Ask Liz Weston

Get smart with your money

Credit Cards

Q&A: Mistaken address leads to debt collection

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Dear Liz: A debt collector says I owe a small debt from a store credit card I opened about six months ago. The wrong address was on file, so I hadn’t received any documentation at all. After opening the account I had called the store customer service line to arrange a payment, but the representative told me I had to wait for my account number and card in the mail. It never showed up, obviously, because of the wrong address issue. I understand that it was still my responsibility to pay this, but I called the store and then the bank that issued the card and got no response. Do I have any right to dispute the collection or at least catch a break?

Answer: The Fair Credit Billing Act requires that when accounts are opened, lenders send written notice about the account holder’s right to dispute errors, said credit expert Gerri Detweiler. Lenders are also supposed to send you statements when your account has activity (such as a balance due).

You could make the argument that the lender violated federal law by sending the information to the wrong address, Detweiler said, and that your credit scores have suffered as a result.

Yes, you should have contacted the store again after the card failed to arrive, but the lender should have fixed the problem and called off the collector once it was notified.

You can file a complaint with the Consumer Financial Protection Bureau at http://www.consumerfinance.gov and it will contact the lender to try to resolve the dispute. You’ll be able to log into the CFPB site to track the progress of its investigation.

You also should get copies of your credit reports and dispute any negative information related to this account, including any collections activity, said Detweiler, who writes about credit and debt at Credit.com.

Should the lender balk at removing the derogatory information from your credit reports, you can hire a consumer law attorney (referrals from http://www.naca.net) to press your case.

Q&A: Could reducing your credit limit hurt your credit score?

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Dear Liz: I asked one of my credit card issuers to increase my credit line from $2,000 to $5,000 but was turned down. The reason given was that I have too high credit limits from my other cards. Combined, I have about $100,000 in available credit, although I’ve never used more than $15,000 at any time and always paid promptly. If I ask these credit card companies to reduce my available credit, will I damage my FICO credit scores, which are around 785?

Answer: Your credit scores may well take a hit if you reduce your available credit, and there’s no guarantee that doing so will induce the issuer you’re courting to raise your limit. If this card is relatively recent, you may find that simply waiting a few months and asking again will get you the credit line increase.

If not, you have plenty of other options. Credit card companies are falling all over themselves to attract creditworthy customers like yourself. Check out some of the offers you’ll find at credit card comparison sites such as NerdWallet, CreditCards.com, CardRatings, LowCards.com and others.

Q&A: Using a separate credit card for online purchases and automatic payments

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Dear Liz: I saw your recent column from the couple upset about the inconvenience of having to reset the automatic payments when their credit card was reissued due to fraud. We had the same problem (our credit card has been reissued six times now!) and got some great advice I’d like to share. We got a separate credit card that is used for nothing but automatic payments and online purchases. It has never been hacked like our other card that we use constantly in the community because we earn airline miles. The last two times our regular card had to be replaced was in the Target and Home Depot hacking, but the other card has been fine so far. We are keeping our fingers crossed. Our issuer has now given us a chip card to replace the constantly hacked one, so I hope we have better luck going forward with both credit cards.

Answer: Several other readers wrote to say they do something similar by using different cards for different purposes, including devoting one to making automatic charges.

It might be wise to have a separate card just for online purchases, however, since the incidence of “card not present” fraud (including online and phone transactions) is higher than that for transactions where the card is physically presented to the merchant.

Q&A: Credit card fraud and automatic payments

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Dear Liz: We’ve had three cases of credit card fraud. Each time, the credit card company issued new cards with new numbers and canceled the old ones (along with the fraudulent charges). We had nine monthly auto-payment authorizations set up, and we seethed at the fact that the card company would not offer to authorize our auto-payments via the new numbers. We eventually received late-payment notices and charges, since the old numbers were still on the record with payees. Are there companies that offer updates to payees when cards are canceled, and new ones issued, in such fraud situations?

Answer: Given all the database breaches lately, automatic updates to auto-payments might come in handy.

But it seems you’re on your own. Your agreements with your billers typically state that you’re required to update them whenever a card expires or its number changes. Many billers will alert you when an expiration date is near or if a charge doesn’t go through, but ultimately it’s your responsibility to keep track.

It’s a good idea to keep a list of your auto-payments so you don’t forget to update them all when this happens again. If you don’t have a list, simply checking your past statements should remind you which accounts are on auto-pay.

Q&A: Credit card debt and surviving spouses

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Dear Liz: You’ve answered a number of questions regarding credit card debt when a person dies. But I haven’t quite seen the answer I need. If a spouse dies, and the remaining spouse is not on the credit card account, is it still the responsibility of the survivor to pay the card? Does the answer vary by state? Or is it a federal law?

Answer: As you read in previous columns, the dead person’s assets are typically used to pay his or her debts. If there aren’t enough available assets to pay the creditors, those creditors may be able to go after the spouse in certain states and certain circumstances.

In community property states such as California, debts incurred during a marriage are typically considered to be owed by both parties. Other community property states include Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In the rest of the states, a spouse’s debts are his or her own, unless the debt was incurred for family necessities or the spouse co-signed or otherwise accepted liability.

Collection agencies have been known to contact spouses, children and other family members and tell them they have a legal or moral obligation to pay the dead person’s debts, regardless of state law. If you are married to someone with significant debt, contact an attorney to help you understand and perhaps mitigate your risk.

Q&A: Debit card fraud follow-up

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Dear Liz: Regarding your recent answer regarding a mysterious debit charge, I beg to differ with your quoted source, Odysseas Papadimitriou of Evolution Finance, who said it was unlikely to be fraud. It took me all of 30 seconds to search online for “credit card fraud small amount” and found multiple reliable sites dedicated to just the kind of small-amount fraud your reader was asking about. I’m amazed that anyone claiming the slightest amount of expertise in credit card scams wouldn’t be aware of this. Ironically, nothing would help the scammers more than purported experts advising the public at large to ignore this type of fraud and assume instead it’s the result of their own oversight. Why such clearly wrong-headed advice is appearing in your column is beyond me.

Answer: Small-amount fraud is a problem — for credit cards. The original question and Papadimitriou’s answer related to a debit card transaction. While small-amount fraud is certainly possible with debit cards, Papadimitriou said the far more common pattern was for thieves to attempt to steal as much as possible before the card was shut down. That, and other details of the transaction, led him to conclude the credit union was probably correct that the transaction wasn’t fraudulent.

Dear Liz: In reading the story of the person with the errant charges on a debit card, I had a similar issue. I found a charge in a town where I had not traveled, at a business I was unfamiliar with. My bank wanted me to contact the business and explain my issue. I said NO! It turns out someone had “keyed” in my debit card number for a $19 charge in error. My response to my bank was that they made the error on giving away my money and that if they wanted to continue being my bank, they would resolve this issue and replace my money. It took about two weeks, but the merchant complied with the bank’s request and gave back the money.

Answer: In the original question, the transaction occurred in the questioner’s home town and the credit union said a PIN was used. It’s highly unlikely that both a debit card number and its PIN would be randomly entered in error.

But your experience highlights the problems inherent in using a debit card. Fraudulent transactions come directly out of your checking account, and you sometimes have to fight with your financial institution to get the money back.

With credit cards, you don’t have to pay the questionable charges until the credit card company investigates.

It’s vitally important to review all transactions on both debit and credit card accounts, and to question any unfamiliar charges. In this case, the merchant wasn’t clearly identified and the customer certainly has the right to push the credit union for more detail. But when all indicators point to forgetfulness rather than fraud, the reader may have to accept that the charge was legitimate after all.