THE BLOG

4 Rights Every Credit Card User Should Know

04/14/2015 09:52 am ET | Updated Jun 12, 2015

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Image copyright: Andrey_Popov Source: Shutterstock.com

Individuals who don't know their rights leave themselves open to being take advantage of. While various consumer interest groups monitor businesses and credit issuers constantly, searching for abuses, they cannot stop all the dirty tricks that exist out there. This is why everyone should try their best to keep on top the protections afforded to them by law. Below is a list of some basic rights you should know about, so that no one can make a pretty penny off your ignorance of the law.

  1. You can view all contracts before signing up for a card.CFPB maintains a database of all credit card agreements that can be viewed here. If you think the terms &conditions are the only agreements you are agreeing to when signing up for a credit card, think again. There exists a whole slew of additional contract clauses you agree to abide by when signing up for your credit card - some of these can be highly problematic.

One hot button issue in recent months has been mandatory arbitration clauses contained in most credit card agreements. Most credit issuers do not let you take them to court, requiring instead the use of arbitration. The Consumer Financial Protection Bureau (CFPB) recently published the results of a 3 year study, which showed these arbitrations tend to favor banks instead over consumers. By not monitoring credit agreements, most cardholders aren't even aware of the rights they lose.

  • You don't have to pay more than 25% of your credit limit in fees, during your first cardmember year. The Truth in Lending Act (TILA) forbids credit issuers from charging you excessive fees within the first year of card membership. This is especially important to know in light of recent news of subprime credit cards charging users insane fees that would leave them with hundreds of dollars in debt, before they spent a single dollar using the card.
  • The CFPB has been cracking down on issuers abusing this rule, but the organization hasn't completely managed to stop the practice. Note, that this rule applies to card membership fees (annual fees, application fees etc.) and NOT the annual percentage rate (APR). The latter is capped at 29.99%, though most cards will charge you far less - the average APR is approximately 17.89% and is based on your credit score.

  • You can view your credit report once a year. The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to make their reports available to consumers, free of charge, once per year. You can get your report by going to annualcreditreport.com, where you'll be able to submit a request to all three major agencies - Experian, Equifax, and TransUnion. Why is this important? A 2014 Consumer Report survey revealed that 1 in 5 Americans find mistakes on their credit report.
  • These mistakes can potentially lead to you being turned down for a loan, apartment, job or credit card. Monitoring your credit report is important - you don't want to find out about potential mistakes only after you've been denied an application. Plus, it finding mistakes opens the door to another one of your rights, which brings me to the next point.

  • You can challenge information on credit reports. Chances are, if a mistake exists on your credit report, it will not be found out about until you say something about it. The FCRA requires credit reporting agencies to adhere to reasonable accuracy standards. They are not required to actively look for mistakes, unless someone brings an inaccuracy to their attention. All you have to do is report the inaccuracy to 1 agency. If they find that there is indeed was a mistake made, they are then required to report it to all other agencies, AND to any persons who requested a credit report on you within the last year. You can read more about disputing errors on credit reports the FTC's website.
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