answer.

Q214. I was mailed a solicitation for a Visa or MasterCard that accrues
      frequent-flyer miles on my purchases.  Is this a good thing?

    It may or may not be.  Does the airline fly to places you really
    want to go?  How many dollars must you charge to earn a free ticket?
    Is the airline likely to be around by then?  Are you likely to spend
    more than you otherwise would, just to accumulate the miles?

    Ask yourself questions like these, in addition to all the others
    mentioned in this section.

Q215. I belong to the Benevolent Order of Mumble, and they mailed me a
      credit-card solicitation.  It would be a MasterCard with their
      logo on it.  Is this a good deal?

    This is an affinity card; see section 1, "Credit cards, other
    cards."  Evaluate an affinity card as you would any other.  If you
    would consider it a good deal in the open market, based on the way
    you use credit, then it's a good deal.  But an expensive card
    doesn't become a good deal just because a small fraction of the
    profits are turned back to your organization.  Unless the card is a
    good deal for you personally, it's a better idea to make a direct
    donation to your organization -- and you get a tax deduction too, if
    it's a charity.

216. My bank offered me a deal if I would agree to set up my checking
     account for automatic withdrawal on the due date to pay the credit
     card. Is this a good idea?

    It depends on the specific terms of the deal.  For example, a
    reduced interest rate is meaningless if you pay off every month
    anyway.

    It also depends on your own spending patterns.  If you tend to
    forget to pay your bills on time, this arrangement can save you some
    late charges or finance charges.  On the other hand, if you forget
    to enter the automatic withdrawal in your checkbook you may find
    you're overdrawn and start bouncing checks.

    Some consumers have reported problems with disputed charges being
    paid automatically, or the bank disregarding special requests to
    alter a scheduled payment.  You should weigh carefully this
    additional loss of control over your checking account against the
    benefits promised.

Q217. I got a call (or saw an ad) inviting me to call a 900 number for a
      "guaranteed" MasterCard or Visa.  Is this a good deal?

    No.  These offers require you to pay up front either for a specific
    secured card or (worse) for a list of banks that issue secured
    cards.

    Instead, if you need a secured card, apply to a bank that advertises
    them.  (Citibank in New York started a nationwide program of secured
    cards in late summer 1991.)

    Even better, ask your own bank about getting a secured card there,
    or referring you.  There's no charge for making the inquiry, and I
    have never heard of a bank charging a fee for a direct application.

    Finally, check the published lists (see section 3, "Lists of good
    cards"), and apply directly to banks listed there.

Q218. What should I watch out for in a corporate card?

    A "corporate card" is an ordinary card, typically American Express
    or Diners Club.  However, you don't apply for it.  It is issued to
    certain employees of a company for the company's convenience in
    managing travel expenses.  There are a couple of possible problems.

    First, you may be individually responsible for charges to the card,
    even though you use it only for business purposes.  This can be a
    problem if your company is very slow to reimburse you for expenses.

    Second, some cardholders have posted articles to the effect that
    corporate cards may not have the same buyer protections (like
    extended warranty) that personal cards do.

Q219. I saw an ad for a card I've never heard of.  What's the story?

    Be careful when applying for credit.  Some companies advertise
    credit cards on TV.  The problem is that although the card looks a
    lot like a Visa or MasterCard, it is only good for merchandise from
    the company's own catalog.  Despite the promise of "discount
    prices," you will pay more than you would pay in stores or through
    other mail-order channels.

    Most legitimate catalog companies take Visa, MasterCard, American
    Express, or some combination.  You should always pick merchandise
    for its own qualities, not because you're forced into it by which
    credit card you have.

Q220. I got an application for a card that didn't state interest rate
      and fees.  Is this legal?

    No.  The U.S.  Fair Credit and Charge Card Disclosure Act requires
    issuers of charge or credit cards (including retail stores) to
    reveal certain basic information in tabular form with the applica-
    tion or the "preapproved" solicitation.  This basic information
    includes interest rate (APR), annual fee, and grace period.
    Disclosures must also be provided before annual renewal if the card
    issuer imposes an annual fee.

    Source:  {Consumer Rights} pamphlet, mentioned in part 1 of this FAQ
    list.  If you have a problem, the agency to complain to depends on
    the nature of the card issuer (Federal Savings Bank, National Bank,
    credit union, etc.); see the pamphlet.


section 3. Lists of good cards
==============================

This FAQ list can't tell you which card is best for you.  Your spending
patterns and needs are different from others', and credit-card terms are
constantly changing.  What this section can and will do is give you a
few simple steps to find the information on your own.  Remember to
evaluate any card offer against the criteria in section 2, "Good deals,
bad deals."

Q301. Where are lists of the best cards?

    No one card is best for everyone.  Are you looking for a card with
    no annual fee?  low interest rate?  long grace period?  Do you want
    a secured card?  Lists are published in several places.

    - {Barron's}, an investment weekly, lists low-rate cards, no-fee
      cards, and the biggest card issuers near the back of the "Market
      Laboratory" section of every issue.

    - {Money} Magazine's "Money Scorecard" also carries a brief list of
      inexpensive credit cards, with phone numbers of the issuers.

    - {The Wall Street Journal} publishes a monthly list, lately on
      Friday of the first week of every month.  Look in the index on
      page C1 for "credit card rates."  (The most recent publication
      dates were Monday, 4 May, and Friday, 3 Apr.)

    Many libraries have back issues of some or all of these periodicals.
    Be sure to ask at the reference desk if you don't see them on
    display.

Q302. I don't want to look up magazines.  Isn't there an easier way?

    First, don't post a request to the net.  You may get some replies,
    but typically they'll be for banks out of your area and will be
    missing important information.  Besides, those repeated requests are
    just what this FAQ list is supposed to prevent, and you wouldn't
    want me to look foolish, would you?  :-)

    Fortunately, you can get a list by mail.  Here are your choices,
    from the May 1990 {Consumer Reports}.  (Prices may possibly have
    changed since then.)

    - Bankcard Holders of America, 560 Herndon Parkway suite 120,
      Herndon VA 22070:  send $1.50 for list of 50 "Fair Deal" banks
      (low interest rate on cards) or $1.50 for a separate list of
      no-fee cards.  Phone number: [phone] or [phone].

    - RAM Research, P O Box 1700, Frederick MD 21701: send $5.00 for
      500-bank "RAM Research Bankcard List" (updated monthly).

    - Consumer Credit Card Rating Service, P O Box 5219, Santa Monica CA
      90405: send $12.00 for "Credit Card Locator," over 100 no-fee
      cards, 200 more with fees under $15, and interest rates on cards
      from 1000 banks.

    Disclaimer:  I have not actually ordered from RAM or CCCRS myself.
    If you have any corrections from experience (not hearsay), please
    email me at [e-mail].

Q303. I understand why low rates or no annual fees are important.  Why
      would I care about which banks issue the most cards?

    A bank that issues lots of cards may be less choosy than a bank with
    fewer customers.  If you are expecting problems getting credit, the
    larger bank might be more willing to accept you.

Q304. Okay, I know that First Mumble Bank of Fubar has a card I want to
      apply for.  How do I get in touch?

    First, don't post a request to the net for their phone number.  This
    costs hundreds or thousands of dollars and wastes lots of people's
    time.  You may get the number you want, but it takes a few days, but
    you surely will get some nasty email.

    Quoting from the FAQ in another group:  The network is NOT a free
    resource, although it may look like that to some people.  It is far
    better to spend a few minutes of your own time researching an answer
    rather than broadcast your laziness and/or ineptitude to the net.

    Try [phone] (it's free) to find if the bank maintains an 800
    number; many do.  If not, look at the area-code map in the front of
    your phone book to find the area code of the city where the bank is
    located (or you can call 411, or the Operator); dial 1, the area code,
    and 555-1212.  Then call the bank and ask for an application.
    Alternatively, larger public libraries have banking directories and
    can probably give you the information at the reference desk or by

    phone.

(continued in part 3)
--
  The opinions expressed above are those of the author and not SPSS, Inc.
                         -------------------
   [e-mail]                                  Phone: [phone]
   Steve Adams        "Space-age cybernomad"       Fax:   [phone]
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Subject: misc.consumers FAQ on credit part 3 of 4
Keywords: credit-cards chargebacks consumer-rights
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Archive-name: consumer-credit-faq/part3
Last-modified: 21 Oct 1992


This FAQ (Frequently Asked Questions) list should be a repository of the
canonical "best" answers.  If you know a better answer or a change that
improves an answer, please tell me!  (Use email, please.  Traffic in
this group is high, and I might miss a relevant posted article.)

                      Steve Adams, SPSS, Inc., Chicago, IL, USA
                                                        [e-mail]

Because this list is quite long, I am posting it in four parts:
    part 1 of 4: detailed contents and introduction
    part 2 of 4: credit cards
    part 3 of 4: credit cards continued (this file)
    part 4 of 4: credit reports
Please read the disclaimers, acknowledgements, and general information
in part 1.  (The most important disclaimer is that I am not a lawyer and
this file is not to be construed as legal advice.)


Some helpful free pamphlets are available from the FRB.  You can write
to Board of Governors of the Federal Reserve System, Publications
Services, MS-138, Washington DC 20551 for these among others:

    - How to File a Consumer Credit Complaint
    - Consumer Handbook to Credit Protection Laws

The phone number is [phone] in case they accept phone orders.

See part 1 of this FAQ list to obtain a catalog of FRB publications,
including many on home-equity loans and other home mortgages.


section 4. When you buy with a credit card
==========================================

Murphy's Law has free play in credit matters.  Here are some common
problems and how to avoid them (if you can) or resolve them (if you
must).

Q401. Is it better to pay by check or by credit card, as a rule?

    In general, it's better to use a credit card.  When you pay by
    credit card, the U.S.  Fair Credit Billing Act gives you a lot of
    protections (see section 5, "Billing errors and overcharges").
    These safeguards don't apply if you pay by check or by debit card.

    However, be aware that credit-card debt is about the most expensive
    legal kind there is.  With banks paying as low as 3% on savings (as
    of January 1992) but charging 19% or more on credit-card balances,
    it makes sense never to carry a balance past your grace period.

    Household budgeting is beyond the scope of this FAQ list.  But
    always bear in mind that if you're paying by check because your
    credit cards are maxed out, you may well be overextended and may
    want to think about deferring major purchases.  Even if your cards
    aren't maxed out, if you're carrying a balance from month to month
    you are paying dearly for the privilege.

Q402. When I make a purchase, can they ask for my address or phone
      number?

    This is a complicated question.  There are two possible sources of
    an answer:  Federal and state law, and the policies of the
    card-issuing organization.

    Law:  There is no Federal law on the subject.  According to Bankcard
    Holders of America, the laws of CA, DE, GA, MD, MN, NJ, NV, and NY
    prohibit recording personal information in connection with
    credit-card transactions.  Note the word "recording":  strictly
    interpreted, this means they can ask you to show a driver's license
    but can't write anything down from it.

    Policy:  According to letters from

        Director of Public Affairs                and
        Visa USA Inc.                        MasterCard International
        P.O. Box 8999                        888 Seventh Avenue
        San Francisco, CA  94128-8999        New York, NY 10106

    merchants are not allowed to refuse a sale made by Visa or
    MasterCard solely because the customer refuses to provide additional
    personal information.  According to Bankcard Holders of America, the
    same is true when you use your American Express card, but not when
    you use Discover.

    If merchants have "sufficient" reason to suspect you are not the
    authorized card holder, they may ask for further ID.  This exception
    rarely comes up in real life, and even if it does they must not
    write the information on the Amex, Visa, or MC charge slip.

Q403. If it's against the rules, why do merchants insist on address or
      phone number?

    Don't rule out ignorance:  many merchants don't know the rules.
    They may think (wrongly) that getting extra information from you
    will protect them somehow.  The truth is that if they follow the
    procedures of the credit-card company, they will get paid, period.

    On the other hand, some merchants are deliberately flouting the
    rules and depending on you to acquiesce.  Why?  Because they can
    sell your address or phone number, or add you to their in-house list
    of sales prospects.

    Don't accept the old wheeze about "in case there's a problem."  If
    the merchant follows proper procedures at the time of sale, there
    won't be.  If you leave your card behind they can send it to the the
    card issuer, who will return it to you.

Q404. What should I do when asked for personal information I don't want
      to give?

    See also "Is there any official document" and "Where should I report
    merchants who break the rules?" later in this section.

    If you don't see what all the fuss is about, please skip this Q.
    Note the key words, "information that I don't want to give."

    The most effective response is to ignore the request.  When they
    say, "I need your signature and phone," simply sign in the proper
    place and hand them the charge slip without your phone number.
    Don't comment on the request in any way.  More often than not, they
    won't follow up.

    If they do notice that you didn't put down the personal information,
    and ask you again for it, simply say quietly "I don't give that
    out." Almost all the time, the clerk writes down something like
    "refused" and that's the end of it.

    If they still insist, you have to decide how important it is to you
    to make a point.  If you don't much care, give them what they want
    so you can get back home.

    If (like me) you're a privacy fanatic, you can do one of several
    things.  (1) Point out that Visa and MasterCard rules don't allow
    them to require this information and wait to see what they do.
    Typically the clerk calls the manager to "authorize" the sale, which
    she does right away.  (2) Or you can say "Fine:  if you can't make
    the sale without this information, give me a credit slip and keep
    the merchandise." (Since the sale has already gone into the register
    they probably won't call your bluff.  They've never called mine.  If
    they do, get a written credit slip unless you're sure that the
    transaction has not already been processed electronically.)  (3) Or
    you can make up a phone number.  Please use one beginning with 555
    so that some innocent person doesn't get sales calls.  (4) Or, if
    you happen to know the number of the store it's always a nice touch
    to give them that.

    In all this, be firm but pleasant and quiet.  Don't raise your
    voice, but if this is important to you then don't let yourself be
    bullied either.  After all, this is America and you can almost
    always get equivalent merchandise from another store.

Q405. I tried to charge a $10 item but the merchant pointed to a sign
      "minimum charge $20."  Is this valid?

    Never for Visa and MasterCard; generally not for American Express.
    Discover explicitly allows the merchant to set a minimum purchase
    amount, according to email received by the previous editor.

    MC and Visa rules provide that a merchant may not require any
    minimum purchase amount.  This is the merchant's agreement with Visa
    or MasterCard; it is not a Federal law.  (On the other hand, if you
    insist on charging a 79-cent ball point pen, I hope you get four
    flat tires on the way home.)

    According to Bankcard Holders of America, if a merchant takes
    American Express and also Visa or MC, Amex doesn't let the merchant
    impose a minimum purchase on Amex users because that would
    discriminate against them.  Merchants who take Amex but neither Visa
    nor MC may impose minimum charges but Amex officially discourages
    the practice.

Q406. Can the merchant charge credit-card users more than cash customers
      for the same item?

    In a word, maybe.  In a few more words, probably, if the merchant
    goes about it the right way.

    The Federal Truth-in-Lending Act prohibited surcharges on credit-
    card purchases until 1984; since then, there has been no Federal law
    on that subject.  (Other provisions of the law are still in force.)
    The states of CA, CO, CT, FL, KS, MA, ME, NY, OK, and TX have laws
    against surcharges, according to Bankcard Holders of America.

    Discover allows surcharges on credit-card purchases, except in the
    above states.  Visa and MasterCard prohibit them.  American Express
    discourages them in general, and specifically prohibits them by
    merchants that also take MasterCard or Visa because Amex doesn't
    allow merchants to discriminate against it.

    There is a loophole:  merchants are allowed to give cash discounts.
    This means in practice that they can't charge you more than the
    labeled price if you pay by credit card, but they can charge you
    less if you pay cash.  Some companies announce (usually in tiny
    print in the catalog) that all prices "reflect cash discount" of x%
    so credit-card users must pay x% more than the stated price; this
    may be legal but it certainly violates the spirit of the law or the
    regulations.  I don't know about the "service fee" charged credit-
    card users for things like ordering tickets over the phone, but
    they're certainly not allowed to charge you a higher price in person
    than if you pay cash.

    The other loophole, according to Bankcard Holders of America (BHA),
    is this.  Certain government agencies are by law not allowed to pay
    "discount fees," which are the processing fee the bank charges
    merchants for handling credit-card slips.  Since the banks won't
    handle these for free, if your state lets you pay license fees by
    credit card you may well have to pay a surcharge for the privilege.
    However, BHA says that there are no exceptions for retail merchants.

Q407. I made a hotel reservation, and guaranteed it with my credit card.
      When I showed up, the hotel denied my reservation.  Have I any
      recourse?