Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
M - F 8 am - 5 pm
Credit Cards and Debt
As the costs of everything from food to utilities to health care continue to rise, many people are forced to turn to credit cards to finance day-to-day living expenses. In 1968 Americans owed $8 billion dollars in credit card debt. In 2010, Americans owed approximately $790 billion in credit card debt! In 2009, Americans paid an estimated $20.5 billion in credit card fees alone, such as late fees, over-the-limit fees, and the like. Not all credit cards are the same and there are steps that consumers can take to limit the cost of credit and its impact on their finances. Attorney General Lori Swanson provides the following tips to consider when dealing with credit cards:
Read the Contract to Understand the Terms and Conditions
You should closely review any contract and terms before you agree to take out a credit card from a given company. Do not take for granted the promises and sales pitches from telemarketers, credit card companies, or other advertisements. The credit card industry spends billions of dollars per year marketing their products. Do the research and know what you are buying.
Negotiate the Best Rates and Terms
Borrowers may not know they can negotiate the interest rates they pay and the terms of the contract. Whether you are applying for a new credit card or dealing with an open account, shop around to determine where you can get the lowest rates and the best contract terms. Remember, not all credit cards are the same when it comes to interest rates, fees, or other terms. Even if you already have an open account, you may negotiate with your credit card company to lower your rates and improve your terms. Don’t be afraid to ask for a better deal. If another company is offering you better rates, your credit card company may be willing to match or lower their rates to keep you as a customer. To negotiate a lower rate, just call your credit card company and ask for one. The worst the company can say is “no.” But if it agrees, you could save hundreds or even thousands of dollars per year.
Know Your Rights Under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act)
Congress enacted new provision for credit card holders pursuant to the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (“CARD Act”), which amended the Truth In Lending Act. These protections became effective on February 22, 2010 and include:
How Can Credit Cards Charge Such High Interest Rates in Minnesota?
Many consumers wonder why some credit card companies are allowed to charge such high rates in Minnesota, despite the State’s usury laws. Actions by the federal government (and affirmed by court decisions) have allowed financial institutions to charge customers across the country the highest rate allowed in the bank’s home state. Through this “exportation doctrine,” financial institutions can “export” from their home state higher rates than Minnesota would typically allow from a financial institution that is incorporated in Minnesota. As a result, some Minnesotans who do not pay close attention to the terms and conditions of their credit card could wind up paying interest as high as 30% or more.
What is “Universal Default?”
Some credit card companies monitor your credit report to watch other accounts or debts that you may hold to determine your “credit worthiness.” Under some contracts, a missed payment on an unrelated account with a different company can trigger a “universal default,” resulting in the credit card company increasing your rates or changing your terms. The CARD Act placed some restrictions on universal default, by limiting the ability of financial institutions to raise rates due to "universal default" strictly to future credit card balances (i.e. the company cannot raise rates retroactively on past balance items). The CARD Act also requires credit card companies to provide 45 days notice to a consumer regarding any potential rate change due to a "universal default."
Consumer Tips for Cardholders
Once you have decided on a given credit card and opened an account, you may still be subject to rate increases, changing terms, or other costs that you did not expect. To maintain good credit standing and best manage your credit card debt follow these tips:
Minnesota Department of Commerce
85 East 7th Place, Suite 500
St. Paul, MN 55101
Office of the Comptroller of Currency
Office of Thrift Supervision Consumer Programs
1700 G Street NW
Washington, DC 20552
Federal Deposit Insurance Corporation