Credit card fraud happens every day. It is amazingly easy to open a credit card in someone else's name. Think it can't happen to you?? All the information needed to open an account in your name is floating around on the internet right now! Before I relate this reader's story, I URGE you to pull your credit report if you haven't done so in the last 6 months.

I asked this reader to relate her success in removing information from her credit reports as a result of someone impersonating her by filling out a pre-approved credit application, forging her name and receiving the cards.

This happens all too frequently, if the letters I've received are any indication. Our reader was lucky-- she knew who had impersonated her, opening an account in her name without her knowledge. But it wasn't all luck: she acted promptly on this information. Often your credit is ruined by the impersonator. You'll have a tough time explaining to future creditors that you didn't know anything about the account. You have to prove it. Before we get to her letter, let's go over the steps she took so you can make some mental notes as you read. The steps:

• Knew who had impersonated her.
• Took him to court.
• Was able to prove her case in court.
• Sent the court documents to both the creditors who had unknowingly issued the fraudulent cards and to all the credit bureaus.
• Was persistent in her efforts.

Here's the letter:

I'll explain a little bit more about what I had to do to straighten out the mess and, hopefully, it may help the next person who finds himself in my predicament.

First of all, I was lucky enough to know who did this to me-- my ex-husband. And I was lucky to have him plead guilty in court so I had court documents to prove it. You would think that would be enough to clear my name. Guess again! The credit card agencies told me it was a "marital dispute" and they didn't care if the NY State Supreme Court found him guilty. They said they have their own rules. That infuriated me. Why should an out-of-state credit company offer credit to someone who resides in another state if they don't follow the rules of that state's court? Then they should only offer credit to residents in their own state!

I sent each credit card company a letter with the court documents attached. I had to send them more than once because, it seems, they lose paperwork easily. I had to keep calling and hounding them day after day. If the person I reached couldn't help me, I'd ask to speak to someone who could (their supervisor). If anyone has never had to call a credit card company, be put on hold, be transferred around to every department and every person there, until FINALLY someone that may possibly be intelligent enough to listen and realize that a supervisor needs to handle it answers-- You're lucky. It's a nightmare. They want their money and they don't care if you're innocent or not. I can't tell you how many hundreds of hours it has taken me. You need to be persistent and make sure that you document every single person you have talked to, the date, and what they are going to do for you. Keep following up. I won't kid you, it is a nightmare.

My ex-husband forged my name to 13 credit card applications. The signature did not look anything like mine. Some of the information on the application was incorrect (my salary). Credit card companies never check the signature (such as requesting a copy of driver's licence, etc.). Ironically, in order to request your credit report from Equifax, Trans Union, Experian/TR, you need to send in copies of your Social Security card, driver's license, and sometimes a utility bill to prove who you are! But not credit card companies. They're just happy someone mails back their pre-approval application. Credit card companies, who mail you these pre-approval offers constantly, never know who completes those applications. Have you ever received your neighbor's mail by mistake? It happens!

Another scary thought-- I disputed my Equifax report. I sent in a lot of documents to prove my innocence and most of it was personal information-- such as social security number, account numbers, etc. In other words, things you don't want 'lost'. I mailed this information to Equifax and waited to hear from them. I finally called them two months later and asked them my status. They said they never received it. I know the address was correct and printed clearly. It scares me to think about what might have happened to my paperwork. It is also very difficult to contact these credit reporting agencies without getting a recording. It's frustrating because, if you mail them something, they claim they haven't received it. And you can't get in touch with them by telephone. I found that Equifax frequently changes their 1-800 fraud department phone number that is printed on the top of your credit report. They really have you over a barrel and yet your life depends on them having correct information on you.

Anyway, hope this helped. If you're innocent, you have to stand up for your rights. Be persistent. Eventually, you'll get it cleared. It has taken me almost 2 years but progress has been made. What I have gone through (this is only part of it), has changed my life.

All of the things you can do to prevent this from happening to you:

• Shred all credit cards applications received by you in the mail.
• Pull your credit report every 6 months to verify that there are no accounts in your name that you don't know about.
• Write to the credit bureaus and the mailing list houses to get your name off of their lists.
• For in-depth information on keeping your credit report safe from thieves, order our book!

billing errors
• charges for goods ordered but never shipped
• charges higher than agreed
• charges for goods not shipped as ordered
• charges for products that don't work as represented
• charges for unsatisfactory services
• and similar kinds of problems.

   

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  There's an error on my bill. What should I do?
  The instructions are printed on your bill, probably on the back. Just follow them. The rules are simple: if you report a problem in writing within 60 days of the billing date, the bank must investigate it and respond to you within 30 days. While they are investigating, you don't have to pay the disputed amount or any finance charges on it. If their investigation shows the item was correct, they can restore finance charges retroactively and you will have to pay them.

  The address to write to is on the bill. Look for a heading like "In case of error" or "Send inquiries to."

  Some banks try to resolve problems over the phone; others insist that you write a letter. If you decide to call before writing, make sure you note the date and time of the call, whom you talked to, and what s/he promised to do (if anything). Then send a letter to the "Send inquiries to" address mentioning this information. (Your letter should make clear that you are confirming a telephone conversation, so that the bank doesn't try twice to resolve the same problem.)

  If you resolve a problem by phone, but the bank doesn't follow through, the confirming letter that you sent will preserve your rights.

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  I got ripped off by the merchant. What should I do?
  This apples to any situation listed at the beginning of this section, except billing errors. Fortunately, the U.S. Fair Credit Billing Act gives you strong protection if you used a credit card. Because this comes up so frequently, and people are understandably emotional when they think they've been cheated, I've divided up the answer into several sections that follow.

  The legal language is on the back of your bill, under "Special rule for credit card purchases."

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  Exactly which Purchases qualify under the Fair Credit Billing Act?
  You are protected if all of the following are true:
  • The purchase was made with a credit card. (If it was a debit card, the money is already gone from your account and the bank won't get involved.)
  • The amount charged is more than $50. (The amount in dispute could be less, for example if you bought a $90 lamp but were billed $100. The amount in dispute is $10.)
  • You made the purchase somewhere in your home state, or within 100 miles of your mailing address. (I am not an attorney, but my understanding is that if you are having goods shipped to you by mail or phone order, the place of purchase is the address you are having them shipped to.)

  If some of the above are not true, you are still protected if the credit card company owns or operates the merchant, or the credit card company mailed you the advertisement for what you bought. In that case, your purchase is covered by the rules no matter where you bought or how much you paid.

  In addition, you MAY successfully protest charges outside of these parameters, but there is no legal requirement for the credit card company to correct the problem. (return to Index)

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  Will the bank get involved right away?
  No. Under the law, you must first try "in good faith" to resolve the problem directly with the seller.

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  What does resolving a problem "in good faith" mean?
  "In good faith" is not defined in the law, but in practice it means that you behave like a reasonable person. The merchant is expected to act reasonably, too.

  At a minimum, you should talk to the merchant's customer service department and send a follow-up letter. You have to allow the merchant a reasonable time to respond. What's reasonable? Depends on circumstances. Enough time for mail to go both ways, plus a couple of working days.

  "In good faith" also means that you act promptly. Don't wait three months after the charge shows up on your bill to complain that you never got what you ordered.

  Back orders are a frequent problem. If the merchant tells you the stuff is back ordered, you have the right to cancel the order. (If it's mail order, they're supposed to give you a postage-paid reply card for this.) Then you can tell the merchant you don't want to wait and ask for the charge to be canceled. This may not happen the same day, but it should be reasonably prompt. Wait a few days and call the bank to see if the credit has come through yet.

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  Any other hints for dealing with a problem merchant?
  Most importantly, remember that the person you are talking to is probably not the person who caused the problem. Don't yell. (In a letter, don't use lots of capital letters and don't run on at great length.) Don't sound crazy or make threats.

  Plenty of good people work for bad companies. Lots work for good companies that make an occasional mistake. You may be lucky and deal with one of them. If your approach is "You dirty rotten so-and-so!" you probably won't get anywhere. If your approach is "There's a problem here; can you help me?" you'll have a better chance.

  Be prepared with specific information before you call. Have all the paperwork in hand. Make sure you can give the order date, what you ordered (item number and price), when you were promised the items, your credit card number, how much you were charged. Be clear about what you want-- a refund, a replacement, shipment by a certain date, repair, etc. Most people (not all) respond best if you tell them clearly, calmly and reasonably what you want.

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  I tried in good faith, but the merchant won't budge. Can the bank help?
  Yes. In fact, the law says the bank must help. (All banks know this and most will be very helpful. Don't expect a fight.)

  Write to the credit card issuer and ask for a credit. (They call it a chargeback but they won't expect you to know that.) Use the same address as for billing errors--see "There's an error in my bill," earlier in this section. Make sure you give these important facts in the letter:

  • date you are writing the letter
  • your name and address, as they appear on the bill
  • your account number, and the statement date on the bill
  • Start with "I am writing about a problem with (company name). The transaction date was (mm/dd), the posting date was (mm/dd), and the transaction amount was $(amount)."
  • Then explain, clearly and briefly, what's wrong.
  • Next, state that you tried in good faith to resolve the problem directly with the merchant, but did not succeed. List dates you made phone calls and what was said by the merchant. Enclose photocopies of your letters to the merchant and the merchant's response, if any. (Don't overload the bank with this. You're showing that you acted in good faith; don't write a novel.)
  
  

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  What does the bank do when I ask for a chargeback?
  The bank will credit your account and charge the amount back to the merchant. This must happen within one billing cycle, if you have done everything you were supposed to. If the merchant doesn't respond, the amount is gone from your bill forever.

  If the merchant disputes the chargeback, the bank has to decide who is telling the truth. If you don't like the decision, you can go to court or pursue other remedies that are beyond the scope of these FAQs.

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  What happens to finance charges on the disputed amount?
  You don't have to pay them while the bank is investigating.

  When the bank credits your account, they are also supposed to credit your account with any finance charges that were assessed on the disputed amount from the date of purchase. They may or may not do this without further prompting from you.

  Again, if the disputed charge is later found to be correct, you will have to pay finance charges on it.

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  What if I paid my bill in full before I noticed a problem?
  Strictly speaking, the Fair Credit Billing Act says you may not have to pay "the remaining amount due." However, I (and some other consumers) have found that our banks aren't quite so picky.

  My advice (and remember I am not a lawyer) is to follow the standard procedures for disputing a charge and simply not to bring up the issue of whether you've already paid part or all of it. Odds are, your bank won't raise that issue either.

  However... It's best to examine bills carefully before you pay them. If you question a charge on the 58th day, a month or more after you've already paid it, the bank is entitled to wonder if you're really acting "in good faith" as the law requires.

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  How do I avoid problems with unauthorized charges?
  From the Wall Street Journal, Friday, July 17, page C1

  "If you find that someone else has used your credit card number, write to the card issuer and specify that an "unauthorized charge" was made. If you don't use those words, the issuer will most likely treat the incident as a "billing error," says Ms. Butler of Bankcard Holders.

  There's a big difference. While a billing error must be reported within 60 days, there are no time limits for reporting unauthorized charges. Most people don't get this straight: in fact, a brochure prepared by the Federal Trade Commission and a pamphlet prepared by American Express incorrectly say that cardholders should report unauthorized transactions as billing errors--and that they have only 60 days to do so. A spokeswoman for American Express says its information came from the FTC; a lawyer for the FTC says the agency is now aware of the mistake.

  The most a cardholder will be liable for if someone used their card is $50, the FTC lawyer says; if the card is not used in the transaction, the cardholder won't have to pay any of it."

  [I believe that last bit, about "if the card is not used," refers to people who find your number somewhere and place orders over the phone, where they give the number but don't have the actual card.]

  The article also has a useful sidebar titled "Preventing Crooks from Getting Your Numbers":

  "When traveling:
  • Ask for carbons of car rental agreement, and destroy. Don't leave rental agreement in car where thieves can get it.
  • Shred travel itineraries and ticket receipts issued by airlines and travel agents.
  When at shops and restaurants:
  • Refuse to write address and phone number on credit slips, or credit card account numbers on checks.
  • Don't let clerk write your driver's license number on your check if it's the same as your Social Security number.
  When using a calling card:
  • Don't use a personal identification number (PIN) that's obvious, such as a birth date, work extension, or consecutive numbers.
  • Cover the phone with your body to prevent anyone from seeing what you dial; if you must tell an operator your account number, assume people are eavesdropping.
  When at home:
  • Destroy all pre-approved credit card applications; when cleaning files, shred old statements, pay stubs, and checks.
  • Don't give card numbers to callers who say you've won a prize.
  • If monthly statement doesn't arrive on time, call the issuer immediately."

average daily balance
With average daily balance (the most common method), the issuer calculates the balance by taking the amount of debt you had in your account each day during the period covered by the billing statement and averaging it.

previous balance
With this method, the issuer uses the balance outstanding at the end of the previous period-- that is, the period prior to the one covered by the current billing statement.

adjusted balance method
With this method, the balance is derived by subtracting the payments you've made from the previous balance.

Annual Fee A flat, yearly charge similar to a membership fee

Annual Percentage Rate (APR)
A measure of the cost of credit that expresses the finance charge, which includes interest and may also include other charges, as a yearly rate.

Finance Charge
The dollar amount you pay to use credit. Besides interest costs, it may include other charges associated with transactions such as cash advance fees.

Grace Period
A time, about 25 days, during which you can pay your credit card bill without paying a finance charge. Under almost all credit card plans, the grace period only applies if you pay your balance in full each month. It does not apply if you carry a balance forward. Also, the grace period does not apply to cash advances.

Interest Rate
Interest rates on credit card plans change over time. Some are explicitly tied to changes in other interest rates such as the prime rate or the Treasury Bill rate and are called variable rate plans. Others are not explicitly tied to changes in other interest rates and are called fixed rate plans.

A PIN is a password that goes with your card and allows you to make certain types of electronic transactions involving your card. In some countries (notably France), most credit card purchases are validated with a PIN. (Although you can still use your card without one, they may sometimes have to phone for authorization.) Also, if you have a PIN, you can get cash advances from many cash machines. Note however that it is best to get a 4-digit PIN; longer PINs are not accepted by some networks (notably the French).

Also, protect your PIN as if it were cash. Do NOT write it down anywhere near your card. With this number, and your card, a thief could run your card to its maximum in cash advances.

The ATM card is a little less dangerous if you lose it, since nobody can use it to drain your account without your PIN (personal identification number). Also, most banks limit the amount of cash that can be withdrawn with an ATM card in a day. (A Visa or MasterCard debit card allows a thief clean out your entire account with one purchase.)

Debit cards are convenient but they do have drawbacks. It is a lot more painful to resolve a problem with a purchase if the money is gone from your account (as with a debit card) than if it's just numbers on a piece of paper (as with a credit card). And if you lose a debit card, your whole account can be emptied with no recourse for you. You decide whether you want to take that risk.

A reader has reported that his Schwab account has a debit-type card associated with it, but it is treated like a credit card for other purposes. In other words, it is a credit card, but the debit is made immediately to his Schwab account.

Consumers in the know don't like debit cards because they offer less protection than credit cards in the event of a billing dispute.

In Europe, things are a bit different. In some countries, the Visa and MasterCard networks have been merged and ALL merchants who take one take the other. This is notably the case in France. (But sometimes the merchant isn't aware of this until you point out the M-C logo on his sticker in the window.) On the other hand, the cash advance networks have NOT been merged. Again, in France, almost any bank or cash machine (if you have a 4-digit PIN) can give you a cash advance on Visa (Carte Bleue), but only a few banks (Credit Agricole, Credit Mutuel, and all Post Offices) and cash machines can give you a M-C cash advance. Also, for various reasons, a given card may not work on the day you most need it. And in many countries ( e.g. Italy), the networks have not merged. Thus, it is most prudent to have both.

American Express, Diners Club, and their kin were originally aimed at the more upscale "travel and entertainment" market. They are accepted at many places, though not as many as Visa and MC. Some places don't take MC and Visa but do take American Express or Diners Club.

In Europe, there are increasingly few places that take only Diners Club. There are a very few that take American Express exclusively.

Note that credit card usage and acceptance varies widely across Europe. In France, you can use it at MORE places than in the US. In Italy, less in general, except for tourist-oriented shops. In Germany and England, about the same. In Greece, only in tourist-oriented shops.

The American Express card used to be very handy for traveling in Europe. Among other things, it would let you cash personal checks drawn on your U.S. bank at any of their many offices. Nowadays, however, with your Visa or MasterCard, you can get cash advances at local banks at a better exchange rate.

AMEX also holds mail for their customers at their offices so if you don't know where you'll be staying in Istanbul, you can have mail sent to the AMEX office. (It's enough to have one $10 AMEX traveler's check to be considered a "customer".)

I don't have an AMEX card, but someone who does posted a list of the benefits he had actually received in a year and concluded that the card was worth more money to him than the annual fee. He cited student and non-student discounts for air travel, extra frequent-flyer miles for a variety of airlines, and "twofers" at some big-city restaurants. Your benefits may or may not outweigh the cost of the annual fee depending on your usage patterns.

The best card for you is the one that is accepted where you shop and charges you the least amount of money for the services you actually use. For example, if you always pay off your balance each month, it is important to get a card with a grace period; the interest rate doesn't matter much.

Card users receive some sort of benefit by using the card-- frequent flyer miles or points toward merchandise in a catalog. The organization solicits all its members to get cards, with the idea of keeping their name in front of the card user and, hopefully, keeping the card user loyal to them for future purchases. In addition to establishing brand loyalty, the organization receives some financial incentive-- a fraction of the annual fee or the finance charge, or some small amount per transaction, or a combination of the two-- from the credit card company. Seldom does the organization get much money out of it. Most of the profits go to the card issuer. The credit card company gets more of their cards into customers hands. Everybody wins.

• "bank cards", issued by banks: Visa, MasterCard, and Discover;
• "travel and entertainment (T&E) cards" like American Express and Diners Club;
• "house cards" that are good only at the stores of one chain. Sears is the biggest one of these, followed by the oil companies, the phone companies, and your local department stores.

T&E cards and national house cards (like Sears) have the same terms and conditions wherever you apply

Gas cards and department store cards are a good way to rebuild your credit if you are just starting out, but can be tough to get if your credit is already trashed. Also, these cards do not help your credit as much as a major credit card.

Major credit cards are scored higher than "finance cards" (usually a credit card which can only be used at the store who issues it, like Best Buy, Texaco cards, etc.) So how do you get a major credit card if your credit is trashed? Secured credit cards.

Traps to avoid in secured credit cards

• Reports the credit card limit you have (even if it's only $200).
• DOESN'T report that the card is a secured card.

Credit scores take into account the total amount of credit available to you and the current balance you have on your cards. They use this to calculate your debt ratios which is:

Current Total Balances/Current Total Credit Limits = Debt Ratio.

If they are not able to do this calculation, they will just guess what the limit is and this is going to be your current credit card balance or 100% of your credit limit used. Remember in the credit scoring article, the scoring model likes to see 25% or less of your credit limit used.

If you get a card which reports to the credit bureaus that it IS a secured card, your credit score will also take a hit, even if you are paying on time.

	Reduce the number of cards you carry and use just one or two.  (Optional: Place credit card warning labels on front of credit cards.)
	Use credit cards only for essential purchases.
	Return all unwanted credit cards, cut up into pieces, to the card issuer.
	Keep unused cards in a safe place.
	Carry credit cards separately from your wallet or purse.
	Keep your card in view whenever you hand it to a merchant.
	Destroy carbon papers on receipts.
	Never lend your cards to anyone.
	Promptly report questionable charges.
	Avoid signing blank charge vouchers.
	Don't give card numbers out over the phone on calls you didn't originate.
	Enter charge purchases in your checkbook register as though they were a check.

If your cards are stolen or lost, call the card issuer(s) immediately. Most issuers have toll-free numbers for reporting missing cards and usually maintain 24 hour service. The law says once you make a report of the missing card(s) you have no further liability - in fact your maximum liability is $50 per card for unauthorized charges. If you suspect someone of using your account number write the issuer via certified mail. Only a letter protects your rights under the law. 

	Home mortgage
	Automobile
	The purchase of an item that will long outlast the period of debt incurred to buy it, and that in addition lowers other costs. Example: using credit to install storm windows and insulation in your home, which in turn lowers heating and cooling costs.
	When the purchase is a necessity and not a luxury.
	When it costs no more money to charge.
	When it helps your income tax return.
	When you may need protection on a repair or a purchase (auto, appliances, mail order).

When Credit Cards Are Bad:

	Constant temptation to OVERSPEND.
	Nonessential items purchased.
	Impulsive spending increases.
	Payments are late or only partially made
	Facing bankruptcy.

When Credit Cards Are Good:

	Good identification (required for cashing checks and most car rentals))..
	Safe substitute for cash.
	Automatic record keeping.
	Consolidates many purchases into one payment.
	Saves money when you can take advantage of a good sale.
	Orders can be placed easily by mail or phone.
	You have leverage against the merchant when a problem arises. Your dispute/claim will get prompt attention when the merchant knows your payment can be delayed or disputed.

• Keep a list of your credit card numbers, expiration dates and the phone number of each card issuer in a secure place.
• Open credit card bills promptly and compare them with your receipts to check for unauthorized charges and billing errors.
• Report promptly and in writing to the card issuer any questionable charges. Written inquiries should not be included with your payment. Check the billing statement for the correct address to send any written inquiries. The inquiry must be in writing to guarantee your rights.
• If any of your credit cards are missing or stolen, report the loss as soon as possible to your card issuers. Some companies have 24-hour service and toll free numbers are printed on their statements for this purpose. For your own protection, follow up your phone call with a letter to each issuer. The letter should contain your card number, the date the card was missing, and the date you called in the loss.
• If you report the loss before a credit card is used, the issuer cannot hold you responsible for any subsequent unauthorized charges. If a thief uses your card before you report it missing, the most you will owe for unauthorized charges on each card is $50.

• Watch your card after giving it to a clerk. Take your card back promptly after the clerk is finished with it and make sure that it's yours.
• Void or destroy any incorrect receipts.
• Never sign a blank receipt. Draw a line through any blank spaces above the total when you sign receipts.
• Never give out your credit card number over the phone unless you have initiated the call.
• Never put your card number on a post card or on the outside of an envelope.
• Leave infrequently used cards in a secure place.
• Consider closing any inactive accounts with the issuer(s).

• Credit card issuers offer a wide variety of terms (annual percentage rate, methods of calculating the balance subject to the finance charge, minimum monthly payments, and actual membership fees). When selecting a card, compare the terms offered by several card issuers to find the card that best suits your needs.
• Consider transferring balances on higher interest rate cards and accounts to a card with a lower rate.
• Sign new cards as soon as they arrive. Cut up all unwanted cards.

The Beginning of the Credit Card Era

In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York City. From that modest beginning, credit cards have become an indispensable part of modern life. Consumers rely on credit cards to help them achieve their lifestyle goals by letting them take advantage of special bargains, spread payments out over several months, and provide cash in emergencies. Credit cards have become so widespread that they are often accepted as a piece of primary identification.

Getting the most from your credit cards involves four main steps:

• Use your credit cards wisely.

• Protect yourself against fraud.

• Review your credit history regularly.

• Get the right card for your needs.

  Use your credit cards wisely

  Follow these simple tips to get the most from your card.
  

  Tips:

• Pay your credit card bills on time. This is the single most important thing you can do to preserve and enhance your credit rating. Always pay at least your minimum payment and allow time for your payment to reach the company if you are using the mail.

• If possible, pay off your balance in full each month. If this is not possible, then make as large a payment as you can comfortably afford. Paying off or paying down your balance is a sound financial move—one that will save you money on interest charges.

• If you can't pay off your balance in full, then slow down on your credit card use for the next while. Take time to step back and have a careful look at how much you earn and how much you spend each month. A little budgeting can save you big money down the road.

• Check your statement carefully each month. Review your statement carefully. Do all the charges look correct? Have any required credits been applied? Are there any unusual or unexpected charges? Your credit card company will correct legitimate errors, but only if you bring them to their attention in a timely manner before you pay your bill.

• Transfer your balance to a card with a lower interest rate. If you have two or more credit cards with outstanding balances, consider moving the outstanding balances to the card with the lowest interest rate. You will save money each month and simplify your record keeping by receiving only one bill.

• Negotiate for a lower rate with your credit card company. If you have a good credit history, you are a valuable asset to your credit card company. Call them and seek ways to lower your interest rate. This is often possible, but never advertised. If the interest rate you are currently paying is very high, imply you may cancel the card and go with a competitor unless they adjust your rate downward. It doesn't hurt to ask, and you may be surprised at the results.
  

  Protect yourself against fraud

  While credit card fraud is a problem, here are a few simple steps you can take to greatly reduce the risk of becoming a victim.
  

  Tips:

• Sign new cards immediately. When you receive your new or replacement card in the mail, sign it, in ink, right away. If it is a replacement card, destroy the old card by cutting it into many small pieces.

• Shred old credit card receipts. You can purchase an inexpensive paper shredder at an office supply store. All old receipts with your credit card number and any unneeded documents with your social insurance number or other sensitive personal information should be shredded before disposal. This prevents the common practice of criminals going through the trash to find receipts and stealing your identity

• Never fax your credit card number. Your credit card number can lie for hours in the fax basket at the other end. Anyone passing by can record your number and begin to use your card number fraudulently. It is even possible for criminals to intercept your credit card number while the fax is in transmission.

• Use caution when giving your credit card number out on the phone or on the Internet. Only give out your credit card number on telephone calls you initiate to business or organizations you trust. Never give your number out to callers who call unannounced, no matter how legitimate the call sounds.

• On the Internet, look for an Internet address that begins https:\\. The "s" indicates that it is a secure connection and a small padlock symbol should appear in the bottom right hand corner of your screen, indicating it is safe to transmit your credit card number.

• Call your credit card company instantly if you suspect trouble. All credit card companies have 24 hour lost and stolen help lines. If you lose your wallet or purse or have it stolen, call without delay! Much fraud happens within the first hour or two, before the victim realizes the cards are missing. Your credit card company will block your cards from being used and stop you from being responsible for any charges thieves incur.

• Take advantage of any security features your card offers. Many newer cards have the option of including your photograph on the card. This is excellent protection and is highly recommended.
  

  Review your credit history regularly

  After you have obtained the best credit card, and are using it wisely, review your credit history on a regular basis. This helps ensure your history is accurate and that any issues have been resolved to your satisfaction.

  North America has three national credit-reporting bureaus. Your credit rating is held at one or more of these bureaus. When checking on your rating, be sure to contact all three, as your rating may be held on file at more than one bureau. The three national credit bureaus where you can check your credit report are Equifax, Experian, and Trans Union. Check the Yellow Pages, under Credit to find the numbers in your area.
  

  Get the right card

  With all the choices in cards available, chances are good,very good, you can find a better card for your needs. Today's cards can save you money, offer better features, and even support a cause you believe in. Here are some tips on finding the right card and where to check that you have the best card for your needs.
  

  Tips:

• 4 Be alert for companies offering a great interest rate for transferring your existing balance to their card. Usually these rates are only in effect for a short time, often six months. At the end of this time, the rate can revert to a much higher permanent rate. Keep your eye on the Annual Percentage Rate (APR); this is the figure that counts in the long run.

• Lower is better: read the fine print and find the Annual Percentage Rate (APR). This is the interest rate the companies charge you if you carry a balance. You want the lowest rate possible; as each percentage point drop will save you money on the months you have an outstanding balance.

• Nothing can be better: Try for a credit card that does not charge an annual fee. Many credit cards charge you a fee each year to use their cards. While this may be offset by other benefits the card may offer, you can find cards that do not charge this annual fee. Why pay for the privilege of using a credit card when you don't have to?

• Explore the options: Today's cards offer a wide range of excellent features, including frequent flier points, programs that bank points toward a new car, and cards that support charitable organizations. Other options worth having include car rental insurance coverage, trip cancellation coverage, and extended warranty coverage.

Choosing and Using Credit Cards

Chances are you've gotten your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires." Before you accept, shop around to get the best deal.

Credit Card Terms
A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost. So it's wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require no application. You also may want to ask about these terms when you're shopping for a card.

Annual Percentage Rate. The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements.

The card issuer also must disclose the "periodic rate" - the rate applied to your outstanding balance to figure the finance charge for each billing period.

Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Because the rate change is linked to the index's performance, these plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you're considering a variable rate card, the issuer must also provide various information that discloses to you:

• that the rate may change; and
• how the rate is determined - which index is used and what additional amount, the "margin," is added to determine your new rate.

At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change.

Free Period. Also called a "grace period," a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you'll have enough time to pay.

Annual Fees. Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; "gold" or "platinum" cards often charge up to $75 and sometimes up to several hundred dollars.

Transaction Fees and Other Charges. A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card.

Balance Computation Method for the Finance Charge. If you don't have a free period, or if you expect to pay for purchases over time, it's important to know what method the issuer uses to calculate your finance charge. This can make a big difference in how much of a finance charge you'll pay - even if the APR and your buying patterns remain relatively constant. See page 4 for examples of how the methods can affect your costs.

Examples of balance computation methods include the following.

Average Daily Balance. This is the most common calculation method. It credits your account from the day payment is received by the issuer. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."

Adjusted Balance. This is usually the most advantageous method for card holders. Your balance is determined by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period aren't included.

This method gives you until the end of the billing cycle to pay a portion of your balance to avoid the interest charges on that amount. Some creditors exclude prior, unpaid finance charges from the previous balance.

Previous Balance. This is the amount you owed at the end of the previous billing period. Payments, credits and new purchases during the current billing period are not included. Some creditors also exclude unpaid finance charges.

Two-cycle Balances. Issuers sometimes use various methods to calculate your balance that make use of your last two month's account activity. Read your agreement carefully to find out if your issuer uses this approach and, if so, what specific two-cycle method is used.

If you don't understand how your balance is calculated, ask your card issuer. An explanation must also appear on your billing statements.

Other Costs and Features
Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many cards do not permit a grace period for the amounts due - even if they have a grace period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.

You'll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan's services and features. For example, you may be interested in "affinity cards" - all-purpose credit cards sponsored by professional organizations, college alumni associations and some members of the travel industry. An affinity card issuer often donates a portion of the annual fees or charges to the sponsoring organization, or qualifies you for free travel or other bonuses.

Special Delinquency Rates. Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. These rates sometimes exceed 20 percent. Information about delinquency rates should be disclosed to you in credit card applications or in solicitations that do not require an application.

Receiving a Credit Card
Federal law prohibits issuers from sending you a card you didn't ask for. However, an issuer can send you a renewal or substitute card without your request. Issuers also may send you an application or a solicitation, or ask you by phone if you want a card - and, if you say yes, they may send you one.

Cardholder Protections
Federal law protects your use of credit cards.

Prompt Credit for Payment. An issuer must credit your account the day payment is received. The exceptions are if the payment is not made according to the creditor's requirements, or the delay in crediting your account won't result in a charge.

To help avoid finance charges, follow the issuer's mailing instructions. Payments sent to the wrong address could delay crediting your account for up to five days. If you misplace your payment envelope, look for the payment address on your billing statement or call the issuer.

Refunds of Credit Balances. When you make a return or pay more than the total balance at present, you can keep the credit on your account or write your issuer for a refund - if it's more than a dollar. A refund must be issued within seven business days of receiving your request. If a credit stays on your account for more than six months, the issuer must make a good faith effort to send you a refund.

Errors on Your Bill. Issuers must follow rules for promptly correcting billing errors. You'll get a statement outlining these rules when you open an account and at least once a year. In fact, many issuers include a summary of these rights on your bills.

If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you didn't accept, or for an item that wasn't delivered as agreed. Of course, you still have to pay any part of the bill that's not in dispute, including finance and other charges.

If you decide to dispute a charge:

• Write to the creditor at the address indicated on your statement for "billing inquiries." Include your name, address, account number, and a description of the error.
• Send your letter soon. It must reach the creditor within 60 days after the first bill containing the error was mailed to you.

The creditor must acknowledge your complaint in writing within 30 days of receipt, unless the problem has been resolved. At the latest, the dispute must be resolved within two billing cycles, but not more than 90 days.

Unauthorized Charges. If your card is used without your permission, you can be held responsible for up to $50 per card.

If you report the loss before the card is used, you can't be held responsible for any unauthorized charges. If a thief uses your card before you report it missing, the most you'll owe for unauthorized charges is $50.

To minimize your liability, report the loss as soon as possible. Some issuers have 24-hour toll-free telephone numbers to accept emergency information. It's a good idea to follow-up with a letter to the issuer - include your account number, the date you noticed your card missing, and the date you reported the loss.

Disputes about Merchandise or Services. You can dispute charges for unsatisfactory goods or services. To do so, you must:

• have made the purchase in your home state or within 100 miles of your current billing address. The charge must be for more than $50. (These limitations don't apply if the seller also is the card issuer or if a special business relationship exists between the seller and the card issuer.) and,
• first make a good faith effort to resolve the dispute with the seller. No special procedures are required to do so.

If these conditions don't apply, you may want to consider filing an action in small claims court.

Shopping Tips
Keep these tips in mind when looking for a credit or charge card.

• Shop around for the plan that best fits your needs.
• Make sure you understand a plan's terms before you accept the card.
• Hold on to receipts to reconcile charges when your bill arrives.
• Protect your cards and account numbers to prevent unauthorized use. Draw a line through blank spaces on charge slips so the amount can't be changed. Tear up carbons.
• Keep a record - in a safe place separate from your cards - of your account numbers, expiration dates and the phone numbers of each issuer to report a loss quickly.
• Carry only the cards you think you'll use.

For Help and Information
Questions about a particular issuer should be sent to the agency with jurisdiction.

National Banks
Comptroller of the Currency
Compliance Management, Mail Stop 7-5
Washington, DC 20219

State Member Banks of the Reserve System
Consumer and Community Affairs
Federal Reserve Board
20th & C Streets, NW
Washington, DC 20551

Federal Credit Unions
National Credit Union Administration
1776 G Street, NW
Washington, DC 20456

Non-Member Federally Insured Banks
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth Street, NW
Washington, DC 20429

Federally Insured Savings and Loans, and Federally Chartered State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552

Other Credit Card Issuers (includes retail/gasoline companies)
Consumer Response Center
Federal Trade Commission
Washington, DC 20580

Here's how some different methods of calculating finance charges affect the cost of credit:

* To figure average daily balance (including new purchases): ($400 x 15 days) + ($100 x 3 days) + ($150 x 12 days)/30 days = $270

** To figure average daily balance (excluding new purchases): ($400 x 15 days) + ($100 x 15 days)/30 days = $250

You may already have a credit card, but if you don't, you can be sure there will be many opportunities to get one once you arrive on campus.

Many credit companies set up tables in the common areas of college campuses to encourage students to sign up for credit cards. Often, they give away trinkets such as T-shirts, water bottles, frisbees, coffee mugs, etc. in exchange for having you fill out an application. Sound easy? It is, but think twice before you do it.

Unfortunately, many of the credit cards offered on campus may not be a good value for students. According to a study conducted by the U.S. Public Interest Research Group (PIRG), students who obtain credit cards at campus tables have higher unpaid balances than those who do not. Carrying high, unpaid balances is one of the quickest ways to incur too much debt and fall behind in payments.

Surprisingly, students are a good credit risk, despite the fact that they often do not have jobs and are also borrowing student loans. Research has shown that student borrowers are valuable customers because they tend to stay loyal to their first card, continuing to make purchases for many years to come.

Like loans, using credit cards can help you build a positive credit history. This can enhance your ability to receive a private student loan, buy a car, rent an apartment, get a job, and eventually, try to buy a house. Of course, there are other advantages to having a credit card including:

• Security in emergencies;
• Reduced need to carry cash or checks; and
• Enhanced personal responsibility and independence.

However, only one national card like a VISA or a MasterCard is necessary to receive these benefits.

Unlike repayment on a traditional loan, such as a student or car loan, credit cards do not allow you to spread the amount you owe over a fixed period of time. Instead, you are required to make a minimum monthly payment, which is the smallest amount you can pay and still meet your cardholder agreement (the terms you agree to when signing up for the card).

The minimum payment is usually 2 percent of your outstanding balance. Unfortunately, by paying only the minimum each month instead of paying off your entire balance, your debt will continue to grow. Many credit card companies also charge late fees (usually 2 percent of the outstanding balance), and higher interest rates on cash advances.

As a student, you will have to decide for yourself if you can handle the responsibility of a credit card. They are easy to get but not so easy to manage, especially if you end up with a high, unpaid balance on which interest is accruing, but payments are not being made. According to the PIRG study, of the 79 percent of surveyed students who use credit cards for multiple purposes, only 13 percent reported limiting credit card use to emergencies.

When making your decision about a credit card, ask yourself the following:

• Do I need a credit card?
• Can I afford a credit card?
• Will I be able to pay off my balance each month?

If you decide to apply for a credit card, be a smart consumer and shop around. Look for a company that offers the following:

• Low interest rates or finance charges (combined, they are called APR)
• Low or no annual fees
• A grace period (time during which no payments are due) before finance charges are posted
• Other benefits including purchase warranties, free gas, airline miles, etc.

Credit cards can be helpful in emergencies or if you are able to pay off the balance each month, but be wary! Credit cards can also get you into trouble. Here are some helpful hints on using credit cards:

• Watch out for carrying balances. Some cards charge 20% or more in interest. (Interest is usually called "finance charges" on your statements.)
• Fixed rates aren't always fixed! A credit card company can change the rate by informing you 15 days before changing the rate.
• Look at your statement carefully and call the company right away if you have any questions.
• There is usually a large finance charge for cash advances and interest begins accruing as soon as you take the money out, not after the next statement closing.
• Be aware of annual fees. Many times you are charged $50 or more just to have the card.
• Watch out for introductory offers! When you receive a credit card offer in the mail with a low rate, it may expire in three or six months. Note when and by how much the rate increases after the "introductory offer" expires. You may not remember when it expires, but the card company will.
• Think about your purchases. If you are not able to afford the purchase now, chances are you won't be able to afford it in a month when the credit card bill comes in!

• Cut your recreational expenses.
• Call your credit card company. They may be willing to work out a repayment schedule with you.
• Develop a budget and stick to it! Everyone makes mistakes, but credit will follow you and hurt your eligibility for mortgages or loans down the road.
• Look into credit counseling services. Many offer educational programs or individual counseling sessions to help you get back on track.