by: Peter Kenny
Some credit card users may begin to notice what are called opting out policies on the back of their credit card statements. These opt out notices are being delivered to some credit card users who are in jeopardy of having their interest rate increased by the credit card issuer. There are several reasons why a credit card issuer may decide to increase the interest rate on a consumer. This article deals with a few of them.
Some consumers may be surprised to learn that if their credit score should drop, for any reason at all, some credit card companies will use that as an indicator that the consumer is more at risk of defaulting on credit obligations and will increase the interest rate for that consumer in turn. The US Congress is looking into this practice, but as of yet there are no restrictions in place to keep credit card companies from using it.
However, the majority of credit card companies who are using this policy must notify the customer in advance that they are planning to increase the interest rate. They must also give the customer a chance to pay off the balance and to opt out of the credit card altogether. What is not always clear to consumers who get these notices is the reason why they are being moved up into a higher interest rate category. The language of the notice may state the "additional information" or some other vague term has led the creditor to decide on the increase. The notice will usually contain some type of instructions that the consumer can follow to get more insight into the cause. In some cases, the consumer is simply led toward the credit reporting agencies.
Those consumers who get these types of notices should read them carefully. Of particular importance is the policy that the company will use on the balance if the consumer does not opt out. Some credit card companies have decided that the entire previous balance will be charged the new, higher interest rate, even if new purchases are not placed on the card. In other words, for those consumers with a balance of, say, $1000 at 18 percent would have a new bill for a balance of $1000 at 29 percent, or whatever percent the company decides to increase to. This can mean a huge increase per month for a balance that has not changed.
Two important issues concerning opting out from these plans are first, consumers only have a certain amount of time to do so before the company will assume that the consumer does not want to opt out and they will begin assessing the higher interest rate. In other words, silence is not golden. The other issue is that some credit card companies have strict rules on how the consumer must follow up should he or she decide to opt out. Usually, this means a written letter sent to the company. Those individuals who receive one of these notices and wish to opt out should follow the instructions to the letter in order to avoid future problems.
What To Do If You Lose Your Credit Card
Do you know what to do if your credit cards or ATM cards are stolen? You might be surprised at how many people do not.
All consumers should know that the Fair Credit Billing Act (FCBA) and the Electronic Fund Transfer Act (EFTA) offer procedures if your cards are lost or stolen.
In general, here is what you should do:
You should report the loss or theft of your credit card or ATM card to the card issuers as soon as possible. This is easy to do as most companies have toll-free numbers and 24-hour customer service set up to deal with these types of problems. It is always a good idea to follow up the phone call with a letter. Within the letter, include your account number, when you discovered that your card was missing, and the date you first reported the loss to the company.
For Credit Card Loss: According to the FCBA, if you report the loss before the cards are used the card issuer cannot hold you responsible for any unauthorized charges. If the card is used before you report it missing, the most you will be responsible for in unauthorized charges is $50 per card. This is true even if your credit card is used at an ATM machine to access your credit card account.
Consumers should always review the next billing statements carefully. If you find any unauthorized charges, send a letter to the card company describing each unauthorized charge. You will need to let them know the date your card was lost or stolen and when you first reported the loss to them. Make sure you send this letter to the address provided for billing errors and not to the place where you send your payments unless you are told to do so.
In the event your ATM card is lost or stolen: Report your loss to the issuer as soon as possible. If you report an ATM card missing before it is used without your permission, the card issuer cannot hold you responsible for any unauthorized withdrawals. Keep in mind that if an unauthorized use occurs before you report the loss to the issuer, the amount that you can be held liable for will depend on how quickly you reported the loss. For example, if you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for its unauthorized use.
If you do not report the loss within two business days after you discover the loss, you could be liable for up to $500. If you wait until more than sixty days have passed, you may be liable for unlimited amounts if you fail to report an unauthorized transfer or withdrawal within 60 days after your bank statement is mailed to you. That means you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts.
If unauthorized ATM transactions are on your bank statement, report them to the card issuer as soon as possible. Once you have notified the issuer of the loss, you cannot be held liable for additional amounts, even if more unauthorized transactions are made.
Because of these time limits it is always a good idea to check your cards often to see that you still have them.