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Making Purchases With Credit Cards - The Best Credit Cards to Use

Commonly Asked Questions About Making Purchases with Credit Cards

Last Updated: November 2, 2012

In today's fast paced world, the majority of purchases made are done using a credit card. Credit cards are a convenient method of paying for everything from gas to groceries. Writing checks have become a habit of a by-gone era - now everyone uses either a bank debit card or a credit card to make purchases in stores and online.

There are some pitfalls and problems you can encounter if you are not an informed consumer. We have complied the most frequently asked questions from our readers below.

  1. Is it Better to Pay by Check or by Credit Card?

  2. Can a Merchant Ask For My Address or Phone Number When I Make a Purchase?

  3. What Should I Do When I Am Asked to Give Out My Personal Information?

  4. I Tried to Charge $10 But the Merchant Said "Minimum Charge $20." Is This Valid?

  5. Can a Merchant Charge Credit Card Users More Than Cash Customers For the Same Item?

  6. I Made a Hotel Reservation and Guaranteed it With My Credit Card. The Hotel Denied my Reservation. Do I Any Recourse?

  7. I paid by check and the merchant wrote my credit card number on the back. If the check bounces, can the merchant charge my card?

  8. Can Mail-Order Merchants Charge My Card Before They Ship?

  9. Is there any official document that I can take with me to show merchants who violate the rules?

  10. Where should I report merchants who break the rules?

  11. Does my payment have to reach the lender by the "due date" on the bill, or is it enough if I just mail it by the due date?

  12. I Have a Checking/Savings Account at the Same Bank as my Visa or MasterCard. Can They Freeze My Account or Take Money From it if I Miss a Payment?


Is it better to pay by check or by credit card, as a rule?
In general, it's better to use a credit card. When you pay by credit card, the U.S. Fair Credit Billing Act gives you a lot of protections. See our article on "Billing errors and overcharges". These safeguards don't apply if you pay by check or by debit card.

However, be aware that credit card debt is about the most expensive legal kind there is. With banks paying as low as 3% on savings (as of January 1992) but charging 19% or more on credit card balances, it makes sense never to carry a balance past your grace period.

Household budgeting is beyond the scope of this FAQ list. But always bear in mind that if you're paying by check because your credit cards are maxed out, you may well be overextended and may want to think about deferring major purchases. Even if your cards aren't maxed out, if you're carrying a balance from month to month you are paying dearly for the privilege.

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When I make a purchase, can they ask for my address or phone number?
This hardly ever happens anymore, but sometimes merchants will ask you for this. Politely refuse.

Law: There is no Federal law on the subject. According to Bankcard Holders of America, the laws of CA, DE, GA, MD, MN, NJ, NV, and NY prohibit recording personal information in connection with credit card transactions. Note the word "recording." Strictly interpreted, this means they can ask you to show a driver's license but can't write anything down from it.

Policy: According to letters from

Director of Public Affairs and

Visa USA Inc.
P.O. Box 8999
San Francisco, CA 94128-8999

MasterCard International
888 Seventh Avenue
New York, NY 10106

Merchants are not supposedly not allowed to refuse a sale made by Visa or MasterCard solely because the customer refuses to provide additional personal information. According to Bankcard Holders of America, the same is true when you use your American Express card, but not when you use Discover.

However, if merchants have "sufficient" reason to suspect you are not the authorized card holder, they may ask for further ID. If they do ask for ID, they must not write the information on the Amex, Visa, or MC charge slip.

If merchants do ask you for any information that that actually write down or put into a computer, it's going to be your zip code, which will help them with sales databases. Zip codes are pretty innocuous, and I always give mine.

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What should I do when asked for personal information I don't want to give?
See also "Is there any official document" and "Where should I report merchants who break the rules?" later in this web page.

If you don't see what all the fuss is about, please skip this Q. Note the key words, "information that I don't want to give."

The most effective response is to ignore the request. When they say, "I need your signature and phone," simply sign in the proper place and hand them the charge slip without your phone number. Don't comment on the request in any way. More often than not, they won't follow up.

If they do notice that you didn't put down the personal information, and ask you again, simply say, "I don't give that out."

If they still insist, you have to decide how important it is to you to make a point. If you don't much care, give them what they want so you can get on your way.

If you're a privacy fanatic, you can point out that Visa and MasterCard rules don't allow them to require this information and wait to see what they do. If someone is really going to make it that tough on you to hand over your money, I'd walk.

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I tried to charge a $10 item but the merchant pointed to a sign "minimum charge $20." Is this valid?
Never for Visa and MasterCard; generally not for American Express. Discover explicitly allows the merchant to set a minimum purchase amount, according to email received by the previous editor.

MC and Visa rules provide that a merchant may not require any minimum purchase amount. This is the merchant's agreement with Visa or MasterCard; it is not a Federal law.

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Can the merchant charge credit card users more than cash customers for the same item?
Yes, if the merchant goes about it the right way.

The Federal Truth-in-Lending Act prohibited surcharges on credit card purchases until 1984; since then, there has been no Federal law on that subject. (Other provisions of the law are still in force.) The states of CA, CO, CT, FL, KS, MA, ME, NY, OK, and TX have laws against surcharges, according to Bankcard Holders of America.

Discover allows surcharges on credit card purchases, except in the above states. Visa and MasterCard prohibit them. American Express discourages them in general, and specifically prohibits them by merchants that also take MasterCard or Visa because Amex doesn't allow merchants to discriminate against it.

There is a loophole: merchants are allowed to give cash discounts. This means in practice that they can't charge you more than the labeled price if you pay by credit card, but they can charge you less if you pay cash. Some companies announce (usually in tiny print in the catalog) that all prices "reflect cash discount" of x% so credit card users must pay x% more than the stated price. This may be legal but it certainly violates the spirit of the law or the regulations. I don't know about the "service fee" charged credit card users for things like ordering tickets over the phone, but they're certainly not allowed to charge you a higher price in person than if you pay cash.

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I made a hotel reservation and guaranteed it with my credit card. When I showed up, the hotel denied my reservation. Have I any recourse?
That depends. Most hotels and motels (but not all) subscribe to the "Lodging Services Addendum" in their merchant agreement with Visa. If the hotel is one that participates, and they have no room for you when you arrive with a guaranteed reservation, their agreement with Visa requires them to:

  • Provide the cardholder with at least comparable accommodations for one night at another establishment.
  • Provide transportation for the cardholder to that establishment.
  • If requested, allow the cardholder to make a 3-minute local or long distance call.
  • If requested, forward all messages and calls for the cardholder to the alternate establishment.

However, your unsupported word is not exactly proof that you had a reservation. Next time, write down the date and time you called, the rate you were quoted, which credit card you used for the guarantee, and the confirmation number. (You may have to ask for a confirmation number.) You need that info if there's a problem with your reservation, or if your plans change and you have to cancel.

Some state laws may protect you when you have a guaranteed reservation, whether you guaranteed it by a deposit or by credit card.

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I paid by check and the merchant wrote my credit card number on the back. If the check bounces, can the merchant charge my card?
The answer to this one is no, with a couple of caveats.

The merchant shouldn't be writing down your credit card number, your driver's license number or anything else on the back of that check, though they can certainly ask for ID. Most of them can run the check through a scanner using the codes on the bottom of the check to see if it is good, so writing anything down is superfluous.

For you rubber check passers: if your check bounces, the merchant can come after you for the amount of the bounced check, something that happens pretty often. If you lose in court, the merchant can garnish your wages. But if they try and charge your card, you can lawfully call the credit card company and claim a false charge.

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Can mail-order merchants charge my card before they ship?
According to Janet Hug of Visa USA, "a merchant is not permitted to bill ahead of time" except in case of a deposit or down payment that the customer agrees to.

MasterCard said in a letter that a merchant can charge you before shipment only if s/he tells you and you agree to "the terms and conditions of the sale."

American Express said the merchant can charge your card as soon as you give your account number; but if you receive the bill before the merchandise, call Amex customer service and you don't have to pay while they investigate.

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Is there any official document that I can take with me to show merchants who violate the rules?
Yes. If you really think it's necessary, you can print out a copy of your rights from the Federal Trade Commission's website. That should be official enough for any merchant.

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Where should I report merchants who break the rules?
If merchants violate any of the above laws, you can report them to your state's or city's consumer protection office or attorney general. If they violate any rules of American Express, the company would like to know about it. Report violations of Visa or MasterCard rules to the bank that issued your card. If the sale was completed, you can also send a letter with a copy of the charge slip to the Visa or MC address given earlier in this section.

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Does my payment have to reach the lender by the "due date" on the bill or is it enough if I just mail it by the due date?
That's a good question and the answer varies. The Uniform Commercial Code says that a bill is considered paid on the postmark date of the payment, but many states have different laws. Even in states where the bill is considered legally paid on the postmark date, you may find that lenders will consider it paid on the date they process it.

My personal practice is to avoid hassles by always mailing payment a reasonable time before the due date. Even if I could push it legally, I don't believe the couple extra days of "float" is worth the aggravation of fighting with the lender over this point.

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I have a checking or savings account at the same bank as my Visa or MasterCard. Can the bank freeze my account or take money from it if I miss a payment on my credit card bill?
Probably yes. You should check your cardholder agreement. The typical agreement gives the bank the right to take the money in any of your accounts with them if you are delinquent on your bill. Even if there's not such a provision in your cardholder agreement, it's probably buried somewhere in the fine print that governs your deposit account.

However, the Fair Credit Billing Act does not let them take any collection action at all if you have properly notified them of a dispute.

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