Open End Credit
What is Open End Credit?
An open end credit account is one under
which you are allowed to make repeated purchases or obtain loans. You
are given the privilege of paying the balance in full or, you may pay
Common examples include:
Bank credit cards;
Home equity credit lines;
Department store or service station credit cards;
Overdraft privilege on checking accounts.
A finance charge may be computed on the unpaid balance of an account when you and a business agree to such terms in writing. The account is not considered past due as long as you make payments according to the terms to which you agreed. The finance charge (interest) is the price you pay for being granted credit. The finance charge pays the business in part, for its expense in keeping track of your account and its balance. In Wisconsin, there is no longer a cap on the yearly interest rate or "Finance" charge you can be charged.
Your Rights with Open End Credit
- To be obligated, you must sign an agreement which state the terms when you establish the account. The business is required to give you a copy of the signed agreement.
- Be aware that with a credit card, you may meet the requirement explained above when you sign the application form and receive a copy of the agreement.
- Essentially you have agreed to the terms offered by signing the application, using the card or signing you name to the first sales slip.
- Under the Marital Property Law, if you or your spouse open an account, the business will ask you to sign a statement that the account is used for marital or family purposes. Your spouse must receive a copy of the agreement from the business, or a notice of extension of credit.
Before you make the first transaction under an open end credit agreement, the business must disclose to you in a single written document, the following items:
- The conditions under which finance charges will be imposed.
- Any period (called a grace period) within which the balance may be paid to avoid a finance charge.
- How the business determines the balance on which the finance charge will be computed
- How the total amount of finance charge is determined
- The periodic rate (such as 1.5% per month) and
the corresponding annual percentage rate (APR) of the finance charge.
--If the rate may vary, you must be provided a statement of this fact.
--You must also be given a written explanation of what circumstances would bring about a rate change.
--Further, you must be given a written statement indicating the limitations on any such increase and the effects of such an increase.
- The minimum payment required each billing cycle
- The amount of any other charges in addition to a finance charge which may be imposed.
- Whether any annual fee is charged, and the amount of the fee
- Any security interest (collateral) which will be required.
- A notice regarding the customer's right to dispute billing errors.
When you get your bill
Each business with which you have an open end account is required to provide you with a statement for each billing period in which you have an unpaid or credit balance over $1.00. The statement includes specific information and disclosures.
Before paying, review these items
- The outstanding balance at the beginning of the billing cycle
- Each transaction posted to the account to determine if you authorized it
- The amount and date of each payment, refund, rebate or adjustment posted to the account
- The amount of the finance charge
- The periodic rate or rates of finance charge (interest), and, the annual percentage rate of the finance charge (APR)
- The balance on which the finance charge was computed and how that balance was determined.
- The closing date of the billing cycle and the outstanding balance of the account on that date
- Any grace period you have to pay the balance to avoid an additional finance charge.