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Credit


No. By definition they are “credit” cards, meaning that when you use them you are borrowing money from the issuer that you must pay back.
Debit cards and credit cards are generally accepted at the same places. Debit cards carry the symbol of one of the major types of credit cards on them (Visa, MasterCard, etc.). While many debit cards can be used as credit cards, some debit cards cannot. Debit cards are linked to your bank account (usually a checking account), and money is debited (withdrawn) from the account as soon as the transaction occurs. Credit cards are different; they offer a line of credit (i.e., a loan) that is interest-free only if the monthly credit card bill is paid in full and on time. (See below, Should I pay my bill in full each month?)
  • For most people, opening a bank account of some kind is preferable to carrying around cash or seeking out money orders to pay for things. We all have to deal with money in some way, whether it’s a paycheck, paying bills, or getting a loan. If you choose not to have a bank account, you will have to find a place to cash checks and securely store your money. There are many types of businesses that offer money services, such as check-cashing and payday-loan businesses, but they often charge high fees. Having a bank account, usually a checking account, allows you to use and have access to your money more easily and operate more safely in a lot of areas.
    • A bank account allows you to pay your bills online, instead of needing to mail them or go into an office. Rather than remembering when you need to pay bills every month, having an account means you can automate payments to come out regularly, so you’ll never forget and get behind on your bill payments. A bank account also allows you to keep your cash safe, so it’s not stolen or damaged in a fire or flood.
    • Many employers will only pay your wages by direct deposit into a bank account, instead of giving you your wages in cash or by check. If you receive government benefits, you will also need a bank account for direct deposit, as many benefits will only be paid that way.
    • If you choose to open a bank account, or if you must do so because of your employment or government benefits, you should investigate which type of account to open (usually a checking account, savings account, or both), and what the “fine print” is for each of those accounts.
      For example:
      • Are there fees associated with the account?
      • Does the account earn interest on your money for you?
      • Is there a minimum daily balance that is required on this type of account?
      • What happens if you overdraw (spend too much from) your account?
      • Is the bank FDIC (Federal Deposit Insurance Corporation) insured?
  • You will want to make sure your bank account, whether it is a checking or savings account, is FDIC insured. When a bank is FDIC insured, this means that the federal government protects the money you deposit with the bank, up to a certain amount.
  • For more information, check out the student brochure of the Louisiana Bankers Education Council at www.lba.org;  the Federal Deposit Insurance Corporation (FDIC) at www.fdic.gov; the National Endowment for Financial Education at www.nefe.org; and the Federal Financial Literacy and Education Commission at www.mymoney.gov.

  • Credit cards offer convenience, but their main purpose should be to establish a good credit history. You will need a good credit history so you can, when the time comes, qualify for car loans and mortgages, be able to rent an apartment, qualify for favorable interest rates on all types of loans, obtain lower auto and homeowners insurance premiums, or qualify for a job (employers are increasingly using credit scores when evaluating job candidates). Credit cards should be viewed as a convenience and not an extension of income.
  • Credit card issuers offer a variety of terms (annual percentage rates, methods of calculating balances subject to finance charges, minimum monthly payments, and actual membership fees). When selecting a card, compare the terms offered by several card companies to find the card that suits your needs.
  • The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. In other words, you can get a free copy of your credit report up to three times each year, once from each company. Your credit report includes information on where you live, how you pay your bills, whether you’ve been sued, and whether you have filed for bankruptcy. The 3 reporting companies have joined together to produce an easy way you can access your report from each of them. You can access your free credit reports in one of 3 ways:
    • Visit www.annualcreditreport.com;
    • Call 1-877-322-8228; or
    • Complete the Annual Credit Report Request Form located at www.consumer.ftc.gov and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
  • Make sure once you’re on the site or otherwise making the request for your credit report that you check information for all 3 companies.
Usually, however banks charge interest – at a much higher rate – when you take out a loan.
To establish and maintain a good credit score, it is best not to max out your credit card. It’s a good idea to keep your credit card charges to 25% of your overall credit limit, or even less. (See below, Should I pay my bill in full each month?).
Credit issuers watch how you manage your credit cards, and paying late is the worst black mark on your credit record and can lead to a lower credit score.
Problems with your credit record can negatively impact your ability to get a job, rent an apartment, buy a car or get a cell phone.
If you can, always pay more than the minimum payment due each month on your credit card bill. It is best to pay off your credit card each month; this avoids paying interest on the amount you have borrowed from the credit card company.
  • For example, if you pay $50 a month on a credit card bill of $2,000 at an 18% interest rate, it will take more than five years to pay off the original $2000 debt. If you were to pay less than $30 a month, you’ll never pay off the $2000 debt.


Consumer Protection


If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor.” If you fall behind in repaying your creditors, or an error is made on your account, you may be contacted by a debt collector. However, certain methods of debt collection are not allowed by law.
Any party that you borrow money from is a “creditor” (i.e. Visa, MasterCard, Macy’s, BestBuy). This can be a person, a bank, or any other enterprise that has lent money or extended credit to you. It can also be someone who provided you goods or services for which you owe money. For example, a medical provider who rendered treatment in exchange for later payment would be a creditor.
If you are served with a Petition or Complaint and a Summons related to a debt, don’t ignore it! Ideally, you should seek legal advice from an attorney right away. There are deadlines for responding to the lawsuit which can often occur very quickly.
  • Even if you consult an attorney, you may still choose to represent yourself in a court proceeding, especially if the amount you’re being sued for is small. Take the time to find out what possible defenses you may have before showing up to the hearing.
  • If the debt you are being sued for is not yours or is on behalf of a company or party you have never heard of or done business with, you should still respond and seek legal counsel. This likely means that you are the victim of identity theft. You should contact the Consumer Protection Section of the Louisiana Attorney General’s Office at 1-800-351-4889, or online at www.ag.state.la.us. You can also file a complaint with the Federal Trade Commission (FTC) by visiting www.consumer.ftc.gov.
A debt collector is any person, other than your creditor, who regularly collects debts owed by you. A debt collector may contact you in person, by mail, telephone, telegram or fax. However, he or she may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m. Further, the debt collector cannot tell anyone other than you and/or your attorney that you owe money. Within five days after you are first contacted, the collector must send you a written notice telling you the amount you owe, the name of the creditor to whom you owe the money, and what action to take if you think you do not owe the money. A collector may not contact you if (within 30 days after you are first contacted) you send the collection agency a letter stating you do not owe the money. If the collector sends you proof of your debt, such as a copy of the bill, he can renew collection activities.
  • Keep a list of your credit card numbers, expiration dates, and the phone numbers of all card issuers in a safe place.
  • When you use your credit card, watch your card after giving it to a clerk. Take your card back promptly after the clerk is finished and make sure the card is yours.
  • Never sign a blank receipt. Draw a line through any blank spaces above the total when you sign receipts. Tear up the carbons when you take your credit card receipt.
  • Open credit card bills promptly and compare them with your receipts to check for unauthorized charges and billing errors.
  • Write card issuers promptly to report any questionable charges. Written inquiries should not be included with your payment. Instead, check the billing statement for the correct address for billing questions. The inquiry must be in writing and must be sent within 60 days to guarantee your rights under the Fair Credit Billing Act.
  • Avoid giving your credit card number over the telephone unless you know the company is trustworthy. Never write your card number on a post card or on the outside of an envelope.
  • Sign new cards as soon as they arrive. Destroy expired cards. Cut up and return unwanted cards to the issuer.
  • If one of your credit cards is missing or stolen, report the loss as soon as possible to the card issuer. Check your credit card statement for a telephone number to report the stolen card. Follow up your phone call with a letter to the card issuer. The letter should contain your card number, the date the card was missing, and the date you reported the loss.
  • If you report the loss before a credit card is used, the issuer cannot hold you responsible for any subsequent unauthorized charges. If a thief uses your card before you report it missing, the most you will owe for unauthorized charges on each card is $50.
  • A pyramid scheme is an arrangement where a large number of people (at the bottom of a “pyramid”) pay money to a few people (at the top of a “pyramid”). Each new participant pays for the chance to advance to the top and profit from payments of others who might join later. The promoters pitch that you can make a lot of money. The fact is, you can lose a lot of money, and usually that’s the case!
  • Beware, some promoters disguise their pyramids as legitimate multi-level distribution schemes (MLDS). A MLDS is a way of distributing products in which the products are sold by independent salespeople, usually in customers’ homes. As a distributor, you can build and manage your own sales force by recruiting and training others to sell those products. Your wages then include a percentage of the sales of your entire sales group as well as your earnings on your own sales. The best protection is prevention; an informed consumer can learn to identify the difference between a fraudulent pyramid scheme and a legitimate MLDS.
Take your time and avoid high pressure sales tactics; good opportunities do not disappear overnight. Ask questions about the company, the products (cost, fair market value, source of supply, potential market value in your area), start-up fees, and the company’s guaranteed buy-back of products. Do your research and get written copies of all the available company literature. Ask others who have had experience with the company, especially those no longer involved. Investigate, double check and verify all information. Contact authorities if a company seems questionable.
  • You can contact the Consumer Protection Section of the Louisiana Attorney General’s Office at 1-800-351-4889, or online at www.ag.state.la.us.
  • You can contact the Federal Trade Commission (FTC) by visiting www.consumer.ftc.gov. If you suspect you’re the victim of identity theft, you can visit the FTC’s Identity Theft site at www.identitytheft.gov.


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