Could Consumer Dispute Resolution Have a Class Problem, Not an Arbitration Issue?

by John Kiernan on December 5, 2012

supreme courtHow can we fix arbitration?  That’s the question we posed last week after The Pew Charitable Trusts released a study that revealed how disturbingly prevalent mandatory arbitration clauses are in the fine print of checking account agreements.  The thing is, after exploring the issue a bit further and talking to some of the country’s foremost experts on arbitration and consumer disputes, a new question arose:  Is the arbitration process actually broken?

Don’t worry if you’re a little lost right now because a bit of background is certainly in order.

What Do We Really Know About the Underground Market for Stolen Credit Card Info?

by John Kiernan on November 20, 2012

We’ve all seen the news reports about consumer credit card data being stolen as a result of a major retailer, card network, payment processor, gaming company, etc., having its network breached by hackers.  But unless you were directly affected, the details of the crimes and the scope of the damage were likely quickly forgotten.

For example, you may not recall that 94 million credit card accounts were exposed when hackers broke through the firewalls of TJX Companies, Inc. – the holding company for T.J. Maxx and Marshalls – in late 2006 or that 134 million more accounts were breached when Heartland Payment Systems’ records were compromised by spyware in 2008.  There are indeed countless examples, including more recently when, in 2011, an attack on the PlayStation Network unearthed 12 million unencrypted credit card numbers, along with 77 million accountholders’ full names, e-mails, and home addresses, costing Sony millions.

What to Do if You Lose Your Wallet

by Odysseas Papadimitriou on June 21, 2012

lost walletWait, where is it? Back pocket? Nope. Purse? Not there either. Even a quick sweep of the house comes up empty. You’ve lost your wallet, and the panic is starting to set in. As your mind races through all of the places where you could have left it, you wonder what to do if you can’t find it. That’s a very good question, and one which we should all know the answer to (especially the ADD folks among us)!

When you lose your wallet, it’s not just a folded piece of leather that you’re missing, but also your IDs, debit card, credit card(s), gift cards, cash, health insurance information, family photos, and maybe even your Social Security card. The ramifications of your loss are therefore many, and to be safe you unfortunately have to operate under the assumption that it’s been stolen. That necessitates a sort of lost wallet triage.

6 Fun Facts about Credit Cards

by John Kiernan on April 18, 2012

6 fun facts about credit cardsWe use credit cards on a daily basis, but how much do we truly know about them? That’s probably not a question you’ve ever given much thought, and even so, you might find it hard to believe that such a small piece of plastic could carry many secrets or surprises. The truth, however, is that while we take the ubiquity of credit cards for granted, they have a rich and complicated history, and many facets of their usage and evolution do offer the kind of interesting tidbits that one could pull out at a cocktail party or game night (‘cause that’d really impress your friends, huh?).

So, without further ado, here are 6 of my favorite credit card nuggets:

BP Makes a Mess of Its Credit Card

by John Kiernan on March 7, 2012

We all know the old saying, “If it aint broke, don’t fix it.” Well, everyone except BP, which appears to have gotten this idiom backwards because they seem unable to stop breaking good things. First the Gulf of Mexico and now the BP Credit Card, which used to be one of the very best gas credit cards before changes to the offer effective March 3 turned it into one of the worst.

Of course, BP should not be alone in shouldering the blame, as Chase – the issuer of this once-great co-branded credit card – is also complicit in its downfall. Regardless of who exactly is to blame, what is now abundantly clear is that BP is losing a significant strategic advantage over its competition. The credit card bearing its name is no longer a draw, but is instead an example of everything that is wrong with corporate rewards programs.

No Balance Transfer Fee Credit Cards Are Back, But Are They Here to Stay?

by Odysseas Papadimitriou on February 22, 2012

No Balance Transfer Fee Credit CardsRemember the good old days when free balance transfer credit cards – you know, the ones with 0% balance transfer rates and no balance transfer fees – were in abundance? We all thought such credit card offers went the way of pay phones and Polaroid film once the CARD Act took effect, as this law prohibited the type of “gotcha,” hair-trigger pricing that allowed issuers to make money off cards without obvious revenue-generating features. However, Discover and Chase recently resuscitated the free balance transfer with a pair of new offers, a development which begs the question: Are they here to stay?

A changing credit card environment
Back in the old days, credit card companies were able to offer cards with 0% intro rates and no transfer fees because such features largely served as bait soon to be followed by a switch. You see, issuers knew that a very high percentage of customers who opened such cards would inevitably miss a payment by a day, exceed their credit line by at least $1, or mistakenly use the card to make a purchase, allowing them to implement penalty rates and fees as well as an unfair payment allocation policy that forced consumers to pay off their highest-interest balances last.

Do You Have to Pay Taxes on Your Rewards?

by John Kiernan on February 8, 2012

Initial rewards bonuses have been all the rage in the personal finance world ever since economic recovery began following the worst of the Great Recession a couple of years ago. Banks across the country have been using bonus cash, points or miles – given in return for account opening or spending a certain amount in the first few months – to lure some of the best consumers into using their products and services. The benefits of this strategy were obvious: banks got a more consistent customer base and consumers got hundreds of dollars in free money to play with. But with tax season rolling around, the rage inspired by these initial bonuses has been less about popularity and more about actual anger. You see, as it turns out, things like airline miles, hotel points and cash back could actually be taxable!

Uh, what? That’s right, as first reported by the LA Times’ David Lazarus, Citibank has been sending 1099 forms to customers who took the company up on promotional deals offering thousands of American Airlines rewards points in return for opening a checking or savings account. Since Citi values these points at 2.5 cents each (despite the fact that they’re only worth 1-2 cents through redemption), consumers who opened a new bank account thinking they’d get a couple free flights are instead being handed bills of up to around $262.50 payable to good ole’ Uncle Sam. Exactly how much you owe the IRS depends on how many points you were given and what tax bracket you’re in, but perhaps even more concerning is what Citibank’s tax surprise means for rewards in general. Are all rewards taxable, even those tied to rewards credit cards? Or is it limited to account opening throw-ins? If so, how significant must a gift be to be taxed?

Think Miles & More is Bad? Check Out What British Airways Has to Offer

by Odysseas Papadimitriou on December 20, 2011

A few months back, I wrote an article about how glaring flaws in Lufthansa’s rewards program were causing me to question my long-time relationship with the Star Alliance member. With these doubts in mind, the 100,000 initial bonus miles being offered at the time by the British Airways Credit Card proved too much to resist. What’s the worst that could come of shifting my airline loyalty program allegiances and opening the British Airways Card, I thought? Sure, BA’s network of partner airlines doesn’t even come close to matching Star Alliance’s, but shouldn’t that result in the company compensating via better rewards, customer service, etc.?

Apparently not, as my experience thus far with the British Airways rewards program has made Star Alliance look terrific by comparison. While BA’s problems are numerous, they can be separated into two primary categories: effectively worthless rewards and unprecedentedly bad customer service.

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.

Calling Customer Service? A New Scam is in Town

by Odysseas Papadimitriou on December 7, 2011

During a recent experience to forget with WalMart.com and its customer (dis)service department, I happened upon something likely to be quite interesting to both American Express and anyone using an American Express small business credit card.

It all started when a WalMart representative informed me that my digital gift card order had not been completed as a result of a problem with my credit card. I, of course, reacted by immediately flipping the card over and calling the number listed on the back for Amex’s 24/7 small business customer service department…or so I thought.

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.

Eliminate Back-to-School Spending Stress with the Right Rewards Card

by John Kiernan on August 26, 2011

Help for College StudentsIf you looked at your child’s back-to-school checklist and wondered how in the world you’d pay for everything on it, don’t worry, you’re not alone. About one out of every five Americans feels stressed about back-to-school shopping this year, according to a survey conducted by Chase, and 25% plan to spend less on school supplies this year than they did last year. What’s more, 34% of people intend to save on back-to-school shopping by re-using old supplies, while 26% plan to clip coupons and 25% say they’ll shop at discount stores. Those are all great ideas, which can lead to big savings. But why not throw the right rewards credit card into the mix and save up to another 6%?

As we all know, rewards credit cards often offer particularly high rewards on particular spending categories. And since the Island Approach to spending advocates having a few different rewards credit cards that complement each other and help you save on your biggest expenses, both your credit card arsenal and your back-to-school budget could benefit from the addition of a card with particularly attractive grocery and department store rewards or a card offering rewards at a mega-store where you can buy practically everything or a card that helps you save on office supplies.

Could Credit Card Companies be Groupon Killers?

by Odysseas Papadimitriou on July 22, 2011

credit card companies grouponConsumers have shown an obvious affinity for Groupon and its hundreds of copycats, but lost amidst their buzz is the notion that daily deals as we currently know them might not be the end-game for targeted local consumer marketing. The recent announcement of a partnership between American Express and Facebook to create “Link, Like, Love,” a deal-driven spending platform which takes advantage of the credit card company’s extensive customer base and purchase tracking capabilities as well as the social media giant’s unique reach into the lives of consumers, highlights the potential credit card companies have to change the game significantly. But, in the end, do credit card companies really have what it takes to be Groupon killers?

On Tuesday, American Express and Facebook launched Link, Like, Love and immediately became a serious contender to popular daily deal providers like Groupon and Living Social. The joint partnership allows consumers to link their American Express credit cards to their Facebook accounts and immediately access a virtual treasure trove of deals from leading national retailers and travel providers, including H&M, Dunkin’ Donuts, Sports Authority, Sheraton, Westin, Celebrity Cruises and Travelocity. Small businesses can also load their own deals through the service’s self-serve feature. Consumers simply select deals to load onto their Amex accounts, purchase the goods or services advertised, and automatically receive a statement credit.

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

Southwest Airlines Credit Card Offers Two Free Round-trip Flights

by John Kiernan on July 6, 2011

wb-southwestFeel bad about missing the British Airways offer for two free round-trip international flights a few months back? Well, here’s a chance to make up for it. Southwest Airlines recently announced a limited-time deal whereby consumers can score two free roundtrip flights simply by opening the Southwest Airlines Credit Card and making a single purchase.

Think that sounds too good to be true? Let’s take a closer look at the terms of this deal and see whether you are really free to move about the country with this credit card.

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:

Consumer Debt Pay Down Hints At Significant Impending Debt Increase

by John Kiernan on June 17, 2011

debtAmerican consumers paid down 26% less credit card debt during the first quarter of 2011 than they did in the same period last year, according to a recent credit card debt study conducted by Card Hub – a fact which portends a significant rise in debt throughout the remainder of the year as well as the possibility of dangerous consumer overleveraging.

While one might consider any debt pay down to be a positive one, context is needed to explain why the Q1 2011 data is so concerning. During the first quarter of each year, consumers inevitably pay down a portion of their debt thanks to holiday bonuses, tax returns and a desire to rid themselves of balances remaining from holiday shopping. It’s normal.

8 Reasons Why You Should Use a Credit Card

by John Kiernan on May 13, 2011

New Credit CardsThroughout the financially tumultuous past few years, the credit card industry has been the subject of a great deal of attention in the press, Congress and the court of public opinion. The system admittedly was broken. Shady credit card companies, hiding behind a conspicuous lack of transparency, were using bait-and-switch tactics and confusing policies to take advantage of their customers. Now that the Credit CARD Act of 2009 has eliminated most of these issues, we can again being to appreciate just how useful credit cards can be. So, without further ado, 8 reasons why you should use a credit card as long as you trust yourself to spend wisely.

1. Credit building

American Express Bursts Back Into Cash Back Market With Revamped Blue Cash Offerings

by John Kiernan on April 28, 2011

amex blue cash credit cardOh how quickly things change. For years, the American Express Blue Cash was my credit card of choice. It offered 1% cash back on gas and groceries and 0.5% on all other purchases up to $6,500 in annual spending, but that’s not what made it so impressive. After $6,500, bonus cash back terms kicked in, taking the base cash back rate to 1.5% and the gas-and-groceries rate to an impressive 5%. Needless to say, the Blue Cash was hard to beat…at least until something in the market changed and the Blue Cash lost its appeal.

You see, other products emerged that had rewards structures able to not only compete with the Blue Cash’s earning rate but also beat this once-dominant spending vehicle in terms of rewards earning simplicity. There’s the Bank of America Accelerated Cash Rewards Card, which offers 1.25% on all purchases; the Capital One No Hassle Cash Rewards Card, with 2% on gas and groceries and 1% else; the Chase Freedom Visa, with up to 5% cash back on rotating spending categories; and last but not least the Capital One Venture Rewards card, which is basically a 2% cash back credit card when miles are redeemed for any travel-related purchase.

The Achilles Heel of the Capital One Venture Rewards Program: Customer Service

by Odysseas Papadimitriou on April 22, 2011

capital one venture rewards credit cardIn my opinion, the Capital One Venture Rewards Credit Card is one of the best travel rewards credit cards on the market. After all, it’s essentially a 2% cash back card when miles are redeemed for any travel-related purchases charged on your card. This means that for every $10,000 you charge on this card, you earn 20,000 miles, which can in turn be redeemed for a $200 travel-related purchase. All you have to do is call Capital One, identify the purchase you wish to redeem your miles for, and that’s that. Needless to say, the Venture Card is my primary spending vehicle. And while I would be hard-pressed to replace it, there is one thing that could bring the Venture Card down: Capital One’s customer service.

This became readily apparent when my fiancé recently tried to redeem her miles for a plane ticket to Greece. This experience revealed a number of disturbing facts about Capital One’s customer service as well as the inner-workings of the Venture Rewards program.

Want 2 Free Trips to Europe? Talk to Chase and British Airways

by John Kiernan on April 11, 2011

ba bonus credit card milesChase, in partnership with British Airways, recently announced a new travel rewards credit card for people with excellent credit that essentially provides any first-time Chase cardholder with two free roundtrip-transatlantic flights within the first three months of being open.

Consumers receive 50,000 bonus miles immediately upon making their first transaction with a British Airways Visa Signature Card and another 50,000 miles after spending $2,500 in the first three months. Each of these rewards bonuses can be redeemed for a World Traveler Economy class round-trip ticket from the U.S. to anywhere in the United Kingdom, Belgium, France, Germany Ireland, Luxemburg, Switzerland and The Netherlands.

Hurry, Double Your Airline Miles!

by John Kiernan on March 16, 2011

double airline milesOn March 9, Capital One began a promotion centered on its popular Venture Card that could ultimately result in thousands of customers easily doubling their airline miles, while also increasing the flexibility of their use.

As part of the Capital One Venture Card “Match My Miles” program, the financial giant has pledged to match as many as 100,000 already-earned airline miles for each consumer that opens a Venture Card until May 13 or one billion miles have been given out, whichever comes first. Consumers who do not currently have Capital One accounts will also receive 10,000 bonus miles if they spend at least $1,000 during the first three months their Venture Cards are open.

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