Credit Card Protections

Credit Card Protections

Credit cards do offer valuable consumer protections for some purchases under federal and state law. In the event of a lost or stolen card, Regulation Z, the Truth in Lending Act, limits a cardholder’s liability to a maximum of $50 per card. Additionally, if the consumer immediately contacts the issuer(s) and alerts them of the situation, the borrower generally has no further responsibility for unauthorized charges (in addition to your phone call, we recommend that you follow up with a confirming letter to the issuer).

If you, the consumer, want to dispute a merchandise purchase (for example, if you order an item using your credit card, and it arrives broken or inoperative), then the Fair Credit Billing Act allows you to address the matter through the card issuer. You must notify the card issuer in writing within 60 days after the first bill containing the error was mailed to you. In your letter, include: your name; account number; the type, date and amount of the error; and the reason why you believe the bill contains an error.  By law, the card issuer must investigate the problem and either correct the error or explain to you why the bill is correct. This must occur within two billing cycles and not later than 90 days after the issuer receives your letter. Do not pay the dollar amount in dispute during the investigation. For more information regarding dispute resolution, contact the billing dispute department via the toll free number found on your credit card statement. This Act applies to credit card purchases made in your home state or within a 100 mile radius of your residence, whichever is greater. 


Late Fees and Over-the-Limit Fees

Just as consumers who are late in making credit card payments are assessed a penalty fee, usually $20 to $40, card holders who exceed their credit limit can be assessed an “over-the-limit fee.” The most effective and simplest strategies to avoid being assessed these fees is to closely monitor your spending, keep your balances low and your payments current.

Universal Default/Penalty Phase and High APRs

Many credit card issuers now insert “Universal Default” clauses into their contracts which allow them to substantially raise APRs on the accounts of cardholders who are delinquent on other debts, who exceed their credit limits, or who experience a drop in credit score. A number of consumers have told us that during this so-called “penalty phase” they have seen their APRs “skyrocket” to 30% or more. 

“Double Jeopardy”

"Maxed out" cardholders can find themselves in a financial double jeopardy situation, with credit cards that are both over their credit limit and being paid late. If the penalty for each violation (over the limit/late payment) is $25.00/each per month, over a one year period, the combined fee charge is $600.00, plus interest!  Remember, always use credit cards wisely. Strive to regularly pay your account balance in full and on time each month to avoid interest charges and related fees and penalties. 



Big Plastic on Campus:
A Graduate Study of Credit Card Usage on the University of Maine Orono Campus
                        - By David Leach, MPA

In the spring of 2002, a sample group of undergraduate students residing in dormitories at the University of Maine completed a survey regarding credit card solicitation and card utilization on the Orono campus.

Noteworthy findings included:

•    92% of students surveyed had been solicited for credit cards on campus.
•    86% had been solicited over the telephone in their dorm rooms.
•    60% of students surveyed had at least 1 credit card in their own name.
•    18% of students had acquired at least 1 credit card through a UMaine on-campus solicitation.
•    47% of male students that carried credit card balances owed $3,000 or more, while only 6% of balance-carrying female cardholders fit into this category.
•    On average, undergraduate seniors carrying credit card balances owed $2,338 (total of all cards), while first-year students (freshmen) averaged a total card balance of $867.