Anyone with access to your credit card information can process charges against your account. However, you are not defenseless against this type of theft. There are Federal statutes that lay out specific guidelines for both the company that prepares your credit card statement, and for how you go about contesting invalid or incorrect charges. The process is not automatic. You have to (1) identify invalid or incorrect charges and then (2) contest the bogus charges in writing within a specific timeframe.

The implication here is that you are on top of your credit card activity including reconciling your statements every month. This reconciliation is similar to how you balance your checking account. The intent is to insure that all of your charge, credit and payment activity is accurately reflected on your monthly statements. If you are not doing a monthly reconciliation of your credit card statements, you could be allowing people to steal your money.

A Travel Service Scam

Several years ago, my wife, Lois, and I had a credit card through our credit union. One month there was a charge on our credit card statement for $96.00 that did not reconcile with my records. I immediately wrote the required contesting letter to the credit union. In response, the credit union put the charge on hold and suspended the payment of any interest on the charge until the contesting process was completed. A letter was sent to the company that had processed the charge. There was no response from the company within the allotted response time and the charge was deleted from our credit card account.

The next month, a new $96.00 charge appeared on our credit card statement from the same company. I wrote another contesting letter. The results were the same. The charge was deleted from our account. We still didn't have a clue who was behind these invalid charges.

Normally, Lois and I do not open any advertising mail that we receive from companies with which we do not do business. For some reason, Lois opened this one piece of junk mail from a travel service in Florida. The first paragraph in this company's ad said that if we did not inform the company that we did not want their service our credit card would be charged $96.00 per month to pay for our membership. This travel service was the source of our unknown charges! How they got our credit card information is not known. We immediately sent them our refusal of their service. Not unsurprising, the charges to our credit card continued every month.

After writing contesting letters for six months, we decided that was enough. The only way we could put a stop to the illegal monthly charges was to cancel our credit card account. Since canceling that credit card we have had no further illegal charges from that travel service. Had we not reconciled our credit card statement every month, we would probably still be paying $1,152.00 per year for a travel service membership about which we had no knowledge.

Staying On Top Of Your Credit Cards

Reconciling your credit card statements each month should not be an undue burden. The first step is to set up a simple system for keeping track of account activity. It's important that everyone who uses the credit card know how this system works and consistently participates.

* For transactions that result in a receipt, designate a place (basket, sack, a special desk drawer) where all credit card receipts are put as soon as possible after the transaction.

* For payments made from your checking account, record those payments in your checkbook register.

* For all other credit card transactions not covered above, make a note with the date, a description of the transaction, and the amount. Put the note in your receipt location.

The next step is to reconcile your monthly statement as soon as feasible each month after you receive it. This entails matching all activity recorded on your statement with your activity records. For each item on your statement, find the matching receipt or note in your receipt location, or the matching entry in your checkbook register. When you find a matching piece of paper, set that paper aside.

When you have matched all activity on your statement with your records, you are done. All receipts and other pieces of paper from matching transactions can be destroyed if not needed for another purpose. The important point to remember is that all receipts and notes that have appeared on a statement cannot be placed back in your receipt location.

If you end up with any activity on your credit card statement that did not match your records, you must immediately start the contesting process by writing a letter. The company that prepares your credit card statement is required to provide you with instructions on how to do that.

What Must Be On Your Statement

Instructions for contesting charges must be printed on your credit card statement. These instructions are typically on the back of your statement where your billing rights are explained. For example, here is the "Billing Rights Summary" from the back of a statement from one of our credit cards.

"In Case Of Errors or Inquiries About Your Bill. If you think your bill is wrong, or if you need more information about a transaction on your bill, write us on a separate sheet of paper at the address indicated on the front of this statement after the phrase "Send Inquiries To" as soon as possible. We must hear from you no later than 60 days after we sent you the first bill on which the error or problem appeared. You can telephone us, but doing so will not preserve your rights.

In your letter, give us the following information:

o Your name and account number.

o The dollar amount of the suspected error.

o Describe the error and explain, if you can, why you believe there is an error. If you need more information, describe the item you are unsure about.

You do not have to pay any amount in question while we are investigating, but you are still obligated to pay the parts of your bill that are not in question. While we investigate your question, we cannot report you as delinquent or take any action to collect the amount you question."

There are a few points from this summary that are important to keep in mind.

1. You must write a letter. If you don't, you forfeit your rights. Note that "a separate piece of paper" does not include an email. I've seen credit card sites where charges can be contested directly from the site by sending an email. Until the law is changed to specifically include either "a separate piece of paper or an email," I recommend you protect your rights by sticking with snail mail.

2. The contesting letter must be received no later than 60 days "after we sent you the first bill on which the error or problem appeared." That means the postmark date on your letter is not considered when determining whether or not you met the 60 day requirement. The letter must be physically received by the company that prepared your statement within 60 days from the statement date. It behooves you, therefore, to not tarry before writing your letter.

3. Be careful when selecting the address to which you send your contesting letter. If you use the wrong address, it could take months for your letter to get forwarded to the correct destination thus possibly negating your billing rights. On the front of the statement from which I copied the above billing rights summary I found three mailing addresses. There was the address for mailing payments, a return address on the payment stub that I'm guessing is for window envelopes, and a customer service address under the caption "Please Direct Written Inquiries to." Note that the customer service address, the address that must be used for contesting letters, is not after the phrase "Send Inquiries To" as stated in the billing rights summary.

If you receive your statements electronically, finding your billing rights information on the web site of the company that sends you your statement may not be as easy as turning over a piece of paper. The information, however, must be available. Keep looking until you find it.

Completing The Process

One aspect of the contesting process that is normally not covered in billing rights summaries is how you will find out the results of any investigations. I've written many contesting letters and it is my experience that you will receive a letter notifying you of the investigation results.

Conclusion

I've had excellent results over the years from my contesting letters including avoiding the charges made by a relative who managed to get an extra credit card issued to them without our knowledge. We learned what happened when a statement arrived with charges from a trip to Hawaii followed by a couple of weeks in Las Vegas. The invalid charges were over $13,000.

I'm a firm believer in keeping close tabs on credit card activity. Whenever I see someone refuse or throw away a credit card receipt, or hear someone scoff at reconciling their credit card statements, I wonder how much of their, or their parent's money is being stolen with their blessing. Over the years, my contesting letters have saved us several thousand dollars. I hope you are as diligent in managing your credit card accounts.