Both federal and state laws impose a variety of obligations on credit card companies. These laws regulate areas including discrimination, information disclosures, billing, fees, and debt collection.
If you don't understand how credit cards work and what your rights are, your credit card application might be unfairly refused, your contract might contain unfair terms, you might be defrauded, or you might have to deal with aggressive debt collectors.
Discrimination in Credit Decisions is Illegal
The federal Equal Credit Opportunity Act prohibits credit discrimination based on race, color, religion, national origin, gender, marital status, or age. It also prohibits credit card issuers from discriminating against you because you receive public assistance, like food stamps.
In addition, a creditor can’t refuse to grant you credit because you exercised your rights under the Consumer Credit Protection Act, which contains federal consumer credit laws like the Fair Credit Reporting Act. This law not only prevents credit card issuers from rejecting your application but also prevents them from imposing more stringent conditions, such as higher interest rates, for illegal reasons.
Some states have also enacted laws that prohibit credit discrimination on grounds other than those covered by federal law. Check with your state consumer protection office or talk to a local attorney to find out whether your state has any laws covering credit discrimination. If you’re a victim of illegal discrimination, you're entitled to file a lawsuit against the creditor.
Finding a New Credit Card
When shopping for a new credit card, consider whether you want one that provides cashback, rewards, travel deals, no annual fee, or other features. You can review and compare different types of credit cards online at websites like Bankrate and NerdWallet.
Once you find a card you want, review its terms and conditions, including the annual percentage rate (APR), grace period, and fees, to ensure they’re acceptable. For example, if you think you’ll carry a balance on the card, you don’t want a card with a high APR because you’ll rack up a lot of interest charges.
You can find information about the terms in the credit card agreement. To get the agreement, go to the company’s website and search for a link that says “Terms and Conditions” (or something similar). The Credit Card Accountability and Disclosure Act of 2009 (the CARD Act) requires credit card companies to put their agreements online.
Also, the Consumer Financial Protection Bureau (CFPB) has a database of credit card agreements from hundreds of different companies.
Credit Card Disclosures
The federal Truth in Lending Act requires that credit card issuers provide you with a disclosure statement before you sign a credit card contract. The title of this document is often something like “Credit Card Agreement and Truth-in-Lending Disclosure.”
The disclosure statement must include the annual percentage rate, the issuer's method of determining finance charges, the amount of any fees connected to the card, and other important terms associated with getting the card.
Be sure you fully understand the Truth-in-Lending Disclosure before you sign up for a particular card.
Credit Card Errors, Disputes, and Fraudulent Charges
Billing disputes occur from time to time. You might be billed for the wrong amount, charged for defective merchandise, or a fraudulent charge might appear on your bill.
Billing Errors
The federal Fair Credit Billing Act (FCBA) provides settlement procedures for billing errors, like if your bill shows:
- unauthorized charges
- charges that list the wrong date or amount
- charges for goods and services you didn't accept or that weren't delivered, or
- mathematical errors.
Other types of billing errors include the issuer's failure to post payments and other credits, like returns, and the issuer's failure to send bills to your current address—assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends.
To take advantage of the FCBA's protections for billing errors, you have to write to the credit card company at the address given for billing inquiries, not the address where you send your payments. Send your letter so that it reaches the creditor within 60 days after the first bill with the error was mailed to you. Be sure to include your name, address, account number, and a description of the billing error. The Federal Trade Commission has a sample letter you can use as a template.
The creditor has to acknowledge your dispute, in writing, within 30 days after it receives the letter unless the problem is resolved before that time. The credit card issuer must then resolve the dispute within 90 days. If the company doesn't comply with these time limits, it forfeits up to $50 of any amount you might owe. While the credit card company investigates the dispute, you may withhold payment for the disputed amount.
Defective Merchandise
Under the federal FCBA, you may withhold payment on any damaged or poor-quality goods or services purchased with a credit card, as long as you have made a real attempt to solve the problem with the merchant.
To take advantage of this protection, the sale must have been for more than $50 and must have taken place in your home state or within 100 miles of your home address. These distance and amount conditions don’t apply when:
- The seller issued the credit card (such as a department store card issued by the store).
- The seller controls the card issuer or vice versa.
- The seller obtained your order by mailing you an advertisement in which the card issuer participated, urging you to use the card to make the purchase.
Fraudulent Charges Due to a Stolen or Lost Card
The FCBA limits your responsibility to $50 if a thief uses your credit card before you can report it, and many cardholder agreements say you're not responsible for any charges. Under the law, if you contact the issuer before a thief uses the card, you're not liable for any unauthorized charges. Also, you're not responsible for any unauthorized charges if the credit card number was stolen, but not the card.
After you report your card as stolen or lost, the issuer will suspend the card and send you a new one. (This is different from canceling or closing your credit cards, which can cause problems with your credit reports.) The issuer will also credit back any fraudulent charges that were made to your account, although you can expect them to conduct a fraud investigation.
Limits on Penalty Fees
Credit card companies typically charge penalty fees for:
- late payments
- over-limit charges (if you opt in), and
- payments returned for insufficient funds
The CARD Act limits these fees to the actual amount the violation cost the company, or to a maximum of $32 for the first violation and $43 for a second violation if it occurred within six billing cycles of the first violation (2024 figures).
Credit Card Debt Collectors
The federal Fair Debt Collection Practices Act limits the actions that creditors can take to collect debts. A debt collector, for example, generally can’t contact you before 8 a.m. or after 9 p.m.
Also, you can stop a debt collector from contacting you by sending a demand in writing. Once the debt collector receives the letter, it may not contact you except to tell you there will be no further contact, or to notify you that it will take a specific action, like filing a lawsuit.
The Fair Debt Collection Practices Act includes many other restrictions on the actions of debt collectors. Some states have laws that govern debt collection as well.
Getting More Information
The Federal Trade Commission website is a useful resource for information on consumer protection laws and issues related to credit cards and their use.
If you have an issue with your credit card issuer or bank, you may submit a complaint to the CFPB. The CFPB will forward your complaint to the company and work to get you a response.
For detailed, specific information about any of the federal laws discussed in this article or to find out the laws in your state and learn how they might apply to your situation, consider contacting a consumer protection attorney.