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Credit Card Facts that You Might Not Know

    For many users, the process of using a credit card is pretty simple. You shop for something. Then you take those items to the register or navigate on line to your online shopping cart. You present your credit card as payment information. The account information is obtained, you sign an agreement to pay, and you walk away with the items you purchased.

    Here are some common facts about credit card use.

    #1. Merchants are “strongly recommended” to request the CVV2. The CVV2 is the three digit number that can be found on the back of your credit card. For some specific credit cards, it may be a 3 or 4 digit number that is printed on the front of the card, above the last 4 digits of the account number. By requesting this number, a retailer can have more certainty in transactions that occur without a card.

    #2. Payment processors are reactive, not proactive, to fraud. Credit card processors, which process the actual data of a purchase, are relying on retailers to be a screening tool against fraudulent transactions. Although American credit card accounts typically have a $0 liability on fraudulent transactions, the rules are not so friendly to the retailer. They can be hit with fraudulent chargebacks and that means a loss of money and a loss of inventory. That is why the checkout process can be so extensive sometimes. It’s a retailer’s way of making sure they don’t lose money.

    #3. Retailers can require a minimum purchase amount of $10. In the United States, credit card processors allow retailers to be able to set a minimum purchase guideline if credit cards are going to be used. These rules may also apply to debit cards that bear the same logo of a credit card processor. A retailer is given the right to refuse a transaction that must be placed on credit if it doesn’t meet this minimum standard.

    #4. A processing fee for credit card transactions may also be charged. The credit card rules of the United States also permit retailers to charge a transaction fee that is a certain percentage of the overall sales amount. It is typically a 1% fee, but it can be higher. This fee helps retailers offset some of the transaction fees that they must pay.

    #5. Credit cards can’t be used to refinance existing debts. Although balance transfers are allowed with US credit cards for customers, a credit card number is not allowed to be used by retailers to refinance an existing debt or to be used for uncollectible debts. If a customer were to write a check to a business and that check bounced, then a retailer would not be allowed to put the purchase onto a credit card number that is on hand.

    If you are looking for a way to lower the interest rates on your credit cards you should try to increase your credit score. Creditors want to reduce risk so they calculate interest rates based on the credit score of the person applying or using the credit.

    What we have done is prepare some suggestions that will help boost your credit score legally.

    Request A Free Copy Of Your Credit Report

    Even if you do not want to lower your interest rate you should get a copy of your credit report at least once per year, The credit reporting agencies by law must give you a free copy, provided you pass their identification requirements. When the credit report arrives, you must look it over in detail for any potential mistakes. If there are mistakes in the report, it will bring your score down making it harder for you to get a lower interest rate on your credit cards.

    In order to get these mistakes corrected, you need to write to the credit reporting agency highlighting the mistake. What the agency will do is contact the creditor and ask them for proof to substantiate the claim or it will be removed from your report. A person should only use this approach if there is a legitimate mistake. By law, the credit agency must respond to this request in writing just like the creditor who has lodged the claim.

    Rules to Follow When Trying To Increase Your Credit Score

    There are a few rules you need to follow in order to keep your credit score as high as possible. Do not carry balances if at all possible. If you do carry a balance, it should not be more than 30% of your available balance. Creditors consider individuals, who have utilized more than 30% of their available credit, in financial strife and more likely to default than someone who has less than 30% credit utilization.

    Another important item is to always pay at least the minimum amount by the due date. If you make the payment on the “due date”, that payment could take a day or two before it is reflected on your statement so make sure you pay the balance in full as early as possible to avoid any interest charges.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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