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Using Plastic - a Young Adult's Guide to Credit Cards
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
"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
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
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
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
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
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
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
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
If you find any inaccurate information in your credit file, you
have the right to correct it. The following information may be
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
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
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
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