Facts for Consumers from the Federal Trade Commission

Using Plastic: A Young Adult's Guide to Credit Cards -- July 1992

Some of your friends may have credit cards already. At first 
glance, a credit card gives you freedom to buy something on the 
spur of the moment -- without worrying if you have enough cash in 
your pocket. It makes shopping look incredibly easy: just one 
payment at the end of the month.

But if you talk to friends or adults about using credit cards, 
you may find that there are drawbacks. Some credit card users 
find they've spent too much money on too many things. Some can't 
pay their bills on time. And, those who have trouble paying back 
their debts may find they can't borrow money when they want to 
make a really important purchase -- like a car or a house.

The key to using a credit card wisely is knowing how to use it 
responsibly. We hope this brochure helps you do that by 
highlighting the important things all credit card users should 
know.

"I want to get my first credit card. How do I do it?"

You may be able to get your first credit card with your name on 
it through your parents. By having your parents co-sign for the 
card, you use your parents' income and good repayment history to 
qualify. You then can make purchases with the credit card, and 
you or your parents can pay the bills.

If you have a job or other income, you may be able to get a 
credit card on your own. This is important because if you want to 
use credit regularly -- and someday apply for even more credit -- 
you will need to establish your own "credit history."

This credit history (prepared as a "credit report" by a credit 
bureau) is a description of how responsibly you handle credit -- 
for example, whether you pay bills on time. Financial 
institutions usually check your credit report before lending you 
money or issuing you a credit card. To establish your credit 
history:

1. Apply for a credit card at a local store or a small loan at a 
local lending institution. Ask the creditor if the store or 
lending institution reports credit histories to a credit bureau. 
If they do and you pay back your debts regularly, you will 
compile a good credit history.

2. Ask the creditor for specific reasons if you are ever turned 
down for credit. For example, your current salary might not be 
high enough or you may not have worked at your current job long 
enough. Time may resolve these matters. Reapply for credit when 
your situation changes.

3. Ask someone with an established credit history (such as a 
relative) to act as your co-signer if you cannot get credit on 
your own. The co-signer must promise to pay your debts if you 
don't. If you use a co-signer, repay your debt promptly and try 
again to get credit on your own.

"There are so many credit cards. Which one should I apply for?"
If you are choosing a credit card, think about how you will use 
it. You may want to compare the following cost features to see 
which card will best suit your financial needs.

1. Annual percentage rate (APR): The APR measures the cost of 
credit on an annual basis and may be the easiest way to compare 
costs among credit cards. Usually, the lower the APR, the less 
you'll be charged for credit. The APR includes the interest rate 
and other costs, such as service charges or loan fees. If you 
expect to pay back less than the full amount you charge each 
month, you'll have to pay finance charges on the unpaid balance. 
In this case, choose a card with a low APR.

2. Annual fees: Many companies charge an annual fee, no matter 
how much or little you use their credit card. But if you intend 
to pay your credit card bills in full each month, you may not 
have to pay monthly finance charges. In this case, a card with a 
low annual fee may be more important to you than one with a low 
APR.

3. Grace periods: This "free" period allows you to avoid any 
finance charges by paying your bill before the due date shown on 
your statement. Some cards have grace periods from 21 to 30 days. 
Some have no grace periods and impose finance charges from the 
day you use the card. Cards with longer grace periods may save 
you money, but only if you pay all of your charges each month.

4. Other charges: In addition to comparing the terms noted above, 
check several credit card offers to see if you will be charged a 
fee for things such as paying your bill late or charging more 
than your credit limit. These extra fees, which may be charged in 
addition to interest, add to the cost of using your credit card.

"There's a mistake on my credit card bill. What do I do about 
it?"

Always read your monthly credit card statement promptly and 
carefully. Check whether there are errors on your bill (such as 
wrong amounts or no credits given for a returned item), or 
whether someone has made illegal charges on your credit card. If 
you find an error:

1. Send the credit card issuer a letter right away -- within 60 
days after the first bill containing the error was mailed to you. 
Use the special "billing error address" given on your monthly 
statement or credit card contract. Remember that only a letter to 
the special address protects your rights under the law. Phone 
calls do not protect you.

2. Include in your letter: your name and account number; the 
date, type, and dollar amount of the charge you question; and why 
you think there was a mistake. You may be asked later to sign a 
statement under oath that you did not make the purchase in 
question.

3. Know that the credit card company must tell you that it has 
received your letter and corrected the mistake, or explain why 
the bill is believed to be correct.

4. Make sure to pay the charges on your credit card bill that are 
not in dispute.

"Help! My wallet was stolen -- with my credit card in it. What 
should I do?"

If you discover your credit card lost or stolen:

1. Call the credit card issuer immediately about the situation. 
Use the telephone number established by the card issuer for this 
purpose. Follow up the call with a letter giving your card 
number, when the card was missing, and the date you called in the 
loss.

2. Understand that if a thief uses your card before you notify 
the credit card issuer, you may be held responsible for up to $50 
for unauthorized charges for each card.

3. Know that you cannot be held responsible for more than $50 in 
unauthorized charges for each card.

"I don't want anyone else using my credit card. How can I protect 
my credit card account?"

To safeguard your credit card -- and your credit record -- make 
sure you:

l 	Never lend your card to anyone.

l 	Never leave your card or receipts lying around.

l 	Destroy all carbons and incorrect receipts.

l 	Never put your card number on a postcard or on the outside 
of an envelope.

l 	Never give your card number over the phone, unless you are 
certain the company or organization is highly reputable.

l 	Sign your credit card in ink as soon as it arrives.

l 	Keep a record of your card number, expiration date, and the 
phone number and address of the card company in a safe place, 
separate from your wallet.

l 	Do not sign a blank receipt, whenever possible.

l 	Draw a line through blank spaces on charge slips above the 
total so the amount cannot be changed.

l 	Open billing statements promptly and compare them with 
receipts you have saved.

l 	Write promptly to the credit card issuer if any questionable 
charges appear on your statement.

"I've paid some of my credit card bills late. How can I find out 
if my credit record is still good?"

You have the right to know every piece of information in your 
credit file under the Fair Credit Reporting Act. If you want to 
find out what your credit record looks like, take the following 
steps:

1. Call credit bureaus to find which one has your file. Look in 
your local Yellow Pages under "Credit" or "Credit Rating and 
Reporting." Call every credit bureau listed in your area and tell 
each one that you want to see your file.

2. Although the credit bureau is not required to give you a copy 
of the report, more and more are doing so -- often for a small 
fee. You'll be required to identify yourself -- by phone, 
in-person, or by mail -- before any information is disclosed.

3. If you were turned down for a credit card and you request your 
file within 30 days of the denial, you will not be charged for a 
copy of your file.

"There seems to be a mistake on my credit file. How can I fix 
it?"

If you find any inaccurate information in your credit file, you 
have the right to correct it. The following information may be 
useful:

l	Tell the credit bureau, in writing, why you think the 
information is incorrect. Supply copies of any documents 
supporting your position.

l	If the credit bureau cannot confirm the information you 
challenge, it must delete or change it.

l	If you disagree with the credit bureau's findings, you may 
write a brief statement stating your side. This becomes a part of 
your credit bureau report.

l	If negative information in your credit report is accurate, 
only time may erase it. Credit bureaus are permitted to report 
negative information for 7 years and bankruptcies for 10 years. 
In some cases, though, negative information may be reported 
indefinitely. Don't be misled by credit repair companies that 
promise to "repair" or "clean up" your credit history. They can 
correct errors -- but not change the past.

"I spent too much shopping -- and now I'm having trouble paying 
back my credit card bills. What can I do?"

Sometimes, because of overspending, illness, or other 
difficulties, you may find it impossible to pay your bills on 
time. If you ever find yourself in that situation, consider the 
following information:

l 	Try to work out a modified payment plan as soon as possible 
with those you owe money to.

l 	If you're having trouble making car payments, know that 
financing contracts often let the financing company repossess 
your car with no advance notice. Try hard to work out car payment 
problems.

l 	Be cautious about turning to a debt counseling company to 
solve your debt problems. Avoid paying in advance until you find 
out what the company can really do. Before you sign any contract, 
check out the organization with the Better Business Bureau or 
your local consumer protection agency.

l 	You may want to contact a non-profit counseling service, 
such as the Consumer Credit Counseling Service (CCCS), for help. 
You can find CCCS listed in your telephone white pages. In 
addition, non-profit financial counseling programs are sometimes 
offered by universities, military bases, and credit unions.

"This information is great -- but where can I get more help?"

Different federal agencies regulate different kinds of cards, so 
check to see which company issued the card. For cards issued by:

l	Department stores, oil companies, or other non-bank 
creditors, write: Credit Cards, Correspondence Branch, Federal 
Trade Commission, Washington, D.C. 20580.

l	National banks, write: Office of the Comptroller of the 
Currency, Consumer Activities Division, Washington, D.C. 20219.

l	Savings and loan institutions or federal savings banks, 
write: Office of Thrift Supervision, Consumer Affairs Program, 
Washington, D.C. 20552.

l	Federally-insured, state-chartered banks, write: Federal 
Deposit Insurance Corporation, Office of Consumer Affairs, 
Washington, D.C. 20429.

l	All other banks, write: Federal Reserve Board, Division of 
Consumer and Community Affairs, Washington, D.C. 20551.

If you want more information about your credit rights, you can 
write for a free copy of any of the following Federal Trade 
Commission brochures: Cosigning a Loan; Credit and Charge Card 
Fraud; Credit Billing Errors; Credit Practices Rule; Electronic 
Banking; Equal Credit Opportunity; Fair Credit Billing; Fair 
Credit Reporting; Fix Your Own Credit Problems; Lost or Stolen: 
Credit and ATM Cards; Scoring for Credit; Solving Credit 
Problems; Utility Credit; and Women and Credit Histories. Write: 
Public Reference, Federal Trade Commission, Washington, D.C. 
20580. You also may write to this address to receive a free copy 
of Best Sellers, a listing of all the FTC's consumer 
publications.


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