Financial Poise
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Are You Opening and Reading Your Credit Card Statements?

When Kim graduated from college her first job paid pretty well.  Although she had lived on very little while in college, as soon as she started receiving bi-monthly paychecks, Kim was “sucked in” to the world of debt and entitlement.

Not really understanding, because no one ever taught her, Kim was lured into a “pre-approved” credit card.  Not surprisingly, like her peers, Kim began to spend money before she earned it.  Kim erroneously thought that because the bank had extended credit to her, she was entitled to use that credit for “free.”

On the dreaded 15th of the month, Kim glanced at her statements.  Seeing the total outstanding balance growing from $450, to $850, and then to more than $1,200, Kim started to panic.  Every month, starting around the 1st, she would have heart palpitations at the thought of receiving the statement.  She would find herself obsessing about it at all times of the day and night.

Kim saw that each month she was getting in deeper, yet she wasn’t making any additional money.  It was hard to know how she was going to pay off the debt.  At night, in bed, she would tell herself, “No more.  I am not going to buy lunch out tomorrow.  I am not going out to dinner with my friends this weekend.  I am not going to buy more than the bare essentials when I go to the grocery store.  I can do this.  I am going to get this debt paid off!”

Sometimes Kim kept her resolve and other times she “gave in” to her “inner devil,” shopping at Lululemon and sabotaging any hope she had of obliterating her debt in the short term.

Shortly before I met her, Kim’s latest tactic to deal with her debt came in the way of automatic payments through her checking account.  I was happy that Kim had taken that step (no more late fees to pay, or damage to her credit score for missing payments).  But, Kim’s comfort in knowing payment would be made directly from her account gave her a false sense of security that she no longer had to suffer through opening and looking at her credit card statements.  Wrong!

Credit card errors are rampant.  No one, and I mean no one, is concerned about the accuracy of your bills but you.  Yes, occasionally you may get a call from your credit card company because its screeners had flagged a blatantly obvious fraud, but generally speaking, only you know what you charged.  The credit card company is not going to know if you really signed up for a monthly subscription fee (even you may not know you were required to “cancel” after expiration of the “free” introductory period).  Did you buy software or jewelry or gas or any of the other charges on your card?  If you aren’t examining your credit card statements, you are likely giving away your hard-earned money.

Do you find comfort in “knowing” that you are only responsible for $50, the maximum exposure under most credit card agreements, for unauthorized charges?  Well, that only “works” if you notify the credit card issuer of your dispute within 60 days of receiving the erroneous statement.  If you don’t make the complaint, you lose.  Period.

So, here are five things I want you to do that could save you literally thousands of dollars:

  1. Open and read your statements. Line by line.
  2. If you see an error, immediately dispute it by calling customer service (the number is on the card and the statement). Be specific about the charge, including date and amount at issue.
  3. Follow up in writing (and keep a copy).
  4. Pay the outstanding, undisputed charges on time (at least the minimum amount). You cannot be charged for the disputed amount, nor can interest accrue on it, while the matter is under investigation.  The credit card company has one month to acknowledge your dispute and two billing cycles to make a determination.
  5. Make sure to read your next statement, which should have an acknowledgment of the dispute. Once the credit card company makes a decision, you will receive notice as to how much you owe, the date final payment is due and when interest charges will begin to accrue.

Mistakes happen.  Sometimes it is fraud and sometimes it is simply human error.  Either way, if you don’t look for the errors and take action, you lose by default … you lose.  You work too hard for your money.  Do you really want to give it away because you are “afraid” to look at the statement?  I don’t think so.

These days Kim opens and reads her statements, while charging less and making a bigger dent in the total outstanding balance.  Now, for the first time, she understands how the growing interest on her outstanding balance is preventing her from growing her personal net wealth.  Since she has reduced her impulse to charge, and closely analyzes charges as they come in, Kim has grown confident in her credit card usage and has spread the word to her family and friends.  Just last week Kim told me her mother found a fraudulent $325 charge on her bill for electronics purchased in another state.  A great find that likely could have been completely missed.

Do not lose by default; you work too hard for that money.

About Michelle Gershfeld

I’m a debt settlement and bankruptcy attorney who negotiates resolutions between clients and their creditors. I am also a real estate attorney involved in both sides of purchasing and selling distressed real property. I am passionate about teaching people about money and helping individuals of all ages achieve financial independence and success in a "no…

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