Consumer Alert

Banking Department Issues Seasonal Warnings On Using Credit Cards Wisely

New York, NY: At the height of the holiday shopping season, the Banking Department is urging all credit card users to make sure they know the details of their agreements with the card issuers. This reminder, along with other important information on credit and debit cards, is contained in a new fact sheet posted on the Department's Website.
Credit cards can be extremely useful: they allow shoppers to carry less cash, are more readily accepted than personal checks and, when used responsibly, can help establish a positive credit history. However, shoppers should remember that when they use a card, they are essentially taking out a high interest loan and should be wary of running up expenses on their credit cards that they cannot pay off each month. Credit card users are responsible for paying a service charge and interest on an unpaid balance at the end of the month. In addition, paying late can result in additional finance charges, raising the interest rate on outstanding balances and hurting credit history.
Credit card users should also be on the lookout for credit card scams that have been popping up all over the country. Con artists are taking advantage of people with poor credit by advertising guaranteed credit cards that require payment in advance. There is no such thing as a guaranteed credit card and people should never pay anyone in advance for a so-called guaranteed credit card.
Banking Superintendent Diana L. Taylor said: "Sometimes the desire to give during the holidays overwhelms a person's common sense. Shoppers should know what their budget is and plan carefully to stay within its bounds. Shopping carefully and spending wisely will help people avoid post-holiday sticker shock and credit headaches."
Go to the Banking Department Website (http://www.banking.state.ny.us/csbr.htm) to download the new "Cards, Cards, Cards.and What You Need To Know About Using Them" fact sheet or call 1-877-BANK NYS to get a copy.
Other helpful fact sheets on the Department's Website include:
• How to avoid identity theft by memorizing personal identification numbers (such as your ATM card PIN) and online passwords. Never keep these numbers or passwords in your wallet or purse, and never write them on the cards themselves. Report lost or stolen credit, debit or ATM cards immediately.
• A basic banking fact sheet urges consumers to pay careful attention to any monthly fees and/or per-transaction fees that a bank may charge if you go over your transaction limits. You should always read and understand your agreement before you sign it.
• Information on buying or leasing a car including the benefits of leasing (lower monthly payments) and the benefits of buying (no limits or charges for use of the vehicle).
• he new check clearing process facilitated by the federal law known as Check 21. Check 21 allows checks to be processed electronically and reduces "float time" on checks. It also allows your bank to not return your paper checks at the end of the month.
• Avoiding dangerous loans such as payday loans, cash-advance loans and advance fee loan scams. A payday loan results when a borrower gives a lender a postdated personal check or authorization for automatic withdrawal from a bank account. In return, the borrower gets cash, minus the lender's fees. A cash advance loan is a small, short-term, high-interest loan that is offered in anticipation of the receipt of a future lump sum of cash or payment. Advance fee loan scams involve a company claiming that they can guarantee you a loan if you pay them a processing fee, an application fee or pay for 'insurance' on the loan in advance.
• Getting out of debt safely through the use of credit counseling services. These companies can contact creditors to help arrange lower fees and interest rates (sometimes with better results than a consumer could normally negotiate) and can create a reasonable debt consolidation and/or repayment plan.
• Opening a bank account and a detailed explanation of direct deposit and online bill payment.
• How to spot a phishing scam, in which con artists use e-mails or fake Websites to lure people into revealing sensitive personal information such as credit card numbers, user names and passwords, Social Security numbers, PINs, mothers' maiden names, etc. The information can then be used to make purchases, steal money from accounts and illegally use a victim's identity.
• Reverse mortgages, which are home equity loans that permit you to convert some of the equity in your home into cash while you retain ownership. A reverse mortgage works like a traditional mortgage, only in reverse, since instead of a borrower making payments to a lender, the lender makes payments to the borrower. If the borrower does not adhere to certain requirements, the lender may have the right to foreclose on the property and take title. It is extremely important to have a complete understanding of all aspects of a reverse mortgage loan.
• How to save and invest for retirement by figuring out how much income you will need to live comfortably after you retire. Retirees generally need 70% to 80% of their income to maintain a similar lifestyle in retirement. Add up your projected annual Social Security benefits, projected annual pension benefits, and 4% to 6% of your personal savings, to get a rough estimate of what you will be living on when you retire. The fact sheet also supplies information on the different types of investment plans that are available.
• The safety measures that one should take when using an ATM. Common sense is your best guide to using an ATM safely. If you suspect something isn't quite right, trust your instincts. Use an ATM or a bank branch where you feel more comfortable.
• How to use credit wisely, which has tips on how you can manage your credit.
• How to understand your credit report and credit score. A credit report is a record, kept by three private credit bureaus, of how you pay your bills, how you repay your loans, how much credit you have available, how much debt you owe, and other public records such as tax liens and court judgments. When a lender gets your credit report, they can also generally get your credit score. A credit score is a mathematically calculated number based on the information in a credit report.
The New York State Banking Department is the regulator for all state-chartered banking institutions, virtually all of the United States offices of international banking institutions, all of the State's mortgage brokers, mortgage bankers, check cashers and budget planners. The aggregate assets of the companies and institutions supervised by the Banking Department are over $1.3 trillion.