Search results matching tag 'credit cards'

Card companies roll out ‘friendlier’ cards

Karen Datko — Wed, 23 Sep 2009 16:00:00 GMT

Zut alors! Credit card companies are beginning to offer simpler, more consumer-friendly credit cards to the masses.

For instance, Bank of America's Basic Visa card, which debuts next month, will charge the same interest rate no matter how you use the card. It also comes with a set $39 late fee that won't fluctuate regardless of how large your outstanding balance is.

Also, Jack at Master Your Card said, the interest rate won't go up even if you make a late payment.

Even better, it seems, is Chase's new Blueprint feature, newly available for some 20 million existing credit card accounts. Blueprint allows cardholders to single out certain types of purchases -- say, groceries or gas -- that they can pay in full each month interest-free while finance charges accumulate on the rest of the balance.

Why are card companies trying to make things easier for us? In part, they're trying to get ahead of the curve before new credit card rules kick in. The Washington Post offered another possible explanation:

Credit card experts said card issuers are clearly trying to improve their images after months of defending themselves for raising interest rates and cutting credit lines for even their most creditworthy customers.

We like the added transparency of these new features. One interest rate? That will eliminate the surprise you get when you open your bill after using the card for cash advances.

Blueprint -- which is free and optional -- has several attractive features. You can tell Chase when you want to pay off a particular purchase or your entire balance, and it will produce a payment plan to fit your goal and allow you to review your progress online. You can also use Blueprint to set a budget and track your spending. Sounds like a good tool.

Bing: More about Chase Blueprint

What do other personal-finance bloggers think?

Re Basic Visa: Several noted that this card comes with a hefty interest rate -- the prime rate plus 14%.

Re Blueprint: "The whole thing feels very Mint-y and Thrive-y -- which means this could be pretty cool," Jack at Master Your Card wrote.

However, he wondered if the "full pay" feature for groceries and such really saves you money, and answered:

No, not really -- you aren't saving anything if you think about it. The deal is that you pay no interest on a certain category provided that you pay it off in full. This holds true for any kind of balance you hold on your credit card -- Blueprint or no. ... What Blueprint does is help you track spending in a certain category. It's about self-awareness.

David Weliver at Money Under 30 reviewed Blueprint and praised the transparency, which, he said, will allow card users to make better decisions about using credit. But, he added,

Does Blueprint make it "smart" or "OK" to borrow on a credit card? Hardly. The best policy is to pay your card in full every month. And for those determined to get into credit card debt, a Chase Blueprint card might be the credit equivalent of a "light" cigarette; they'll both still kill you in the end.

Related reading:

Pay your bill, get a reward

Would a credit card balance transfer help?

Credit card rates, fees soar as new law looms

Cash is not king

Karen Datko — Tue, 22 Sep 2009 21:56:00 GMT

This guest post comes from Frank Curmudgeon at Bad Money Advice.

I still don't get the debit card thing. But according to The Wall Street Journal, there is a new trend I do understand: establishments accepting cards but not cash.

Slips of paper and metal disks are an inefficient and archaic form of money. You have to go to an ATM to get some, and often pay a fee. To use it, you have to wait for the clerk to make change. You have to carry it around. And then there is the growing pile of coins most of us have at home.

And don't get me started on parking meters. Offering me a nice parking space for half an hour in exchange for a quarter, and only in exchange for a quarter, is more scavenger hunt than transaction.

Bing: Parking meters that take credit cards

Plastic pushing out paper has been a long brewing trend. I can remember when grocery stores didn't take cards. I still feel a little funny charging things there. Today we take for granted that we can use plastic just about anywhere, even in places, like taxicabs, that a generation ago would have seemed implausible as potential users of cards.

It's now actually hard to think of cash-only places. Most parking meters. My favorite burger joint in Cambridge, Mass. The vendors who work the grandstands at Fenway (although the concession stands and the waitresses in the premium seats take cards). I'm hoping the hot dog guys hold out for a while longer. There is something reassuringly nostalgic about passing the dogs down the row, the money in the other direction, and then the change back.

From the merchant's point of view, taking cards costs a small percentage of the bill, but that's a tradeoff most of them made their peace with long ago. Making it easier and more convenient for customers to spend money is good for business.

And cash is not without its costs to the business owner. There's the cost of paying a cashier to make change. And there is the unfortunate tendency of some of your employees to slip a little bit of it into their pockets.

(If you think about it, a lot of the way stores are traditionally arranged is to make it hard for employees to steal cash. Having a few centralized cash registers is an obvious example. And charging $14.95 instead of $15 has more than a psychological appeal. It forces the salesperson to go to the register to make change.)

Not only is cash not costless for the merchant, it gets proportionally more expensive as fewer customers use it. There is an unavoidable overhead to maintaining a cash register full of small denominations to make change. As the customers paying the old-school way become a dwindling minority, that register starts to look like an expensive convenience that benefits a small number of people.

Which is, I suspect, what inspired the establishment in the WSJ article to go all-plastic. The restaurant, ironically (appropriately?) called Commerce, found that "more than 90% of customers had already made the switch to plastic." Given that this is the sort of place where a plate of spaghetti costs $23, I'm betting that proportion was significantly higher than 90%.

And in case you are wondering, it is perfectly legal for a business not to accept cash, provided they state this in advance. It's a free country and you can agree to whatever terms of payment in your contracts you like.

About the only argument I can think of in favor of cash is that it does not leave a paper trail. But I am suspicious of those who think not generating a record of their transactions is important. As the WSJ quoted the blog Eater (but rudely did not link to) this is "bad news for mobsters, drug dealers and the Real Housewives of New Jersey."

Related reading at Bad Money Advice:

When to start collecting Social Security

How money gets wasted

Credit cards and our nation of children

YouTube credit card rebel gets results

Teresa Mears — Mon, 21 Sep 2009 20:33:00 GMT

Ann Minch, the California woman who took her fight over a credit card rate increase to YouTube, apparently has extracted the concession she sought from Bank of America.

In a new video posted Saturday, she said Bank of America had agreed to return the interest rate on her $5,943.34 balance, which had been hiked to 30%, to 12.99%. The bank's first offer was 16.99%, which she said she rejected.

She said she was contacted by Jeff Crawford, senior vice president of existing credit card accounts, who was polite. He didn't mention either her video or her "taxpayers' revolt" -- which she says is not over.

Minch's first YouTube video, which has circulated widely on the Internet, has been viewed more than 241,000 times.

Arthur Delaney, the Huffington Post blogger who catapulted Minch into the limelight when he shared her story last week, also was the first to report that Minch and Bank of America had reached an agreement. He quoted a Bank of America spokeswoman, who confirmed that the bank had contacted Minch and, "based on additional information we received about her situation, we reached a mutually agreeable resolution."

Minch's case generated thousands of comments from our readers, some supporting her and others saying that her problems were her own fault.

Many readers said they also had had their credit card rates raised substantially, even though they had made all their payments on time. Bankrate.com and Business Week wrote last year about Bank of America doubling rates for cardholders with good credit.

New rules that went into effect Aug. 20 require card companies who raise your interest rate or otherwise change the terms to tell you that you can cancel the card and pay off the balance at your old rate over five years. But, your minimum payment may rise.

Bing: More on the new credit card law

The new rules are long overdue, according to a reader calling himself Anon E. Mouse: "Where else can you have a contractual agreement that one party can just decide that they no longer wish to be held to, so they just change it regardless of what the other party wishes (besides professional sports), while legally holding the other party to the NEW terms, and the other party has NO RECOURSE???"

But a reader known as Captain Falcon believes Minch brought her problems upon herself, and she should pay up: "The sense of entitlement people in this country have truly baffles me. She racked up thousands in debt and is basically acting in delinquency and some people agree with it?! I'm no pro-business neo-con but people need to stop saddling the card companies, lenders and banks with 100% of the blame and show some responsibility. I'm sick of people, even friends of mine, make stupid decisions then try to blame the bank for their problems. Maybe a 30% rate will teach this lady to abstain from frivolous materialism and show some restraint!"

Reader Mick thinks both sides are wrong: "It is the fault of regulators for allowing banks and CC companies to change rules in the middle of the game. The run-up in interest rates to obscene levels of 30% and more amounts to usury. Some relief may be coming next year but you can bet your bottom dollar that the CC issuers will get all they can before the rules change. As for the woman who is refusing to pay up, she spent the money and her refusal to pay just puts the burden on other cardholders in the form of even higher interest rates. She needs to find a way to pay her debts. Nobody held a gun to her head and made her use the card."

ME Simpson agreed: "What Ann has finally discovered is that credit card companies are natural predators. Carrying a credit card is like being in a cage with a lion. But, that doesn't mean you have to stick your head in its mouth."

What the new credit card law means for you

Credit card rates, fees marching up

Is your credit card issuer unfair?

Seniors racking up credit card debt

Karen Datko — Fri, 18 Sep 2009 20:10:00 GMT

Here's a statistic that should give us all pause: The average credit card debt of seniors grew by 26% between 2005 and 2008, CreditCards.com reports. For the rest of us, the increase was a comparatively modest 3%.

Also, CreditCards.com says: "According to a study (.pdf file) released in July 2009 by New York City-based Demos, a public policy group, consumers 65 and older carried $10,235 in average card debt last year." That is a lot.

And that's very troubling, considering that so many retirees are living on Social Security and no other savings, and face considerable medical expenses despite government-run Medicare. The dreaded "doughnut hole" is just a drop in the bucket compared with the other potential health care-related demands on their money.

Bing: Do you have to pay your parents' debt?

What's happening here?

The CreditCards.com post gives few clues but offers lots of solutions -- and they're good ones. We figure several factors are at work.

Many older folks are stretched thin. That's true in better times, but now, because retirement savings for lots of people have shrunk, they're turning to credit in a pinch. (Our partner site ConsumerAffairs.com pointed out that many older people are now delaying retirement big time.) For some real-life stories, and this is from August 2007, read "Is Grandpa drowning in debt?"
Medical expenses are a burden. The Demos study says, "Older households, those 65 and over, reported the highest amount of credit card debt due to medical expenses: $3,988."
They're victimized. Consider how vulnerable people who didn't grow up in the computer age are to phishing and other forms of identity theft. Scammers love seniors. And then there's all the "free" stuff that's advertised as a way for unscrupulous companies to start billing your credit card.

What to do? Be on the lookout for signs that seniors you know are struggling. Yes, this is difficult. If you don't have a close relationship that allows discussion of such things, you're going to have to be very observant.

Are your parents suddenly living beyond their means?
Are their bills piling up on the kitchen table -- unopened?
Are they using a credit card to purchase things they used to pay for with cash, like groceries?

How to proceed? If you can have a frank, respectful discussion, do so. If the topic would be unwelcome, enlist help from other family members or friends, CreditCards.com suggests.

For more help, read "How to handle Mom and Dad's finances."

Related reading:

How to get rid of your folks' stuff

Will you end up supporting your parents?

Help seniors hang up on telemarketing scams

She needs a credit card intervention

Karen Datko — Thu, 17 Sep 2009 18:55:00 GMT

Ashley Baxter has good cause to be worried about her friend. The woman has gone on a major plastic spending spree since she became unemployed five months ago.

We'd heard that such people exist but hadn't run across a case quite like this. It's one thing to maintain your normal standard of living for appearance's sake when you're jobless. That's bad. But this seems worse. Along with the $40 lunches, $300 eyelash extensions and extremely expensive handbags, the friend is now committed to an extra $300 in monthly payments on debt that she didn't have when she was working, Ashley writes at SpendOnLife.

Those aren't living expenses, folks. Is a credit card intervention in order?

Here's what to say, Ashley writes in a post called "Intervention: When friends can't say no to credit," and it all falls under the general category of: Cut your spending drastically if you're not earning.

Find no-cost stress relief. Bars cost money. "For the sake of your finances don't attempt to drown your sorrows in things that will make you forget they exist," Ashley writes. Instead, as Dennis Hopper says, "You, my friend, you need a plan."
You can be entertained for free. The library, Hulu, long walks, volunteering -- get the picture?
Your currency is now time -- you've got plenty -- so if something needs done, do it yourself (and maybe charge others for the same service, Ashley advises).

Overall, Ashley says:

Your willingness to see both the positive and negative sides to your situation will play a large factor in how quickly the situation turns around. When that occurs you don't want to find yourself much deeper in the hole than when you began.

Has it worked? Ashley's friend turns a deaf ear. "She will surely regret the unnecessary added expenses later, but the advice I've been asked for is taken less seriously than Jessica Simpson's career as an actress," Ashley says.

Do you know people like this, who use spending to cushion the psychological blow of losing a job or are just unrealistic? Would you try to sit them down for a little talk?

Related reading:

A survival guide for the unemployed

How much jobless pay would you get?

Recession hitting men harder

Bing: Do men overspend with credit cards?

Woman revolts, won't pay credit card bill

Teresa Mears — Tue, 15 Sep 2009 21:44:00 GMT

Ann Minch is mad as hell and she's not going to take it anymore.

Like many, she has seen the interest rate on her credit card jacked up (in her case, to 30%), even though she made all the payments on time, wasn't over her limit and didn't in any way violate Bank of America's rules. She had been making the minimum payment on her account for years, about $130 a month.

After trying, and failing, to get the interest rate reduced, she has, in her words "fired the first shot in the debtors' revolution" by refusing to pay another cent of her $5,943.34 debt unless Bank of America returns the interest rate to its previous level, 12.99%. She has staked out her position in this YouTube video, which has circulated widely on the Internet and has been viewed more than 150,000 times.

Minch calls the credit card companies "evil, thieving bastards," which, she says, "have reaped ungodly profits in your behemoth casino scams, then lost -- only to turn around and usurp the wealth of this great nation by the outright rape and pillage of middle-class Americans whose sweat and toil built it." She adds, "Every last one of you should be rotting in prison."

Arthur Delaney of The Huffington Post did an interview with Minch, who is 46 and lives in Red Bluff, Calif. She recently lost her job as a mental health case manager. She notes in her video that she has nothing to lose, since she doesn't own a home and has no assets, but a plunge in her credit score could hurt her job search.

Ed Mierzwinski, program director of the U.S. Public Interest Research Group, told Delany that credit card lenders had better be paying attention.

"Historically, powerful and arrogant corporations, often protected by lazy regulators, have ignored consumer complaints -- now social media tools are leveling the playing field for victimized consumers," Mierzwinski wrote in an email to the Huffington Post. "The old web 1.0 mybanksucks.com sites that no one found are being replaced with real-time viral outrage that will require big business to start treating consumers more fairly or pay the price."

We can only hope.

Jason Steele at Ask Mr. Credit Card applauds Minch's decision to close her accounts at Bank of America. He also likes her use of social media to plead her case with the company's executives once appealing through normal channels failed.

But, he thinks she is misguided and that her viral protest will have no impact. Using some of the $5,000 in savings she withdrew from her account to pay off the debt, or doing a balance transfer, would have been much more responsible, he says.

"Acting in an irresponsible and financially self-destructive way is a terrible strategy," he said. "Encouraging others to follow her is morally wrong. The bank will survive her default, but she will be financially ruined."

What do you think? Is Minch engaging in a courageous act of civil disobedience or is she just being foolish? What should consumers do about credit card company practices they consider unfair, especially if they can't pay off their debt immediately?

Related reading:

The big lie about credit card debt

Credit card rates, fees marching up

Is your credit card issuer unfair?

Card companies focus on the wealthy

Karen Datko — Thu, 10 Sep 2009 18:50:00 GMT

This post comes from James Limbach at partner site ConsumerAffairs.com.

If you're an affluent American, chances are you've seen more offers of MasterCard World or Visa Signature -- the so-called premium credit cards -- in your mailbox recently.

Mintel Comperemedia, a provider of direct-marketing information, reports that credit card issuers are advertising more premium cards in an effort to attract the best customers.

In the second quarter of this year, credit card issuers sent 28% more marketing direct-mail offers for premium cards than they did the quarter before. This occurred even as issuers reduced credit card offers as a whole by 8%.

Even more, credit card companies have sent a steady number of premium card offers since early 2008 while slashing direct mail for general cards. In the first half of 2009, premium cards accounted for 19% of mail campaigns tracked by Mintel, compared with just 9% in the first half of last year.

"Credit card companies are competing to attract people with high credit scores and big spending habits," said Andrew Davidson, senior vice president of Mintel. "Because premium credit cards often have high associated fees and low risk, issuers see them as an excellent way to restore profitability in today's economy."

Credit card issuers are also competing by introducing new premium cards. High-profile cards launched since the beginning of the downturn include Chase Sapphire, the Visa Black Card and the American Express Hilton Honors Surpass Card.

Mintel's Davidson sees the focus on premium cards as positive. "Credit card issuers are beginning to expand with more credit and products for the affluent," he said. "It won't be long before this trickles down and we start seeing greater credit card marketing to all consumers."

Related reading at ConsumerAffairs.com:

August foreclosures up 18% over 2008

Small businesses would benefit from health reform, study finds

Is it time to buy yet?

My debit card confusion

Karen Datko — Thu, 10 Sep 2009 15:20:00 GMT

This guest post comes from Frank Curmudgeon at Bad Money Advice.

I have a debit card. I think. It's the ATM card my bank gave me. It's got the MasterCard symbol on it, so I think that means I can use it to buy stuff. Of course, this is just a theory. In the 10 years it's been in my wallet I've never thought to test it out. Why would I?

I am going to admit right here that I am pretty obviously missing something when it comes to debit cards. Debit card transactions now outnumber credit card transactions. This mystifies me. I can think of only three reasons to carry a debit card rather than a credit card.

You are considered a poor credit risk and cannot get a credit card.
You can get a credit card but will not because of ethical or religious objections.
You find it too difficult to overcome the temptation to borrow more than you should if you carry a credit card, so carry a debit card that will limit your spending to cash you actually have.

I can't get my head around how half the transactions in the country could be made by people in one of these categories. I know credit standards are tighter than they used to be, but I am sure that the vast majority of folks can get a credit card if they ask nicely. Ethical and religious objections can't cover very many more.

And the third reason, that debit cards limit your spending, doesn't usually pan out. As a plaintive article in The New York Times points out, what generally happens if you run out of money in your account is not a denial the next time you try to buy something. What happens is the same as what happens when you write a check that overdraws your account. For most people at most banks, the check is covered but the bank charges interest and a significant fee for its trouble.

So if you bottom out your cash on hand in the account, your debit card doesn't stop your profligate ways, it just turns into a really bad credit card.

(The Times article has a loopy defense of the fees charged, quoting an economist who says that 3,000 banks and credit unions would go under if they lost this fee income. "That is because 45% of the nation's banks and credit unions collect more from overdraft services than they make in profits." That just means that 45% of banks either lost money last year or roughly broke even. Just about any single source of revenue will be bigger than the profits they made. And I thought credit unions weren't supposed to make a profit at all.)

To be fair, some banks (including Citibank and ING Direct) do not automatically cover debit overdrafts. So a person could legitimately carry a debit card as a means of spending self-control, provided he shopped around for a debit card that worked that way. But my basic confusion remains. Most debit cards don't put a practical limit on spending, so my reason No. 3 above can't account for very many more users of debit than No. 1 and No. 2.

In a more perfect world, debit cards would be cheaper to use. There is no credit being provided, so it's a service that should be cheaper to supply. In fact, the messy reality is that you pay exactly the same amount for something purchased with a credit or debit card. The big difference being that with the credit card you've got a few weeks to pay.

And if you've got a "rewards" or rebate credit card, using credit is actually cheaper. There are debit cards with rewards programs, but they are much less generous, because the banks get lower transaction fees from merchants and so have less to share in rebates.

And yet more than half of transactions are debit, projected to hit 60% by 2015. I don't get it.

Related reading at Bad Money Advice:

Customers less satisfied with credit cards

Karen Datko — Thu, 03 Sep 2009 22:21:00 GMT

This post comes from James Limbach at partner site ConsumerAffairs.com.

Are you happy with your credit card? If not, you have a lot of company.

Driven by a significant decrease in satisfaction with fees and rates, overall credit card customer satisfaction declined to a three-year low, according to the J.D. Power and Associates 2009 Credit Card Satisfaction Study.

The study finds that overall credit card customer satisfaction fell to 703 on a 1,000-point scale -- the lowest level since the study's inception in 2007. Overall satisfaction among credit card customers remains the lowest among the financial services industries in which J.D. Power and Associates conducts research, including insurance, banking and investment services.

The study measures customer satisfaction with credit cards by examining six key factors: interaction; fees and rates; billing and payment process; rewards; benefits and services; and problem resolution. Satisfaction with fees and rates dropped to 603 points -- down 37 points from 2008 -- contributing considerably to the decrease in overall satisfaction.

Nearly 20% of customers reported an increase in their interest rate since 2008, almost double the 10% who said the same in 2008. The largest decline in satisfaction with fees and rates was among "revolvers" -- customers who carry a balance from month to month -- a drop of 53 index points from 2008.

American Express ranked highest among credit card issuers for a third consecutive year with an index score of 762. AmEx performed particularly well in the rewards, benefits and services, and billing and payment process factors. Discover (751) and National City (740) followed AmEx in the rankings.

Related reading at ConsumerAffairs.com:

Wal-Mart employees going checkless

Free checking isn't always free

Car buyers are thinking American

Ignoring credit card bills costs him $11,000

Karen Datko — Thu, 03 Sep 2009 18:56:00 GMT

Don Godding didn't review his credit card statements each month. He simply mailed a $200 minimum payment and called it good.

So he didn't realize that someone had fraudulently charged about $11,000 to his account over two months or that his balance had shot up to $18,000, according to TheDenverChannel.com. And, because of two other mistakes he made, he's on the hook for that amount, plus interest.

Isn't this the ultimate lesson for those who don't read their bills? "Pay attention. Observe. Watch what you're doing," Godding now says.

Here are the mistakes made by Godding, a Loveland, Colo., retiree who now has to go back to work part time:

He didn't contest the charges on his Bank of America credit card. By paying on the fraudulent charges, the bank told him, he accepted the debt as his own.
Because the card was $2,500 over limit, he transferred the debt to another card because he didn't have $2,500 on hand. "I made the total payoff when I switched. I shouldn't have paid it," Godding told TheDenverChannel.com. A lawyer confirmed that was a bad idea. His minimum payment is now $500.

This wasn't a case of bill avoidance, a mindset columnist Liz Pulliam Weston described in an article at MSN Money. Godding said he just didn't bother to look.

Liz wrote in another article that "credit card fraud is, at least for most consumers, no big deal. As long as you report the bogus transactions within 60 days of receiving your statement, your liability for the charges is typically waived."

There may be a reprieve. A BofA representative said the bank is reviewing the case. Colorado authorities suggested that Godding file a federal complaint.

The Federal Trade Commission says:

Your maximum liability under federal law for unauthorized use of your credit card is $50. If you report the loss before your credit cards are used, the FCBA says the card issuer cannot hold you responsible for any unauthorized charges. If a thief uses your cards before you report them missing, the most you will owe for unauthorized charges is $50 per card. Also, if the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use.

The FTC didn't specifically mention what happens if you ignore your credit card bill and pay off fraudulent charges. But it also says:

Open monthly statements promptly and compare them with your receipts. ... Under the FCBA (credit cards) and the EFTA (ATM or debit cards), the card issuer must investigate errors reported to them within 60 days of the date your statement was mailed to you.

Related reading:

Are you afraid to open your mail?

18 ways to foil credit card thieves

9 big credit card myths