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Which are the best credit cards?

Finding the best credit card is mostly a matter of comparison shopping. Before you accept a credit card offer, be sure to understand the card's credit terms. For instance, what is the annual percentage rate? Is there a free period? How much is the annual fee? Then compare costs and features of other cards to see if you can get a better deal.

Tip Tip: Which card is best for you may depend on how you plan to use it. If you plan to pay bills in full each month, the size of the annual fee or other fees, and not the periodic and annual percentage rate, may be more important. If you expect to use credit cards to pay for purchases over time, the APR and the balance computation method are important terms to consider. In either case, keep in mind that your costs will be affected by whether or not there is a grace period.

The "annual percentage rate," or APR, is a measure of the cost of credit, expressed as a yearly rate.

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

If the credit card you are considering has a "variable rate" feature, the card issuer must tell you that the rate may vary and how the rate is determined. You also must be told how much and how often your rate may change.

A free periodóalso called a "grace period"óallows you to avoid the finance charge by paying your current balance in full before the "due date" shown on your statement. Knowing whether a credit card plan gives you a free period is especially important if you plan to pay your account in full each month.

If there is no free period, the card issuer will impose a finance charge from the date you use your credit card or from the date each transaction is posted to your account.

Most credit card issuers charge annual membership or other participation fees. These fees range from $25 to $50 for most cards, and from $75 on up for premium cards.

A credit card also may involve other types of costs. For example, some card issuers charge a fee when you use the card to obtain a cash advance, when you fail to make a payment on time, or when you go over your credit limit. Some charge a flat monthly fee whether or not you use the card.

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If someone steals my credit card, how much am I liable for?

Under federal law, if your credit card is used without your authorization, you can be held liable for up to $50 per card. If you report the loss before the card is used, federal law says the card issuer cannot hold you responsible for any unauthorized charges.

If a thief uses your card before you report it missing, the most you will owe for unauthorized charges is $50. This is true even if a thief is able to use your credit card at an automated teller machine (ATM) to access your credit card account.

To minimize your liability, report the loss of your card as soon as possible. Some companies have toll-free numbers printed on their statements and 24-hour service to accept such emergency information. For your own protection, you should follow up your phone call with a letter to the card issuer. The letter should give your card number, say when your card was missing, and mention the date you called in the loss.

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Are rebate credit cards a good deal?

The use of rebates has grown rapidly. About one-quarter of the hundreds of millions of credit cards in use offer rebates. Credit card solicitations promise cash, frequent-flier miles or points that will buy everything from gas to video rentals.

Tip Tip: Youíll get a good deal from a rebate card if you spend a lot, and if you pay your bill in full each month. If you carry a balance on the card, what you gain in rebates you will lose in the excessive interest charged by credit cards.

Here are some of the rebate cards offered, with their terms (at the time of this writing):

  1. The Discover Card (800-347-2683). Offers up to 1% back on unlimited amounts once you've spent $3,000.

  2. American Express Membership Rewards (800-297-3276). Awards a point for each dollar charged. Points can be used at CompUSA, NordicTrack, Saks Fifth Avenue, Timberland, and others. Once you have more than 999 points, you can transfer them to a frequent-flier program.

  3. Citibank/Apple Computers Visa (800-374-9999). Gives 2.5% back on up to $3,000 of purchases a year and 5% on higher amounts. Rebates may be applied toward the purchase of Apple computers.

  4. GE Rewards MasterCard (800-544-5232). Rebate maxes out at 2% on up to $10,000 of purchases a year. Because the rebate is figured on a graduated scale, the maximum on the $10,000 is actually 1.4% or $140 a year.

  5. General Motors MasterCard (800-846-2273). Earns 5% toward the purchase of any GM automobile, excluding Saturn; under a special program, cardholders may earn up to 10%. Maximum rebate: $3,500 ($7,000 for Goldcard holders) over seven years.

  6. Nordstrom Visa (800-935-4210). Up to a 5% discount on Nordstrom purchases once you charge $5,000 on the card.

The terms of these cards change often, so be sure to inquire about them before signing up.

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What is the difference between the average daily balance, adjusted balance and previous balance?

Average Daily Balance (including or excluding new purchases). The average daily balance method gives you credit for your payment from the day the card issuer receives it. To compute the balance due, the card issuer totals the beginning balance for each day in the billing period and deducts any payments credited to your account that day. New purchases may or may not be added to the balance, depending on the plan, but cash advances typically are added. The resulting daily balances are added up for the billing cycle and the total is then divided by the number of days in the billing period to arrive at the "average daily balance." This is the most common method used by credit card issuers.

Adjusted Balance. This balance is computed by subtracting the payments you made and any credits you received during the present billing period from the balance you owed at the end of the previous billing period. New purchases that you made during the billing period are not included. Under the adjusted balance method, you have until the end of the billing cycle to pay part of your balance and you avoid the interest charges on that portion. Some creditors exclude prior, unpaid finance charges from the previous balance. The adjusted balance method usually is the most advantageous to card users.

Previous Balance. As the name suggests, this balance is simply the amount you owed at the end of the previous billing period. Payments, credits, or new purchases made during the current billing period are not taken into account. Some creditors also exclude unpaid finance charges in computing this balance.

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What can I do if I am dissatisfied with a credit card purchase?

If you have a problem with merchandise or services that you charged to a credit card, and you have made a good faith effort to work out the problem with the seller, you have the right to withhold from the card issuer payment for the merchandise or services. Check with your credit card company regarding their policies.

If you do not achieve satisfaction through the seller or credit card company, you can file a small claims court actionóan informal legal proceeding that can be used to settle disputes. Check your local telephone book under your municipal, county, or state government headings for small claims court listings.

In addition, you have the following rights:

You have the right to have mail and phone order purchases shipped when promised, or to cancel for a full and prompt refund. If no shipping date is stated, your right to cancel begins 30 days after your order and payment are received by the merchant. If you cancel, the seller has one billing cycle to tell the card issuer to credit your account.

There are two exceptions to the 30-day shipment rule: (1) If a company doesn't promise a shipping time, and you are applying for credit to pay for your purchase, the company has 50 days after receiving your order to ship. (2) Spaced deliveries, such as magazine subscriptions (except for first shipment); items that continue until you cancel (e.g. book or record clubs, etc.); C.O.D. (cash on delivery) orders; services; and seeds or growing plants are not covered.

You have the right to a full refund--because of shipping delay--within seven working days (or one billing cycle) after the seller receives your request to cancel.

You may refuse a delivery of damaged or spoiled items.

Tip Tip: If there is obvious damage to a package you receive in the mail, and if you decide not to accept the package, write "REFUSED" on the wrapper (at time of delivery) and return it unopened to the seller. No new postage is needed, unless the package came by insured, registered, certified or C.O.D. mail and you signed for it.

Tip Tip: If you are ordering something to be delivered by C.O.D., make your check out to the seller, not the post office. That way, you may contact your bank and stop the check if there is an immediate problem with merchandise.

When you return merchandise or pay more than you owe, you have the option of keeping the credit balance on your account or requesting a refund (if the amount exceeds $1.00). To obtain a refund, write the card issuer. The card issuer must send you the refund within seven business days of receiving your request.

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What can I do if there is a mistake on my credit card bill?

Federal law provides specific rules that the card issuer must follow for promptly correcting billing errors. The card issuer will give you a statement describing these rules when you open the credit card account and, after that, at least once a year. In fact, many card issuers print a summary of your rights on each bill they send you.

You must notify the card issuer in writing at the address specified for billing errors when you find an error, and you must do so within 60 days after the first bill containing the error was mailed to you. (For this reason, keep your credit card receipts and promptly compare them when your bills arrive.)

In your notification letter, include your name, your account number, the amount of the suspected error, and the reason why you believe that the bill contains an error. The card issuer, in turn, must look into 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 billing error notice.

During the period that the card issuer is investigating the error, you do not have to pay the amount in question. (For further information, write: "Credit Billing Errors," Public Reference, Federal Trade Commission, Washington, D.C. 20580.)

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How can I get the most benefit from my credit cards?

Here are some suggestions for the use of credit cards:

  1. Pay bills promptly to keep finance charges as low as possible.

  2. Tip Tip: Keep copies of sales slips and promptly compare charges when your bills arrive.

  3. Keep a list of your credit card account numbers and the telephone numbers of each card issuer in a safe place in case your cards are lost or stolen.
  4. Protect your credit cards and account numbers to prevent unauthorized use.

  5. Tip Tip: Draw a line through blank spaces above the total when you sign receipts. Rip up or retain carbons.

  6. Deal only with reliable firms. In doubt? Check with your local consumer protection agency or the Better Business Bureau (BBB) nearest to where the business is located. Study the advertising offer carefully. Ask the company about its warranty, refund and exchange policies.
  7. Tip Tip: Pay by money order, check, charge or credit card so you have a record of your purchase.

  8. Never send cash. Keep the ad you responded to and a copy of the order form. If there is no order form, make your own notes with the company's name, address, phone number, date, amount, the item you purchased, and any delivery date that may have been promised.
  9. Never give out your credit, debit, charge card or bank account numbers unless you've checked out the company or have done business with it before.

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What restrictions and limitations can a merchant impose before accepting my credit card?

Many merchant practices violate your privacy and expose you to potential credit fraud, and therefore are illegal in many states.

To protect you privacy and avoid being defrauded by credit card crooks, say "no" to a merchant who engages in these impermissible credit card practices:

  • Writes your credit card number on your personal check

  • Writes your personal information on a bank credit card sales slip

  • Imposes a minimum sales amount for credit card purchases

  • Charges extra for payment by credit card.

Note Note: Giving a discount for cash payments is allowed.

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How can I stop junk mail or telemarketing calls?

You have the right to tell commercial telephone and direct mail marketers to stop calling you, and to sue in Small Claims Court if they continue to call. If you request it, the Direct Marketing Association--through its Mail or Telephone Preference Services--will ask subscribing companies to take your name off their lists.

Hereís how to register with the Direct Marketing Association: Mail a letter requesting removal from mailing or telemarketing lists to the two addresses below. Include your name, address, city, state, zip code, and phone number.

  • Telephone Preference Service
    Direct Marketing Associations
    Box 9014
    Farmingdale, NY 11735-9014

  • Mail Preference Service
    Direct Marketing Association
    Box 9008
    Farmingdale, NY 11735-9008

If companies you now do business with also remove your name, you can contact them directly to have your name reinstated. Keep records. If the marketer calls again, you can sue. You may have additional legal rights under state or local law.

Tip Tip: If you receive unordered merchandise in the mail, consider it a gift and donít feel pressure to pay for it.

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