Credit Card Blog

Roger Arquer has released an intriguing conceptual design for credit cards of the future. It’s called the Money Clip Credit Card and as the name suggest it allows your credit card to function as a money clip. By carrying your cash and credit card in one devise it could eliminate the need to carry a wallet.

It was design for the 2004 VISA Europe Creative Intelligence Design Competition, a collaboration with the Royal College of Art in UK. This competition designed to generate original ideas for what credit cards of the future could be like, and I think this is a great example.

Credit card usage has been on the rise the last year as mortgage rates have been increasing and it has become increasing difficult to get a mortgage or home equity loan.

During the last five years when mortgage rates were at record lows, home equity loans were very popular.  Due to the generally lower rates, many consumers were using these loans to pay off credit card debt or as a financing alternative to credit cards.

Now that mortgage rates are on the rise and it has become very difficult to get a home equity loans, credit cards are becoming a more attractive option for many consumers wishing to finance major purchases.

There were a lot of upset iPhone owners last Wednesday when Steve Jobs announce the price of the 8 gig iPhone was dropping from $599 to $399 just 10 weeks after it was launched. There was so much uproar over it that he later announced that the early iPhone adopters who paid the $599 price would be receiving a $100 store credit. But why settle for the credit when you can get your full $200 back?

If you purchased your iPhone with a credit card, chances are you’re in luck! Many credit cards offer a purchase protection plan and price protection program that consumers rarely take advantage of. The purchase protection plan typically extends the warranty on all items you purchase with a credit cand and covers you if an item you purchase shortly after purchase. The price protection program guarantees the lowest price on items you purchase with your credit card and will pay you the difference up to a certain amount if a lower price is advertised. This period is usually 60-90 days depending on the card.

There are already many reports of American Express and Citibank customers receiving refunds. So if you purchased an iPhone with your credit card, call the number on the back of the card and ask about their price protection program. It may save you $200.

When trying to pay off debt, many people decide to transfer their credit card balances to another card that offers a 0% intro rate, and too often overlook the benefits of getting a low fixed rate credit card. I’ve decide to put the two to a test and compare our most popular balance transfer credit card to our most popular low fixed rate credit card and see which one comes out ahead. For this test we’re going to assume you have $8,000 in credit card debt and your budget allows for $100 a month towards paying off this debt.

Your Existing Card
Before we take a look at low intro vs low fixed, lets first look at the cost of doing nothing. By leaving the balance on your credit card with an average rate of 14.99% you will pay $1,032 in interest to pay the card off.

The Low Fixed Rate Card
Our most popular low fixed rate card is the MERRILL+ Card. It offers a 9.99% fixed rate and also includes a 12 month intro rate of 1.9%. With this card you will have $2,675 in remaining principal after the promo period and it will cost you a total of $248 in interest to by the time you pay off the card. A $784 savings over doing nothing.

The Balance Transfer Card
Our most popular balance transfer card is Blue from American Express. This card offers 0% intro APR for 15 months, afterwards the rate becomes a better than average 12.24% variable rate. With this card you will have $2,000 remaining in principal after the promo period and it will cost a total of $120 in interest by the time you pay the card off. A $912 savings over doing nothing.

It may come as a surprise to you that the low intro rate came out ahead. That’s because of the jump start you are able to get on paying off your debt in the beginning. Just like with a mortgage, paying off credit card debt is very slow at first and the accelerates as you get closer to paying it off. Due to the 4% monthly minimum payment that almost all card companies require now, the low intro rate card comes out ahead regardless of the dollar amounts. However, this is only true if you no longer charge items on your credit card and truly do pay it off. If you plan to continue making charges, the low fixed rate is the better way to go.

No, I’m not talking about credit card fraud, rather a little known but common-practice by credit card companies when you check into a hotel.

When the hotel swipes your credit card, it automatically reserves a sum of money – an estimate of what it would cost to cover the full stay in the hotel (based on occupancy, number of days plus extras.)

This amount actually becomes unavailable to you until you checkout of the hotel and the hotel processes your final bill and the “earmark” is removed. When you check out, whatever amount was reserved above what you actually used is returned to your available credit for your use.

This actually is beneficial to you, the hotel and the credit card company, as it prevents you from going over your limit before checking out of the hotel. But, you can run into problems if you change your mind on where you will stay and book a second hotel without actually staying in the first one because essentially they can both have earmarks. When you try to make a purchase, unless you are aware of this virtually unknown policy, you could be stuck with a maxed out card even if you have not run up any charges for the first hotel or additional charges for the hotel you actually are staying in.

Credit card companies and hotels should make consumers aware of what’s going on, and ask you to sign or authorize the reserve amount upon check in. So long as consumers are educated on why this is a good practice, I don’t see a reason to be covert about it.

We’ve been hearing about contactless credit cards for years. The idea is to be able to pay for items by just bringing your credit card close to a scanner. It works using RF technology much the same way as access cards to many office buildings and parking garages use.

The promise is that it will make paying for transactions quicker, especially when combined with not requiring signatures for lower dollar amounts. It will also eliminate the problems with magnetic strips wearing out, or registers having difficulty reading the card. In addition, it will potentially make paying by credit card more practical at vending machines and other self-serve locations.

These cards are finally here! Well, not so much here in the US, but they are available in the UK now. MasterCard has unveiled their PayPass system this week and expect to have over five million cards issued within one year. Major retailers in the UK have also signed up to begin accepting these cards.

Both Chase and Bank of America are issuing cards with PayPass here in the US, but the problem is the lack of retailers supporting it. By issuing such a large number of cards being in the UK, and signing up over 1,000 retailers to support this technology, it stands a real chance of getting off the ground in the UK and eventually the rest of the world.

The National Commission for the Protection and Defense of Financial Services’ Customers (Condusef) in Mexico reports that the percentage of bad debts is now around 6.1% of overall debt. This represents a 100% increase since June 2005.

If the current trend continues Condusef President Luis Pazos warns this number could rise to 7.1 percent of total credit card debt by June 2008 which could jeopardize the Mexican banking system.

Credit card spending rose from 0.59% to 2.38% between 2001 and 2007. 12 million Mexicans had 18 million credit cards (1.5 on average) with an average limit of $1500. This is up from an estimated 6 Million circulating credit cards just ten years ago.

An estimated 6600 credit cards are approved to Mexicans every day, with 40% going to new credit card holders without credit history – mostly issued by foreign owned banks.