I’m not a big fan of taking a microscope to my monthly bills. It’s tedious, tiring and I’d rather spend the time with my family and friends.
But give me a chance to save money by keeping tabs on my credit card statement, and I say: Where do I sign up?
Make no mistake, reviewing your bills and your card statement is a big deal. Many people don’t do it. I came back from Cabo San Lucas, Mexico, recently. It’s a great place with nice weather and a swell hotel, the one and only La Pamilla, where I bought some tequila at the duty-free shop. When I checked the bill I saw that the clerk had charged me $600 for the tequila. I realize that it was Milagro Anejo, a top-shelf brand, but that’s a little ridiculous.
Turns out they charged me in pesos. I'd like to think it was an innocent mistake (and certainly not mine because I was buying the tequila, not quaffing it). But my card issuer communicated the amount in dollars and now I’m having them check it out.
If I hadn’t checked the bill, I never would have found the discrepancy.
That’s why I’m doing a two-part column on reviewing your credit card statement. In a tough economy, it’s critical that we check our bills and statements to save as much money as we can. One U.K. study says that consumers lose 10 billion pounds (that's around $14 billion U.S.) every year due to overcharges on bills such as phone and credit card statements. Another U.K. study, by MoneySupermarket.com, says that more than a third of Brits got an incorrect household bill in 2008. Even so, the study claims that half of those surveyed said they don’t review their bills and statements.
Fortunately, checking your bills and statements and correcting the errors you find is highly doable. You just need to know where to look and what to do when you find a mistake.
Let’s give it the Cramer treatment and work it out.
1. Know the laws. Before you take the magnifying glass out, know that Uncle Sam has your back when it comes to getting clean bills and statements. While each state has its own set of laws on statement errors, the Fair Credit Billing Act is a pretty big hammer. The law mandates that businesses correct errors and overcharges on bills fairly and promptly. The act also covers a lot of ground. Unauthorized charges, over-billing, refusal to cancel accounts and wrong amounts charged are all covered under the Fair Credit Billing Act. I’ll write about the FCBA more thoroughly down the road, but for now, the Federal Reserve has a good explanation.
2. Know your statement. You can’t make use of the Fair Credit Billing Act if you don’t review your statements and you can’t review your statements if you don’t know what you’re looking for. Credit card statements, for example, are fairly uniform, providing information on dates of purchase, the price you paid for a product or service, and the name of the business from which you made your purchase. I like to save store receipts and compare the charges from my purchase to the actual charges on my credit card bill. You’d be surprised how often you find a discrepancy, or worse, a double-charge.
3. Know about potential late charges. To avoid late fees, check the dates that your bills are due and be vigilant about paying before that date. If you can’t pay on time, call ahead and ask the business to waive the late fee, then agree to pay the bill upon a fixed date. Consumers often shrug their shoulders when it comes to late fees, paying them without complaint, not knowing they have a good chance of getting late fees waived if they call the business in question and ask that the fees be removed. Remember what happened to me and my Target card. This is serious business.
4. Know your interest rates. On credit card bills, car loans, lines of credit and home mortgages, the key to figuring out the accuracy of your bill is knowing your interest rate. Get a calculator out and figure out whether you’re getting the right bill amount. Better yet, use our calculators at BankingMyWay.com. They’re easy, accurate and will ensure that you’re paying the right amount on things like credit cards and home loans with variable rates.
5. Deal with the problems. If you do find an error, contact your bill issuer right away. Under the FCBA, consumers only have 60 days from your bill’s statement date to act on a billing error. Historically, companies preferred to resolve billing disputes by letter or by other written document. But these days, you can probably settle a billing dispute by calling the 800 number, which is always on the billing statement. Note that the Fair Credit Billing Act only covers written inquiries (you know how bureaucrats love a paper trail). So if you do write a letter, be sure to include your name, address and account number. Then briefly explain the error, citing the date and amount you paid on your bill. Include copies of any sales receipts or other proof of purchase, if possible. By law, your creditor must respond to your query within 30 days and must correct your error within two billing cycles, and no later than 90 days.
If you find a mistake on a credit card bill involving a separate retailer or company, contact that company and state your case, and contact your credit card company to place the charge on hold, until your dispute is resolved. That should buy you enough time to build your case and overturn an error or an overcharge.
Also note that, while you are engaged in a billing dispute, your creditor cannot contact any credit reporting bureau and include the bill on your credit report. By law, no action can be taken against you regarding your credit score until the dispute is resolved. Also, the law says that engaging in a billing dispute cannot negatively impact your credit score. Consequently, you have nothing to lose by questioning a bill and asking for a potential error to be corrected.
6. It is all about arming yourself with knowledge. If you know the score, like I did after my trip to Mexico, then your chances of becoming a victim of billing errors are dramatically reduced. By the way, not to plug any particular outfit, but the people at American Express (Stock Quote: AXP) promptly decided to look into the situation. They were extremely polite and, most importantly, they took my complaint seriously. Actually, I was worried how Amex would respond, as card issuers must be inundated with complaints and I bet there's no shortage of people trying to pull a fast one, so to speak. But Amex quickly understood the mistake in question and went right to work adjusting it.
In part two of “Kill Bill,” I’ll go into greater detail on how creditors construct bills and statements, usually to their benefit and not yours.
—Brian O’Connell contributed to this article.