Auto Backfire - Brief Article

Kiplinger's Personal Finance Magazine, May, 2000 by Kimberly Lankford

CREDIT | This convenience can cost you protection against UNAUTHORIZED CHARGES.

HAVING YOUR credit card bills paid automatically from your account can be a great convenience--no checks to write, no stamps to buy, no chance that your payments will be lost in the mail. But autopilot can crash sometimes, as John Gibson of Bristol, Va., learned to his dismay.

When Gibson received his last AT&T Universal Card bill of the 20th century in December, it included $1,506 in charges he hadn't made. He notified AT&T immediately, but the money was still transferred from his bank account six days later to pay the bill in full. Fortunately, Gibson had enough money in his account to cover the bill, and about a month later the card company refunded the money for the fraudulent charges.

Despite the happy ending, Gibson was out $1,506 for a month. If he hadn't signed up for automatic debiting, he could have withheld payment while the matter was investigated. But there is a way to enjoy the convenience of automatic payments and the protection that Gibson lost: set up the payment schedule so that you have plenty of time between the day you receive your statement and the day the money is transferred.

For example, AT&T Universal Card usually prints statements 25 days before the due date, and lets you sign up to have the money deducted as late as the due date. If the mail is slow and your transfers are made ! 5 days before the due date, a bill could be paid before you can challenge it. (To block payment, your challenge must be made three business days before the scheduled transfer. Gibson's fell through the cracks because of a long holiday weekend.)

Ask your bank how long it takes to make a transfer, then sign up to have your bill paid with just enough time to meet the deadline. That will maximize the time you have to review your bill.

For more leeway, see if you can check your account online. AT&T's online service, for example, shows charges as they're posted. If you question any charges, notify your bank as well as the card company to prevent the fund transfer.

RELATED ARTICLE: Credit cards Zeroing out liability for fraudelent card use

With fraud losses at record-low levels, Visa has officially eliminated cardholder liability for unauthorized charges. Federal law allows issuers to hold cardholders liable for the first $50 of fraudulent charges, but as of April, Visa cardholders don't have to pay a penny.

Actually, that's not a big change. In the past Visa almost always waived the $50 charge.

Other major card issuers have similar consumer-friendly policies. American Express and Discover handle the liability question "on a case-by-case basis," for example, but cardholders are rarely stuck with a bill.

Even if no money is involved, it can be a hassle to clear your statement of unauthorized charges. So notify your card issuer promptly if your card is lost or stolen.

--JOAN GOLDWASSER

Low-interest premium cards Best if you carry a balance

                               RECENT       CASH-ADVANCE     ANNUAL
ISSUER                         RATE(*)      RATE/FEE(C)       FEE

Pulaski Bank & Trust (G)        7.99%        7.99%/none        50
USAA Savings (G,P)              9.75         9.75/none         45
Simmons (G)                     9.95         9.95/none         35

                                LATE/        TELEPHONE
ISSUER                       OVER LIMIT        NUMBER

Pulaski Bank & Trust (G)      $29/$29       800-980-2265
USAA Savings (G,P)             20/20        800-922-9092
Simmons (G)                    20/20        800-636-5151

No-fee premium cards Best if you usually pay the balance each month

                           RECENT       CASH-ADVANCE      GRACE
ISSUER                     RATE(*)      RATE/FEE(C)      PERIOD

Capital One (P)              99%         19.8%/2.5%      25 days
Fleet (P)                   10.6           20.4/4        20 days
AFBA Industrial (P)         1,075          15.9/2        25 days

                           LATE/          TELEPHONE
ISSUER                   OVER LIMIT         NUMBER

Capital One (P)           $29/$29        800-822-3397
Fleet (P)                  29/29         800-225-5353
AFBA Industrial (P)       15/none        800-776-2265

Rebate cards Best of the cash-back cards

                                  RECENT     CASH-ADVANCE    ANNUAL
ISSUER                            RATE(*)    RATE/FEE(C)      FEE

Amex Cash Back (P)                18.74%      21.74%/3%       none
GE Rewards MasterCard (P)          9.99        19.99/2        none
Waterhouse National([dagger])      13.50        13.5/2        none

                                  REBATE       TELEPHONE
ISSUER                            TERMS         NUMBERS

Amex Cash Back (P)               up to 2%     800-843-2273
GE Rewards MasterCard (P)        up to 2%     800-537-6954
Waterhouse National([dagger])       1%        888-327-9962

(*) As of March 3; rates are adjustable, often tied to the prime rate. (C) Cash advances often have no grace period; additional fees may be charged. (O) gold card (P) platinum card ([dagger]) Need Waterhouse account to open