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 As a result, Chase repealed the monthly fees and even provided refunds to the customers it had already charged.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.

Balance Transfer Fees, High Interest Rates: Don’t Fault the CARD Act

by John Kiernan on February 25, 2011

New Credit CardsTwo common complaints about the new credit card law, which celebrated its one-year anniversary on Feb. 22, 2011, are that it led to the extinction of 0% balance transfer credit cards with no fee and that it caused increased interest rates. One of these complaints is rooted in fact, but neither serves as a valid criticism of the law.

Yes, the CARD Act’s passage effectively signaled the beginning of the end for credit cards that offered 0% APR on balance transfers and had no fee for the service. However, no one really has the right to complain about this.

12 Things That Will Never Affect Your Credit Score

by Guest on February 17, 2011

financial-tipsYour credit score is important. You’ve heard it a thousand times, from your parents, financial advisors, TV advertisements, and seemingly everyone in between. They are, of course, correct. Your credit score impacts how much you will pay for a credit card, mortgage, or any number of loans. Many things affect your credit score, but there are also numerous factors that play no role in how this all-important number is computed. Here are twelve things that you don’t need to worry about when it comes to establishing a good credit score.

Anything not in your credit report - There is a wide range of information in your credit report, including payment history, level of indebtedness, length of credit history, and types of credit used. Your credit score won’t take into account anything outside of the credit report.

Don't Learn Your Credit Card Lesson the Hard Way

by John Kiernan on February 4, 2011

credit-lessonI received an e-mail just the other day from a nice woman living in Milwaukee, Wisconsin (Go Pack!) who wanted advice about efficiently improving credit standing. You see, her son was a senior in college and had opened a 0% APR credit card because he thought it sounded too good to pass up. He then proceeded to rack up charges which he could not pay for. However, instead of telling his parents about his credit card debt and asking for help, he just ignored the situation, hoping it would go away. After all, he was just a kid and could probably say “I’m sorry, I didn’t know any better,” and all would be forgiven, right? Well, that seemed to be the case for a couple weeks until more and more letters started coming from his issuer using words like “past due” and “account suspended.”

At this point, the young man (whom we’ll call Sean) finally consulted his parents. “What should I do?” he wondered. They told him that he needed to become current on his bill in order to avoid falling deeper into delinquency and incurring more significant credit score damage. Since Sean didn’t have much money of his own, his parents loaned him the cash, effectively closing the account, under the condition that he find a job at school so that he could pay them back.

Teach Your Kids to Ride Safely Into Their Financial Futures

by Odysseas Papadimitriou on January 21, 2011

Help for College StudentsParents plan financially for their children’s college educations seemingly from the moment they are born. They set up college funds, save and save some more. However, amidst all of this financial preparation they somehow often forget to ready their children for the financial realities of adult life. Instead, they simply hand them credit cards, pack up their cars and head to school.

It is this lacking financial education that has led, in part, to an adult population that spends beyond its means, engages in unsafe lending practices, and accumulates record amounts of credit card debt . Still, if we decide to instruct our kids how to responsibly manage their money—much as we teach them how to read, tie their shoes, and ride bikes—then perhaps they might avoid a Great Recession-like event in their own adult lives.

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.

Caution: No Preset Spending Limit Credit Cards!

by John Kiernan on December 2, 2010

slow

Throughout the Great Recession and its aftermath, much has been made about predatory credit card practices. We have all heard about the unscrupulous issuers, devoid of social responsibility, who misled their customers for profit and helped lead the American economy into a valley. The majority of the time, it seems that it’s people with damaged credit or those new to credit who fall prey to such practices. Consumers with excellent credit generally believe themselves to be immune. However, No Preset Spending Limit (NPSL) credit cards represent a contradiction to that belief as well as a credit option that can both mislead consumers and damage their credit standing, all because of lacking industry uniformity and transparency.

There are three notable types of NPSL cards currently on the market: an American Express charge card, a World MasterCard credit card and a Visa Signature credit card. The American Express NPSL card is a charge card that has a maximum spending amount, though it is not relayed to consumers. The MasterCard and Visa options are credit / charge card hybrids that have a revolving credit limit which consumers are encouraged to exceed as long as they bring their balance below it by the end of each month. They cannot, however, surpass it by an unlimited amount, though the excess allowed is also not made known to consumers. Thus, it is obvious that users are somewhat in the dark with NPSL cards simply because they do not know how much they can truly spend using such cards. Ultimately, this issuer-bred ignorance creates the potential for one’s card to be unexpectedly declined.

Credit Card Applications: After Three, Think Security

by John Kiernan on November 23, 2010

New Credit CardsI recently got a call from a college friend who wanted advice on how to get approved for the best credit card possible . He said he had applied and applied but for some reason had still not been given use of a single card. What should he do differently, he wondered, when applying for cards in the future?

My advice to him: immediately stop applying and open a secured credit card because it provides both guaranteed approval and a safe way to rebuild credit.

Five Ways You Can Turn Your Debt-inspired Frown Upside Down

by Odysseas Papadimitriou on November 19, 2010

5 waysOften, the holiday season—with its emphasis on gift giving—serves as an unwelcome reminder of any financial problems people may have. While this notion might seem depressing, it should actually be viewed as an opportunity. Instead of getting bummed about your situation, simply take the reminder as impetus to remedy your financial woes. The lowering of credit card debt, for one, can be approached and ultimately achieved through the consideration of five simple steps.

Step 1 – Evaluate your necessities
Approach your lifestyle with an exceedingly critical eye, and you will most likely discover that you spend money on things that you can certainly live without, though you might initially believe this to be impossible. You shouldn’t waste money on things like cable TV packages, cell phone data plans, dinners out or fancy vacations. Instead, fund only your means of subsistence—things like food, housing and health insurance—and use your savings to pay down your debt. While this step is the most obvious way to lower your debt, it is also by far the hardest to execute because it is often difficult to part with luxuries you have grown accustomed to.

Gas Credit Cards Provide a Little Slice of Jersey

by John Kiernan on November 12, 2010

gas-credit-cardsI recently took a trip to New Jersey, and for all the flack the state gets for things like MTV’s Jersey Shore, it does have a few things going for it, such as  produce, beautiful beach towns and, oddly enough, gas.  If you haven’t hit the pump in the Garden State you might not know this, but it’s a state law that gas station attendants must fill up your tank for you, free of charge.  You simply pull up to the pump, request a fuel type, sit back and wait.  It’s a gas luxury which most other states do not provide.  However, there are other ways that people from any state can make their gas purchases work for them, so no one gets completely shut out from the world of gas station luxury.

Last year, I decided to get an ExxonMobil MasterCard, and it was a great decision for both practical and financial reasons.  I typically spend $300 a month on gas, which is fairly average.  I simply go through that much gas each month and there’s nothing I can do about it because my work and the location of my home dictate the need for car travel.  I also cannot conveniently bargain hunt for gas prices because the only stations located on my usual routes of travel are ExxonMobil stations that have little cost disparity amongst them.

The Most Common Credit Card Mistakes

by Odysseas Papadimitriou on November 5, 2010

wallet-blog-top-10No matter what type of credit card you use, you are susceptible to the same pervasive credit card missteps as any other consumer. While it’s a fact of life that people make mistakes, simply being aware of the most common credit card missteps and how to avoid making them—both of which are explained below—will significantly decrease the likelihood of error and will, in turn, save you money.

1.  Misunderstand how balance transfers work
Credit card companies often stress their 0% balance transfers but less readily advertise that they also charge fees of 3-5% of the amount transferred for the service. Therefore, it is important to check your credit card application’s fine print before making a balance transfer in order to see how much it will actually cost. Additionally, make sure that you minimize the overall costs you incur by paying off your debt before any 0% interest offer expires.

The Best Rewards Credit Cards For You

by John Kiernan on October 28, 2010

RewardsRewards credit cards are a success in marketing. I mean, who wouldn’t want rewards? They sound fun, beneficial and as if you are automatically getting more bang for your buck. Thus, simply revolving a credit card genre around the word “reward” raises segmental demand. However, this surface attractiveness also belies the fact that these cards are not for everyone.

Indeed, depending on your primary objective for credit card use, a rewards card may not be the cheapest or simplest option available to you. When you are shopping for a credit card you should have in mind one of three primary objectives—lowering the cost of debt, building credit and accumulating rewards. It is important to identify which is your particular aim because different types of credit cards, when used responsibly, are best suited for accomplishing each. Similarly, in most cases there is not a single credit card that serves two purposes in combination more effectively than do two distinct cards designed specifically for each requisite function.

Store Credit Cards and Bad Credit

by Odysseas Papadimitriou on October 23, 2010

store-credit-cards-for-bad-creditYou’d think that Best Buy and Target would be some of the last places you should go if you are trying to improve your credit, especially for you shopaholics who cannot be in a store without going on a shopping spree. Oddly enough, however, store-affiliated credit cards can be a very valuable tool for building or rebuilding your credit.

Before going in depth into the reasons why store cards are useful you must first understand the basic concept behind improving credit with a credit card. No matter if you have bad, damaged, limited or no credit, you need to infuse your credit report with a pattern of positive information to either dilute the impact of past credit negatives like bankruptcy and delinquency or to build from scratch. Though the extent of positive information needed depends on your specific credit situation, this concept is the general basis of credit improvement. Likewise, depending on your circumstances secured credit cards and general-purpose unsecured credit cards (VISA/MasterCard) for bad credit are the usual suspects when it comes to credit improvement credit cards. Undoubtedly secured cards are the cheapest and most disciplined way to rebuild your credit, but if you want to begin adding positive information to your credit report immediately and do not have the cash for a secured card’s security deposit, your options lie in the realm of unsecured credit cards. It is in this context that store-affiliated credit cards—like the Best Buy Credit Card—play the role of the proverbial dark horse.

Recovering Your Credit After the Great Recession

by Kimberly Cole on September 24, 2010

improve-bad-creditAs we all know, the Great Recession has deeply affected consumers credit scores, and therefore, their access to credit. A recent study from FICO, the largest credit scoring company, shows that an increasing number of consumers fall into the bad credit category. The most recent count shows that a whopping 25.5 percent of consumers have FICO credit scores below 599 – that’s nearly 43.4 million people who are considered high-risk customers for lenders.

What makes these numbers worse is that they are likely to grow in coming months, as financial missteps may not be reflected in credit scores for several months. With 26 million people out of work or underemployed according to the Department of Labor, there are a lot of people struggling to make payments without an income.

Think You’re Immune From Identity Theft? You’re Not!

by Guest on September 13, 2010

swiping-credit-cardNo one in America today is immune from identity theft – thieves continue to come up with new ways to steal the information they want.

Stealing your purse or wallet is, of course, the simplest method, but since you’ll notice that and cancel your credit cards, it’s also the least lucrative. Therefore, they prefer methods that you won’t catch unless you’re keeping a close eye on both your credit accounts and your credit report.

American Express Communicates 'Erroneous' Past Due Status

by Odysseas Papadimitriou on September 7, 2010

misleadingCardHub.com released a late payment study today that revealed a flaw in the way American Express communicates late payment status. We found that American Express is communicating to its customers that they are 25 days more past due than they really are. While this is undisputable and proved by a screen shot of my own past due account, many calls and e-mails to American Express’s customer service team, and even admission from the Public Relations team that this is a ‘nomenclature’ issue, an American Express spokeswoman characterized our study as ‘erroneous’.

The spokeswoman said, “We are not out of sync with the industry and you are providing an erroneous report to your readers.” However, it is difficult to understand how she could come to this conclusion when American Express has come up with a unique definition for ‘past due’ – a term that is otherwise clearly defined and universally understood to mean the number of days past the due date (this was the case for all other issuers in the study). At American Express, however, the spokeswoman explained that ‘past due’ refers to the aging of the account and is counted from the time the bill is generated, not the due date for the bill. The last thing that we need right now is for American Express, or any other bank, to come up with their own self-serving definitions for well defined and widely used industry terms.

‘Money is Not Easy, but It’s Simple’

by Kimberly Cole on September 2, 2010

financial-happinessIn an uncertain economy, securing your financial future may seem harder and more important than ever. As anyone who has struggled with their finances knows, there is no magic formula to solving your financial woes. I recently spoke to Laura Rowley, Yahoo! Finance personal finance expert, who says that everything to do with money ultimately comes down to trade-offs.

“If you’re trying to get a handle on your finances, keep in mind that you’re paying for the things you buy with your life’s energy,” Rowley said. If you want a $500 Prada handbag, for example, how long and how hard do you have to work in order to get it?

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.

2010 Starts with an Alarming Debt Trend

by Odysseas Papadimitriou on June 18, 2010

swiping-credit-cardThe storyline in recent months has been that we are in better financial shape than we were this time last year. While that may be true by some measures, CardHub.com released the Q1 2010 Credit Card Debt Study this week, which revealed that consumers are on track to end up with more debt at the end of 2010 than 2009, despite positive signals in the economy.

The CardHub.com study focused on consumer debt data from the Federal Reserve’s G19 report in conjunction with quarterly charge off data to determine how much of the decline in consumer credit card debt is actually due to consumers paying down their debt versus bad debt being written off. The study also made projections on how much debt consumers will accumulate in subsequent quarters of 2010.

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.

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