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When it Comes to Credit, Sweat the Small Stuff

 
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April 3, 2013

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Do you take a quick glance at your credit card statement once a month, check the amounts of the major purchases, then pay? If so, you might want to take a closer look at your bill.

Experts say you should scour your credit card statement carefully, making sure you recognize every charge — even if it's just a few dollars. One good reason to do this: The Federal Trade Commission recently warned that “crammers,” fraudsters who charge small amounts on bills and hope consumers won't notice, are targeting credit cards.

What is cramming?
Cramming happens when a fraudulent company adds a charge to a bill, usually for some service the consumer never ordered. These thieves get consumers' credit card numbers or other financial information in a variety of ways — for example, by holding fake contests or advertising offers for a “free” club or service, according to the FTC.

“Crammers make small charges in an effort to disguise what they're doing,” says Maricarmen Smith-Martinez, a financial educator with CredAbility, a nonprofit credit counseling organization.

In the past, crammers typically snuck charges onto phone bills. But in February 2013, the FTC announced it had temporarily shut down an operation called Ideal Financial Solutions that had stolen more than $25 million by placing charges of less than $50 on consumers' credit and debit cards. The FTC isn't sure how the thieves got the consumers' financial information, but suspects they may have purchased the information from outfits that offer online payday loans.

Many consumers didn't notice the charges, according to the FTC, so some got hit with overdraft charges from their banks. Consumers who did spot the odd charges and called the toll-free number listed next to the amount on their bill were routed to call centers in the United States, the Philippines and El Salvador. Operators claimed the callers had bought financial counseling, loan services or help with filling out payday loan applications.

Other reasons to take a closer look
In addition to keeping an eye out for cramming, there are several other reasons it's smart to scrutinize your credit card statements:

  • Mistakes: Credit card companies can and do make mistakes, says Kathryn Moore, a financial counselor with GreenPath Debt Solutions.”You shouldn't rely on your statement for its accuracy,” she says.
  • Extra programs: You might have inadvertently signed up for an add-on product offered by your credit card company, and you could be paying for it without even realizing it, Moore says. For example, some credit card companies offer products  such as lost wallet assistance, ID theft monitoring or credit insurance, which might cover your payments if you become disabled or lose your job. These products can cost consumers more than $500 a year, according to the office of the Minnesota attorney general.”People are sometimes not aware of the programs they're enrolled in – that's for sure,” Moore says.

How to keep an eye on your bill
Whether you're on the hunt for mistakes or cramming charges, or simply want to be more diligent about your spending, here are four steps to take:

1) Track your credit card spending: Keep a record of everything you buy with plastic, from a sandwich at the corner deli to a sofa. Some consumers find it easiest to use an online service such as Mint because they can categorize and tag purchases, Smith-Martinez says, but it's not necessary to go high-tech.

“It can be something as simple as a tally in a notebook you keep in your purse or car,” Moore says.

2) Make time to go over your bill: Second, you'll need to stay on top of your statements. Moore suggests taking a close look at your statement at least once a month. Some consumers might want to sign up for online banking and check the statement against their purchases once a week or so, Moore says. But it's also fine to wait for your statement to arrive in the mail.

3) Match your records with your statement: When you look at your statement, Moore says you should go over each purchase, match it to your records and reconcile the two. If there's any charge you don't recognize, even for a few dollars, call your credit card company.

“Notify them right away,” Moore says.

The company might be able to provide additional information that can jog your memory, if you did make the purchase. Or, if you determine the charge is fraudulent, the credit card company can close the account and send you a new card with a different account number. In any case, don't pay your bill until you've determined all the charges are correct, Smith-Martinez recommends.

4) Go over the entire statement. Go over the rest of your statement, including interest rate, fees and other information. FederalReserve.gov offers a visual guide to reading your credit card bill.

Giving your statement a good read will show you just how much your credit habits are costing you. Look for fees (such as late fees, over-limit fees and cash advance fees), interest charges, the dollar amount of interest you paid and notices of any changes to your account terms. For example, if you made a late payment, that could trigger a higher penalty APR — although your credit card company must notify you on your statement 45 days before the switch to the new rate.

Overall, many consumers don't pay enough attention to their statements, and sometimes they end up paying the price.

“People need to do a better job of looking at their statements and paying attention to the little details,” Moore says.

If you suspect you're a victim of credit card cramming, notify your credit card issuer right away, the FTC recommends. You may also file a complaint with the FTC online or by calling (877) FTC-HELP (1-877-382-4357).


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