Using Credit Cards and Disputing Charges

What to Know About Using Your Credit Card

With a credit card, you borrow money to buy something now. Later you pay back the money, usually with interest. Some people use a credit card to buy things they cannot afford right now or to help build or improve their credit history. You pay less for your credit if you pay everything you owe every month.

Staying on top of your bills can help you avoid damaging your credit history. Lenders decide if they want to do business with you – and what interest rate to charge you – based on how you handle your money and bills. If lenders see that you always pay your bills on time and never take on more debt than you can pay back, they’ll generally feel more confident doing business with you.

Make your credit card payments by the due date every month.

If you can, pay off your full balance to take advantage of the credit card issuer’s grace period (the time between the end of the billing period and when your payment is due). That means you probably will not pay interest (and that makes credit less expensive for you.) Credit card issuers aren’t required to give you a grace period — but many do, sometimes with restrictions.

If you can’t pay your full balance, make at least the minimum payment. That means you will pay interest on the amount you did not pay back. Credit is more expensive if you pay the minimum amount due. If you don’t pay at least the minimum payment, your interest rate might go up and you might have to pay fees. It also could damage your credit history.

If you pay by postal mail, check your billing statement for the correct due date and address for payment. Using the wrong address — even if the issuer gets the payment at one of their other offices — could delay crediting your account.

If you pay electronically, set up reminders on your account to help you pay on time. You may also be able to sign up to get a return electronic notice showing the issuer got your payment.

Mistakes happen – you have a right to fix them. Make it a habit to review your credit card account statements. Check your statement when you get it, when it’s posted, or as soon as possible to keep track of your spending and spot mistakes or unauthorized charges. Federal law says you have the right to get mistakes fixed promptly — for instance, if the issuer hasn’t billed you correctly or noted your payments properly. Keep your receipts: Having the details of your transactions readily available can help you get inaccurate charges fixed. How you remove or correct charges depends on whether the problem is with something you bought or there’s a mistake on your bill.

Are you considering paying your credit card bill through automatic debiting? You may have the option to sign up for automatic debiting where you give your credit card issuer account information and permission to electronically withdraw your payment directly from your bank account. But the convenience of automatic debiting comes with risks. If you decide to set up automatic debiting to pay your credit card bill, here are some things to know:

Automatic debiting can be convenient but check your credit card bills and statements so you know the withdrawals are accurate. The credit card issuer might take out the wrong amount or bill you for something you didn’t charge.

The bill amounts you pay could vary each month. If you don’t have enough money to cover your bills (that is, if you overdraw your account), your bank or credit union may charge you a fee. Overdrafts also can damage your credit.

Before transferring any funds from your account, the credit card issuer (usually a bank or credit union) must get your signed written or electronic authorization and give you a copy. The issuer must also clearly inform you of the terms of the debits, including their timing and amounts. If the debits will vary, they could state a range of payment amounts. If a payment will vary by more than that range, they have to notify you at least 10 days before the payment will be debited (to give you time to ensure you have enough money in your account to cover it).

Under federal law, the issuer can’t require you to use automatic debits from your bank or credit union account to pay your bill.

What the Credit Card Issuer Must Do 

Under the law, the issuer must

• Credit your account the day they get your payment. But the issuer can require reasonable conditions — for instance, that your payment must arrive by a particular time to be credited on that day, or that you include an account number or payment stub.
• Inform you in your monthly billing statement for each billing period when you owe — or they owe you — more than one dollar. If you haven’t bought anything on the card, but the issuer is charging you interest on your account balance, the issuer must send a statement for the billing period.
• Send you your credit card bill at least 21 days before your payment is due. This helps you know exactly what you owe and gives you time to pay it before you owe finance charges. For instance, you could pay the entire balance of your bill (and usually avoid finance charges) or make a minimum payment (and owe finance charges).
• Promptly credit or refund overpayments and other amounts owed to your account if the amount you’re owed is more than one dollar. If you prefer a refund, the issuer must send it within seven business days after they get your written request. (Ask the issuer for the correct postal address or, if they accept email requests, for the email address.) And if you have a credit balance on your account for more than six months, the issuer must make a good faith effort to refund it to you.
• Give you a written notice that describes your right to dispute billing errors. You should get it when you open a new account and periodically after that.

What to Do If There's a Billing Error on Your Credit Card Account

Sometimes a company may bill you twice for the same thing — or bill you for something you either returned or never got. Federal law (the Fair Credit Billing Act, or FCBA) sets out a dispute process to help you get those mistakes fixed on credit cards and revolving charge accounts (like open-end credit accounts).

This dispute process is for billing errors on credit cards and other types of revolving credit. It doesn’t cover things like personal loans or loans to buy cars or major appliances. For example, you can dispute

• Unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50. But unauthorized charges might be a sign of identity theft. Go to IdentityTheft.gov to learn what to do right away if you suspect identity theft.
• Charges for things you bought, but
  • have the wrong date, amount, or a math mistake
  • are things you didn't accept or weren't delivered as agreed
  • where you’d like an explanation or clarification — or a written receipt

However, if you don’t also dispute a billing error, the issuer does not need to follow the dispute process.

If the issuer didn’t post your payments and other credits, like returns or didn’t send bills to your current address. To dispute this problem as a billing error through this process, you must have sent the issuer your change of address in writing so they had it at least 20 days before the billing period ends.

How to Dispute Billing Errors

To take advantage of the law’s consumer protections

• Write to the issuer. Use the address given for billing inquiries, not the address for sending your payments. Include your name, address, account number, and a description of the mistake. Use this sample letter.
• Send your letter so that it reaches the issuer within 60 days after the first bill with the error was sent to you. If you send your letter certified mail and ask for a return receipt, that gives you proof of what the issuer got. Include copies (not originals) of receipts or other documents that support your position. Keep a copy of your dispute letter.
• Within 30 days of getting your complaint, the issuer must acknowledge it in writing, unless the problem has been resolved.
• Within 90 days of getting your complaint, the issuer must resolve the dispute.

Your Rights and the Investigation

While the issuer is investigating your complaint, you can withhold payment on the disputed amount and any finance and related charges. But you’re expected to pay any part of the bill not in question, including finance charges on the undisputed amount.

The issuer may not take action against you for using your rights. The issuer can tell the three nationwide credit bureaus (Equifax, Experian, and Transunion) that you’re challenging your bill. But the issuer

• can’t take legal action to collect the amount you’ve disputed (or finance charges)
• may not close or restrict your account (though it can apply the disputed amount against your credit limit)
• can’t threaten your credit rating or report you as delinquent
• may not require you to pay your full balance immediately
• can’t discriminate against you if, in good faith, you exercised your rights under the law to dispute a bill

If your bill has a mistake, the issuer must explain to you — in writing — the corrections that will be made to your account and remove all finance or other charges related to the error.

If the issuer’s investigation determines the bill is correct

If the issuer determines that you owe some of the disputed amount, they must tell you promptly and in writing how much you owe and why. You may ask for copies of documents that the issuer says prove you owe the money.

 The issuer must tell you the date when you must pay the amount owed, including any portion of the disputed amount due plus any finance or other charges that accumulated while the amount was in dispute. If the issuer had granted you a grace period previously, they must give you the same grace period. This gives you enough time to pay so you can avoid finance or other charges. If you pay within the time period the issuer gives you, you can’t be reported as delinquent.

If you disagree with the results of the investigation

• Appeal the decision within the time period the issuer gives you for payment or 10 days of getting the explanation, whichever is later. If you want to appeal, write to the issuer and tell them that you refuse to pay because you still dispute the billing error. But know that, at this point, the issuer can begin collection procedures.
• FIle a complaint with the Consumer Financial Protection Bureau.

The issuer can report you to the credit bureau as delinquent. But if they do, the report must also say that you still dispute the billing error. The issuer must tell you the name and address of who gets these reports and, when your dispute is resolved, they must promptly report that to everyone who got a report.

If an issuer doesn’t follow the settlement procedure, they forfeit a portion (up to $50) of what they’re allowed to collect (the disputed amount plus finance charges), even if the bill turns out to be correct. For example, the issuer may have acknowledged your complaint in 45 days — 15 days too late. They may have taken more than two billing cycles to resolve a dispute, or they may have threatened to report your failure to pay during the dispute period. Even if it turns out you owe the disputed amount, the issuer loses the right to collect up to $50 from the amount they otherwise could collect, because they violated the law.

If You Have a Complaint About the Quality of Something You Bought

If you have a problem with something that you paid for with a credit card, you can take the same legal actions against the issuer as you can take against the seller under state law. That depends — and may differ — from state to state. Search for your state’s consumer protection agency to learn more about protections and requirements in your state.

For example, suppose you purchased an appliance that stops working after a month. If your state law gives you the right to sue the seller for this problem, you would also have that right against the issuer. So you could dispute the amount due withhold payment, and ask the issuer to investigate the problem. They could not require you to pay the dispute amount without first conducting an investigation. If you are not satisfied with the outcome, you still retain any state rights you may have: If you have the right to sue the seller, you also have the right to sue the issuer for the problem. But to use this federal right you must withhold payment. To take advantage of this protection

• The goods or services must have cost more than $5.
• You must have bought it in your home state or within 100 miles of your current billing address.
• You must have tried to resolve the dispute with the seller first.

In a few situations, such as if the seller is also the issuer, the dollar and distance limitations don't apply. So, if you bought a washer from an appliance store, using a credit card that the store issued, you would only have to try to resolve the dispute with that company first, regardless of the price of the item bought or in what location you bought it. If the seller would not resolve the problem, you could then dispute the problem with the issuer. This means you should contact the seller quickly, and if they don’t promptly resolve the issue, you can dispute the charge with the issuer and explain why you are withholding payment. The issuer cannot report you as delinquent in this situation, until the dispute is settled or a court makes a judgment.

Report Problems

If you have problems or a dispute with something on your credit card bill, contact the issuer right away so you don’t run out of time to exercise your legal protections. You could also contact the seller at the same time to try to resolve the issue.

But if you have a problem with the quality of the item, contact the seller first, before you contact the issuer.

If those steps don’t work, report it to the FTC at ReportFraud.ftc.gov and to the Consumer Financial Protection Bureau.