Bank Credit Cards

Should you keep the bank credit card you have now, or apply for ones that offer greater advantages? One VISA card or MasterCard could be very different from another VISA Card or MasterCard. What counts is the bank issuing it.

The MasterCard and VISA Organizations do not issue credit cards themselves. They provide a clearing system for charges and payments on the cards and license banks to use the VISA or MasterCard name. It is the issuing bank that determines the interest rates and fees.

A bank's name on a credit card does not necessarily mean that it is the bank actually suing the card. Issuance of credit cards is a high-risk, low-profit business. Seldom does a small bank issue it's own.

Generally, a small bank will act as an agent for an issuing bank. The agent bank puts its name on the card, but it is the issuing bank that actually extends any credit.

Aside from costs, this can be important if the cardholder encounters an error. The correction might have to be agreed upon, not by a friendly local banker, but by an unknown, larger institution, perhaps in a different state.

VISA, for example, has about 1,400 issuing banks in the U.S. and about 10,500 agent banks. Please check this post: The Lure of Easy Bankruptcy.

Choosing which card to take is becoming more difficult, because some of the nation's largest banks have begun active solicitation of customers throughout the U.S. Individuals must be especially careful about accepting any offer that might come in the mail. A recently discovered quirk in the federal law allows federally chartered out-of-state banks to ignore state usury laws that limit the amount of interest or fees that the issuing bank may charge on its credit cards. In Arkansas, for example, state usury laws prevent local banks from charging more than 10% interest on credit card balances. But a federally chartered out-of-state bank, in lending to Arkansas residents, may charge whatever its home state allows even within individual states, the terms on credit cards can vary widely.

Aside from the actual rates and fees, individuals must carefully check the fine print of their contracts. Most banks, for example, do not charge interest on balances stemming from purchases until the customer is billed for such purchases. If the bill on which the charges first appear is paid in full by the stated due date, there is no interest charge to the holder. But some banks, those in Texas, for example, begin charging interest as soon as they receive the charge slip and make payment to the merchant. Thus, interest begins accumulating even before the cardholder receives the bill. These interest charges continue until the bank receives payment from the customer.

Credit Card Cautions

Debit card risk. If lost or stolen, unauthorized use of your bank automation card leaves you liable for the first $50, even if the loss is reported before use. It's up to $500 if you delay reporting it until after someone has tapped your account for a teller-machine withdrawal. Point: That makes the convenience of a debit card potentially ten times costlier than a credit card, which limits your liability to $50 tops and charges you nothing if a loss is reported in time to flag it before use.

Don't disclose the account number of your check-cashing identification or electronic funds transfer (EFT) card, even when reporting it lost or stolen. Why: Authorities don't need to know the number. But thieves posing as bank officers may try to get it in order to use it. Check your credit card statement against your receipts. It's very easy for a dishonest store owner to run off several slips when you present your card and submit them later for payment.

Be sure that it's your card that the store clerk returns. Accidental switches do happen. The number of switches is increasing. It's not costly, but it can be inconvenient, especially if you're traveling.

You are not automatically responsible for any of the credit card charges of family members, even if they're using the family card. Example: An executive's son continued to use his father's credit card after he was told to return it. Under a Federal Trade Commission ruling, the father had only to inform the credit card issuer that the card was being used without permission. Having done so, the father would be responsible only for the next $50 charged.

Withholding Credit Card Payments

Disgruntled consumers may be able to withhold payments on a credit card they used to purchase goods or services that proved substandard. This is the result of a provision of the Fair Credit Billing Act, which enables credit card companies to reclaim disputed amounts from merchants after credit card slips are signed.

Four conditions must be met for a consumer to be entitled to withhold credit card payments:

• The amount of the charge must be more than $50. The charge must be made within the customer's home state or within 100 miles of the customer's home.
• The customer must first attempt to settle the dispute with the merchant directly.
• The customer must give the bank that issued the card written notice that the attempt to settle has failed.

How it works: When the bank receives the customer's notice, it credits the account with the amount of the charge. It then charges this amount back to the bank that serves the merchant. The bank then charges the merchant.

This provision of the law has been little publicized by the banks and credit card companies. Reason: They fear that if too many customers take advantage of this feature of the law merchants will begin to refuse credit cards.