The Battle of the Black Cards: American Express’ Centurion Card vs. Barclays’ Visa Black Card

by John Kiernan on December 13, 2011

In one corner, we have the Black Card. In the other, we have, uh, the Black Card. Confused? Most likely, and that’s exactly why American Express recently engaged in a legal battle for the right to use the name that has come to signify wealth and status not only in the credit card industry, but throughout society and pop culture as well. Rappers routinely crow about their Black Cards in songs, athletes and movie stars are spotted using them by the paparazzi, and they’re even employed in shows like “The OC” and “Entourage” to signal things like prosperity, greed, or overspending to viewers. While Amex was successful in nullifying the Black Card LLC’s trademark on the term “Blackcard,” several trademark infringement and false advertising claims remain unsettled, as does the ultimate question: Which is the better Black Card?

American Express Centurion Card
Though the American Express Centurion Card has long been shrouded in secrecy – an Amex representative responded to a request for comment by saying, “We actually can’t confirm much about the Centurion Card as we don’t talk about its services or benefits” – a few things are substantiated, including its fee structure and the fact that it is available by invitation only. The rest we can only glean from various sources and first-hand accounts, almost as if the Centurion Card is a Bigfoot-esque mythical creature.

Switzerland Supports Criminals & Hurts Your Wallet

by Odysseas Papadimitriou on November 2, 2011

wb_swiss_criminalsWhen you think of Switzerland, the first few things that likely come to mind are bank accounts, chocolate, and neutrality, and there’s a reason for that. The Swiss love to portray themselves as mild mannered people who eschew crime, make delicious candy and run perhaps the most unique banking industry in the world. But hidden behind this façade are layers of hypocrisy and implicit criminal involvement, which allow illicit operations to flourish around the world and provide safe haven for tax evaders. Lost in the aura and tradition of Swiss banking isolationism is the negative effect the Swiss system often has on citizens of other countries. The bottom line is that economies around the world are now more interconnected than ever, and if we want the world to become a safer place or all U.S. citizens to be held accountable for the same tax laws, then Switzerland will need to adjust or risk expulsion from the Western financial network.

Swiss Banking’s Murky Past
Swiss banking secrecy officially took effect in 1934 with the passage of the Swiss Banking Act—which effectively made it illegal to share bank account information with third-parties, including Swiss authorities and foreign governments—and even the circumstances of these origins are enough to raise eyebrows. Switzerland has long justified its banking secrecy laws by harping on the merits of personal privacy, and while this is likely a large part of the equation, scholars seem to agree that the aforementioned 1934 law was passed in reaction to a French scandal, which involved France’s Prime Minister accusing distinguished French citizens from various walks of life of stashing money away in Swiss banks and thereby funding the Nazi regime.

Secured Credit Cards: The Expected, The Surprising & The Best For Your Needs

by John Kiernan on October 27, 2011

secured-credit-cardsThink all secured credit cards are the same? It’s ok, you can admit it. I mean, it’s a natural assumption; they all require minimum security deposits of around $200, the exact amount you put down equals your credit line, you get back your deposit minus any outstanding balances when you close your account, and so on and so forth. Interestingly though, a new study helps complete the picture and reveals some important differences between secured credit card issuers.

Overview & Application Requirements
The first thing you need to know is that not all banks or credit card companies offer secured credit cards. In fact, only 62% of the issuers investigated in the study do. What’s more, there are some minimum requirements for approval that all issuers must abide by. Some are going to seem familiar, others may be a surprise:

Down with Default Rates!

by Odysseas Papadimitriou on October 5, 2011

penalty aprIn a previous article, I made the case that usury laws are counter-productive. Usury laws, which cap interest rates for lenders, completely fail to serve their intended purpose of forcing banks to deliver affordable loans and instead result in the declining availability of loans for anyone whose credit history merits an interest rate above an arbitrary cap. While this is still true for regular interest rates, I would like to suggest one particular feature of our contemporary lending industry that could actually benefit from usury laws: Penalty rates.

Why? Because penalty (or default) rates on loans and credit cards currently dictate the order in which consumers repay their debt obligations during times of crisis and invite banks to engage in reverse competition over who can charge the highest interest rates.

Usury Laws, Anyone?

by Odysseas Papadimitriou on September 28, 2011

usury interest ratesEvery so often, talk of curbing excessive lending practices by instituting usury laws at a federal level resurfaces, and speeches are made, hearings are held and editorials are written, but nothing ever comes of it. This begs a couple of questions: For starters, what are usury laws exactly, and—perhaps more importantly—do we need them?

Usury laws are those that prevent high interest rates, and as a result typically garner popular support, especially in times such as these when the economy is fledgling and anger toward financial institutions is running high. However, you cannot truly evaluate the merit of these laws, which at their basis are a means of forcing lenders to serve the greater public good, without understanding their practical effect.

Why Haven’t Credit Card Membership Fees Risen?

by John Kiernan on September 23, 2011

feesWhile the positive effects of the financial laws passed over the course of the last few years have indeed been many, these new regulations have also served to limit financial institutions’ means for making money. For example, debit card interchange fees have been capped at about 24 cents per transaction, credit card companies can no longer raise interest rates on existing credit card balances unless delinquency reaches 60 days, banks can’t charge overdraft fees unless accountholders agree to opt-in for the ability to overdraw their accounts, and people under the age of 21 can’t open credit cards without either a co-signer or the assets and income required to cover minimum payments.

From the time these laws were first proposed, people have been wondering how banks would recoup their losses, and to a certain extent, these questions have been answered. Having already lost much of the $25-38 billion they once charged in overdraft fees and now facing what Card Hub estimates to be $9.4 billion in lost interchange fee revenue, major banks like Wells Fargo, Chase, SunTrust and Regions are adding fees to checking accounts and are gearing up for a push to prepaid cards. Most banks have also stopped offering unsecured credit cards for bad credit in light of credit card fee restrictions.

Should You Be Mad That Free Checking Accounts Are Becoming a Thing of the Past?

by Odysseas Papadimitriou on September 9, 2011

free checkingWait, they charge fees for checking accounts? This has become a common refrain as more and more consumers around the country are all of a sudden finding monthly fees on their previously free checking accounts. Aside from initial bewilderment, people are responding with emotions that run the gamut all the way from anger to understanding. But, how should you really feel about added monthly fees on your bank account?

It’s understandable that you might at first be angry about having to shell out monthly payments for a service that used to free, but what if there was a good reason for the switch? That might change things for many of us and, of course, begs the question: Why are checking account fees gradually becoming as common as free checking once was?

Money Market Accounts vs. Savings Accounts

by John Kiernan on August 12, 2011

money market accounts vs savings accountsWe recently took a look at the differences between money market accounts and money market funds. This week, to follow up on that discussion, we will examine what separates a money market account from a traditional savings account. After all, if we’re to make responsible banking decisions and effectively manage our money, we must understand the options available to us.

Overview
Both savings accounts and Money Market Deposit Accounts (MMDA) are essentially bank accounts insured by the federal government that allow you to safely deposit your money and garner interest. Accounts offered by banks are insured for up to $250,000 per depositor ($100,000 beginning in 2014) by the Federal Deposit Insurance Corporation (FDIC). The National Credit Union Administration (NCUA) insures those accounts offered by credit unions for the same amount.

Money Market Funds vs. Money Market Accounts

by John Kiernan on August 5, 2011

money market accounts and money market fundsDespite their similar names, money market accounts and money market funds are most certainly not the same thing. So let’s take a look at both to clear up whatever confusion might exist and provide insight into which will best suit your particular needs.

Money Market Accounts
A money market account, also known as a “money market deposit account,” is essentially a savings account. Money market accounts tend to pay more in interest than standard savings accounts and have higher minimum balance requirements but are interest-bearing bank accounts at their core, typically allow for limited check writing and debit card use, and most importantly, are explicitly insured by the FDIC—usually for up to $250,000.

Is it the Beginning of the End for Magnetic Stripe Credit Cards?

by John Kiernan on July 12, 2011

magnetic-stripe-death“A what?” This just might be a common refrain from children a few years down the road in response to their parents discussing the good old days of magnetic stripe credit cards as if they were single-digit movie theater prices or some other relic of yesteryear. Indeed, the magnetic stripe credit card, common in the United States since the 1960s, might be on its way out. But this isn’t the first time the death knell has tolled for magstripe cards, so why should we believe it this time around?

Notable Replacement Efforts

Traveling Abroad? Save Big With A Credit Card

by John Kiernan on June 29, 2011

international-currency-exchangeCredit cards provide the cheapest means of currency conversion. Hold on, before you balk at this statement and argue that someone working for a credit-oriented blog would of course make such a claim, let me tell you something: I have the facts to back it up. In fact, credit cards have the potential to save international travelers as much as 15% on currency exchange, according to a recent Currency Exchange Study by Card Hub.

Card Hub – using both online fact finding and anonymous phone calls – was able to determine the U.S. dollar-to-Euro exchange rates offered by Visa and MasterCard, the credit card networks with by far the largest coverage areas worldwide; 15 of the largest consumer banks in the United States; and Travelex, the most significant airport currency exchange service in the world. And aside from the mere fact that the payment type most conducive to international travel is a credit card, this study revealed that:

Why You Should Care About the Health of Your Bank

by Guest on April 1, 2011

financial-healthWhen deciding where to keep your money, it is a good idea to consider the health of your bank. There was a time, not too long ago, that it seemed as though banks were failing left and right. While the rate of bank closures has slowed, you still need to think about what it could mean if your bank were to fail. It’s true that, if your bank is protected by the FDIC, you will get your deposit back, up to certain limits. However, just getting your deposit back isn’t always enough.

Issues Associated with Bank Closures

Bank of America’s Membership Fees Break Law’s Intent, Follow Treacherous Industry Trend

by Odysseas Papadimitriou on March 4, 2011

no-repricingBack in 2009, Wallet Blog broke the story that Chase had reneged on a promise it made to certain customers not to increase the interest rates on balances transferred to the company’s credit cards. While Chase did not increase interest rates per se, the company did begin assessing $10 monthly fees that increased the cost of consumer debt nonetheless. Working together with the New York Times, Wallet Blog made the story national news, causing then-New York Attorney General Andrew Cuomo to threaten legal intervention against the financial giant. As a result, Chase repealed the monthly fees and even provided refunds to the customers it had already charged.

Such actions were taken because, from a regulatory standpoint, there is no practical difference between interest rates and fees. Both are considered finance charges. In its Federal Truth in Lending Act (Regulation Z), the Federal Deposit Insurance Corporation defines finance charges as:

Fed Rules Promote Accurate Underwriting, Not Gender Inequity

by Odysseas Papadimitriou on March 2, 2011

HouseholdThere has recently been a great deal of talk about rules proposed by the Federal Reserve that seek to require credit card companies to consider the merits of applicants based on individual rather than household income. These rules, critics contend, stand to significantly affect stay-at-home mothers by preventing them from establishing credit history in their own names, which would be extremely important to garnering a loan, renting or buying a property, and/or landing a job in the case of divorce or the death of a spouse.

Given that 2010 Census figures show men to be the sole breadwinners in 28.2% of couples with children under the age of 18 and women to be the only earners in about 4% of such families, roughly 7.3 million women and 963,000 men would face a difficult time garnering access to credit if the claims made by the rules’ detractors prove to have merit.

We’re Not Out of the Woods Yet; Credit Card Debt is Actually Still Rising

by John Kiernan on December 10, 2010

debtComing out of the Great Recession, the last thing anyone wants is for financial history to repeat itself. However, when it comes to consumer debt, that is exactly what’s happening. Many people think that overall credit card debt is decreasing just because consumers paid down over $43 billion in debt during the first quarter of 2010. However, this is merely a reflection of what occurred in the same quarter last year. Numbers from the second and third quarters of 2010 show that—like in 2009—consumer debt is actually rising and is on track to wipe out most of the reduction observed in Q1.

According to the Q3 2010 Credit Card Debt Study conducted by CardHub.com, consumer credit card debt increased by almost $6.5 billion in the third quarter of 2010 alone.

Overview of High-Yield Reward Checking Accounts

by Guest on October 22, 2010

rewards-checking-account

You have probably heard about reward credit cards, but how about reward checking accounts? If not, to give you an idea they are similar to reward credit cards. With reward credit cards, your purchases are rewarded with cash back, miles, or points. With reward checking accounts, your debit card purchases are rewarded with a high interest rate on your checking account balance. There are other requirements and features with these reward checking accounts, but the high interest rate and the debit card usage requirement are the fundamental features. If you are a saver who doesn’t spend a lot, you may find that a reward checking account will be a very good deal.

Reward checking accounts are offered by hundreds of community banks and credit unions around the United States and have been growing in popularity since 2006. There are a few dozen banks which allow you to open a reward checking account online from any state. However, the majority of banks and credit unions only open reward checking accounts for local residents.

How Upfront is Your Credit Card Company?

by Kimberly Cole on August 11, 2010

fine-printIt’s no secret that credit card companies aren’t always up front with their customers. There’s no way to truly know what you’re getting into when applying for a credit card unless you meticulously read the fine print (something few people have the time or patience for).

In case your one of these people who have better things to do than read your credit card agreement all weekend, here is a quick checklist of the absolutely essential information you should look for on your credit card application before you apply:

Good News for Consumers with Defaulted Credit Card Debt

by Guest on July 14, 2010

debtThis guest post was written by Bob Brooks, host of the Prudent Money Radio Show and President of Prudent Money Financial Services. For more information please visit www.prudentmoney.com.

About a year ago, I wrote that things might really start to change in the process of how credit card companies go after consumers who have defaulted on their accounts.

Interest Rate Disclosures Still Misleading Consumers

by Odysseas Papadimitriou on July 9, 2010

ConfusionA credit card agreement isn’t anyone’s first choice for reading material. The language is arduous and the terms are intentionally vague. That being said, it’s still important for consumers to understand the message that they are ambiguously trying to convey. The new credit card law (Credit CARD Act) was supposed to bring clarity, but some credit card companies are using old tricks in order to keep consumers in the dark regarding their protection from interest rate increases.

It used to be that credit card companies, such as Chase, Bank of America, Citi, and American Express, could re-price your APR on your entire balance for any reason and at any time. All they had to do was give you notice and there wasn’t a lot that you could do to avoid the increase. The CARD Act has certainly made the rules around rate increases better for consumers – but that hasn’t stopped credit card companies from trying to make you think otherwise. Although the fine print is confusing, you should rest easy knowing that the consumer protection rules in the CARD Act apply to all credit cards, with the exception of business credit cards.

Watchdogs Patrol World Cup Credit Fraud

by Guest on June 29, 2010

scamThis guest post is written by Ted Higgins, a financial writer for the Total Bankruptcy Blog.

During the World Cup, soccer players will flop, feign, and fall in order to draw penalties against their opponents. Unfortunately, this sort of scamming also occurs away from the field. In fact, major international events like the World Cup create a golden opportunity for criminals operating credit card scams.

Make Your Credit Cards Work for Your Business

by Odysseas Papadimitriou on June 25, 2010

funding-for-small-businessRunning your own business takes energy, organization – and a whole lot of money. Using a credit card for funding a small business can provide you with the resources you need when you don’t have the cash. However, due to small business credit cards’ exclusion from protection under the Credit CARD Act, you should think twice before carrying a balance on your small business credit card.

Even though it’s called a business credit card, the business owner is still personally responsible for the debt incurred at the end of the day. Since the owner is assuming this risk already, it makes sense to use a personal credit card for purposes such as funding or any other expense that you can’t pay back right away. This way the Credit CARD Act will provide the protection you need when carrying a balance.

Credit CARD Act Creates Loophole in Payment Allocation

by Odysseas Papadimitriou on June 9, 2010

LegislationAs we all know, the Credit CARD Act that came into effect earlier this year was meant to protect consumers from egregious practices by the credit card companies. By and large, the new rules do a good job in accomplishing this goal. However, there was one revision in the final draft of the bill around payment allocation that does not have the consumer’s best interest at heart.

The new payment allocation rules state that any payment above the minimum must be applied to the balance with the highest APR first. While this is an improvement from the previous payment allocation rules, it still offers no benefit to people who can only afford to pay the minimum payment each month – that’s 29 percent of Americans according to a FINRA National Survey.

Two Well-Incentivized Checking Accounts

by Lynn B. Johnson on April 26, 2010

High-Yield Checking AccountA couple of checking accounts that come with worthwhile incentives might be of interest to you: one offers tunes, the other, cash.

Florence Savings Bank has a “FreeTunes Checking” account with no minimum balance, no monthly fees, and nationwide ATM refunds. On top of those bonuses, FSB offers free iTunes® downloads at sign up and then monthly, so long as you maintain qualifying status. Pretty neat. The account is only available to those who live in Western Massachusetts, though.

Citibank continues experiments with derivatives

by Brian Johnson on March 1, 2010

cdsIn a recent Market Watch article, David Weidner commented that Citibank is attempting to create a new product, the CLX, which acts as insurance against financial collapse.  The product sounds, as Weidner deftly points out, a lot like the Credit Default Swaps that helped cause our current recession.  It involves the same risks and is being endorsed using the same shaky justifications.

The problem with financial products like the CDS or the CLX is, first and foremost, that it is unclear who covers the ‘bet.’ If financial collapse does happen, and Citibank is to make good on their CLXs, what guarantee is there that Citibank will be in a position, post-collapse, to honor its obligations?  And if it isn’t in a position to honor those obligations, who does?  What’s clear after the fallout of the CDS scandal is that the responsibility of paying off the debts of ‘too big to fail’ financial institutions inevitably falls on the American tax payer.

Nobel Economist Predicts Further Collapse

by Brian Johnson on February 18, 2010

Nobel Prize-winning economist and Columbia Business School professor, Joseph Stiglitz argues in this interview that we are headed for another collapse.  His arguments are sound and should be listened to.

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