The topics in the Dial-A-Law series provide only general information on legal issues within the province of Alberta. This service is provided by Calgary Legal Guidance funded in part by the Alberta Law Foundation. The purpose is to make you aware of your legal rights and responsibilities. This is not legal advice. If you require legal advice, you should contact a lawyer.
This topic discusses a type of credit option, the credit card. If you are sent a credit card in the mail that you did not apply for, you are under no obligation to keep it. Cut the card in half and return it to the issuer. If you use the card, you are considered to have accepted all obligations of the credit agreement.
Credit cards are issued by a number of agencies. Financial institutions, department stores, airlines, gas companies and others such as American Express or Visa each offer their own credit cards. Department store credit cards are generally for the purchases of its goods and services only. Credit cards issued by financial institutions may provide the additional privilege of accessing cash as well as purchasing goods and services.
When you apply for a credit card, personal financial information must be given. You must be honest and give the proper information such as:
- Your earnings.
- Your place of employment.
- The length of your current employment.
- Your spouse’s earnings and his or her place of employment and how long.
- The number of children or dependents you have.
- Whether you own your own home or rent and how long you lived there.
The company may verify the information you give them at the Credit Bureau. The Credit Bureau keeps records of your credit history. Contact the Credit Bureau to find out if the information on your record is correct at Equifax Canada 1-800-658-2627 or Trans Union of Canada (Calgary office) at 403-276-7808.
The records include your name, address, spouse’s name, employment information and other personal information. It also has a history of bank accounts, loans, charge accounts, foreclosures and bankruptcy proceedings. Your credit file is usually combined with your spouse’s name unless you give instructions to the contrary. The credit rating of your spouse can affect your credit rating and vice versa. It may be wise for you and your spouse to keep separate credit accounts. If your spouse dies and there are assets in his or her estate, a credit grantor may claim for debts against the estate.
The terms of payment for the different credit cards will vary. Read the terms of the credit card agreement so that you know your obligations. Do not sign a credit card agreement unless all the blanks on the application are filled in or stroked out. Credit card agreements must describe the goods and set out all costs such as credit charges and interest. There should be no hidden costs, as all charges must be disclosed. The dates and amount of payments to be made should be clearly stated including the total amount to be paid or the balance to be paid.
Some credit cards will require full payment of the balance at the end of each month and other credit cards will require monthly payments on the balance. Shop around for the best interest rates and repayment options for your loan. Your total debt payments made each month should be no more than 40% of your monthly gross income. For example, if you make $1,000 per month, your payments to cover your credit cards and other credit obligations should be $400 or less.
Credit card privileges are expensive. Interest rates are considerably higher than the current rate on consumer loans. The interest or service charges billed on a monthly basis begin to accumulate at the time the purchase or cash withdrawal is made. Do some financial planning before you use your credit card. What goods and services are you planning on purchasing? Make a budget and stick to it.
Credits cards in the names of yourself and someone else means that you are both responsible for all debt of that credit card. It does not matter who made the charges. If you no longer wish to be responsible for the other person’s debt, send a letter advising the credit card company of this. Return the credit card cut in half and ask for the balance owing on the date they receive the letter. Ask the credit card company to verify that your name is removed from the credit card agreement and you are no longer responsible for the other person’s debts. Send the letter by registered mail so that you have proof of delivery.
If your credit card is lost or stolen, report this immediately to the credit card company. Call the telephone number provided on your monthly statements. You should also notify the police. You will not be responsible for any purchases made from the time you call and notify the company of the loss. If someone uses your card before you report the loss, you are responsible for purchases. It is a criminal offence to steal, forge or falsify a credit card. It is also a criminal offence to use a card you know has been cancelled.
An advantage of using credit cards is that they are unsecured debts – no collateral is required. The cards are issued based on your personal credit worthiness. You maintain a good credit rating by paying your bills on time. If you fail to make the necessary payments, you will be sued for the debt and your property may be seized and sold or your salary may be garnisheed.