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Credit cards and charge accounts

A credit card is a convenience that lets the consumer buy goods and services without having to carry cash and checkbooks. This plastic card represents the legal agreement you have with a creditor such as a department store or bank.

When you open a credit card account, the creditor is required by law to set out the terms of the account in writing, including the annual percentage rate and any fees such as an annual fee, over-the-limit fees and late charges that will be charged for the privilege of having the account. This information is usually part of a written agreement, or contract, that also has other terms and conditions related to the account such as minimum payment requirements and what actions by you would violate the agreement.

Most credit cards are for accounts on which you are required to make regular payments, but do not have to pay the whole amount that you owe every month. These accounts are called "revolving accounts." One of the conditions for most revolving accounts is that the consumer agrees not to go over the credit limit that has been set for him by the creditor. If he does, he may be required to pay an over-the-limit fee as well as pay the amount of charges over the credit limit IMMEDIATELY or lose the privilege of making further charges on the account.

Laws relating to seller and lender credit card accounts are similar but with some differences. When you have a credit card issued by a seller, such as a department store, your use of that credit card results in an obligation directly to the seller. In other words the creditor and seller are the same. However, when you use a credit card issued by a bank to make a purchase from a store or other seller, you owe money directly to the bank which, in effect, has made you a loan so you can buy goods or services from a seller. In that case, the bank has paid the store for you, and the bank is the creditor.

Creditors are required by law to send detailed monthly statements whenever there is activity on your account, such as a charge or a credit. If you believe there is a mistake on your statement, the Fair Credit Billing Act gives you a legal right to contact the creditor, and if there was a mistake, to have it corrected. The law defines a billing error as any charge for something you did not buy or for a purchase made by someone not authorized to use your account. A billing error is also something that is not properly identified on your bill, or is for an amount different from the actual purchase price. Another form of billing error is when you are billed for an item that you did not accept when it was delivered, or which was not delivered according to agreement. Billing errors may also include errors in arithmetic, failure to reflect a payment or other credit to your account, or failure to mail your statement to the correct address. You also have the right in some instances not to pay certain charges on your bill if you have a legitimate dispute with the seller of goods or services charged to your account.

If you think your bill is wrong, notify the creditor in writing immediately. Write to the address the creditor lists for billing inquiries, giving your name, account number, explanation of the error and the amount involved. You are still obligated to pay all parts of the bill not in dispute. The creditor must reply to your letter within 30 days. However, the creditor has up to 90 days to correct your account or tell you why they believe the bill is correct. If the creditor made the mistake, you do not have to pay any finance charges on the amount in question. Your account must be corrected and you must be sent an explanation of any amount you still owe.

Under South Carolina law, creditors may change the terms of a credit card account after the account has been opened. If the change is significant, such as increasing any charges for using the account, creditors must give you advance notice in writing. In some instances, the new terms will apply unless you send a written request to your creditor to terminate your account before the new terms go into effect. If your account is terminated as a result, you may continue to pay off your account under the old terms.

This information was prepared to give you some general information on the law. It is not intended as legal advice about any particular problem. If you have questions about the law you should consult a lawyer. If you do not know a lawyer, you can call the South Carolina Bar Lawyer Referral Service weekdays between 9 a.m. and 5 p.m. The number is 799-7100 in Richland or Lexington Counties, and 1-800-868-2284 from other parts of the state.