Credit Card Blog

The credit crisis has resulted in more conservative lending practices. These days, it’s more difficult to qualify for loans that would have been easily available two years ago. That’s because lenders aren’t willing to take the financial risks they once took.

This trend has also caused many banks and card companies to lower their customers’ credit card limits. The unfortunate trickle-down effect is lower credit scores for card holders.

Credit scores are affected by a person’s debt ratio, which is the amount of debt they carry compared to their available credit. When credit limits go down, debt ratio goes up – and credit scores suffer as a result. Card holders might cease to qualify for loans, or they might be required to pay higher interest rates.

Always stay updated on your card’s terms and conditions, and watch carefully for changes to your credit limit. A credit monitoring program is also a good way to be alerted to sudden changes in your credit score. Equifax is one company that offers low-cost credit monitoring services. A web search for “credit monitoring” will turn up plenty of options as well. A little research and a little vigilance will prevent any unpleasant surprises on your credit report.

The FTC is suing CompuCredit, a company that provides credit cards targeted to individuals with lower credit scores and poor credit histories.  The system CompuCredit uses to determine eligibility for credit is being questioned.  While the company seems to take into consideration most of the normal factors for obtaining credit- like how long you’ve had credit, whether or not you’ve exceeded credit limits and whether you make your payments on time- they also have some strange factors to determine eligibility.

CompuCredit also factors what people buy with their credit cards to determine whether or not to extend credit to people.  Customers who use their credit cards to pay for marriage counselors are denied credit; as are individuals who pay for massage parlors,  billiard halls, or their bar tabs on credit.

It seems credit companies can do whatever they want.  At least the FTC is taking action with a lawsuit against this company for it’s strange approval processes, but I can’t help but wonder how much of this type of “stuff” is factored into our actual credit scores?  If it’s possible for a credit card company to use this information to deny or approve credit, it is probably just as possible for a credit report agency to use such information in the calculation of our credit score or history?

A Calgary man was arrested and faces four years in jail for manufacturing and selling credit card skimming devices. Nicholas Wayne Joehle used his apartment as a base of operations, but did business from as many as ten Internet cafes in the downtown Calgary area. He sold the illegal devices over the Internet for about $5,000 each.

Skimming occurs when someone runs a credit card through a hand-held device that stores the account number, expiration date, and other information. Waiters and retail cashiers have been known to employ this method, quickly swiping a customer’s card when no one is looking. The devices themselves are so small that they can be used subtly. Other skimmers have implanted such devices in gas pump card readers, returning to collect the harvested information at a later time. It’s a fast-growing type of credit card fraud, and no one is immune.

To protect yourself, pay in cash if you feel uneasy about handing your card over to a waiter. Keep an eye on your card at all times. And always monitor your credit card statements and credit score for unauthorized activity. Thieves thrive when their victims do nothing; contact your card company immediately if you see anything suspicious.

More bad news about those high gas prices: they’re not just affecting drivers. Some gas station owners are refusing to take credit cards for fuel purchases. Why? As the price of gas keeps going up, so does the dollar amount that the stores must pay per credit card transaction. These interchange fees mean decreased profits, and some store owners have instituted ‘cash only’ policies.

Gas sellers typically mark up the price of gas by eleven or twelve cents per gallon. Rising interchange fees take away about ten cents per gallon. But stores that stop taking credit cards risk losing their business altogether.

These interchange fees affect other retailers as well, but many small convenience store operations are being hit hard. For example, Mr. Ed’s Chevron in St. Albans, WV, makes about sixty dollars in profit from its monthly gas sales. But after paying out a whopping $500 a month in interchange fees, the manager there has decided that it’s just not worth it to take credit cards.

“It kind of runs hot and cold, but I do know some stations have decided enough’s enough, and it’s cash only,” said Ed Stephens, VP of Englefield Oil Co., whose Duke and Duchess Shoppes are scattered throughout Ohio and West Virginia.

It looks like tough times ahead for gas station owners.

Like millions of us, you’ve probably filled out a credit card application. And when you did, you were probably asked to provide proof of income. Once all the necessary information was in hand, the credit card company probably ran a check to see what shape your credit was in. If everything looked good, you soon received your very own charge card. This is the standard procedure. Right?

Not necessarily. Some shocking statistics from the UK suggest that 82% of all successful credit card applicants in 2007 were never asked to verify the information on their applications. 14% said that they never even answered questions about their income or outgoing bills.

As a result, some applicants overstated their income by as much as 70% in order to qualify for the cards. Many used the cards unwisely, and had to take out additional loans to make their monthly credit card payments. Others simply defaulted; lenders in the UK had to write off £17.3billion of credit card debt last year.

Some responsibility lies with the lenders, of course, but card holders should know their limits and be realistic about their spending habits. Don’t let this happen to you!

Using your credit cards sometimes offers good deals, even if you aren’t counting on the credit card rewards program.  Here are two promotions your travels might let you take advantage of:

Receive $25 off a round trip flight through Southwest when you purchase a Southwest gift card with a value of at least $100.  Purchase the giftcard online with your Visa card before June 30th to qualify (only United States issued Visa cards will qualify).  The $25 discount must be applied on Southwest tickets purchased between July 1 and Aug 30th, and you must purchase your tickets with at least seven days advanced notice of the date of travel.
Go to www.southwest.com/rapidrewards/giftcardvisa.html for more info. 

Get a $25 Visa gift card when you pay for your Marriott Hotel and Resort reservation with your Visa credit card.  Staying on a Friday or Saturday is required, and you must give code “V12″ when booking your hotel stay.  There are some restrictions.  Visit www.marriott.com for more info.

I heard about these deals through Tom Parsons of The Dallas Morning News.

Kids do the darnedest things.

For example, six-year-old Bennett Christiansen of Aurora, Illinois, managed to get his own credit card from Bank of America.

Amy Christiansen, the child’s mother, said that all of her family members had been receiving offers of credit in the mail – including Bennett. For a bit of fun, she allowed Bennett to fill out and send in one of the applications addressed to him.

In a totally unexpected development, Bennett soon received a credit card with his name on it, even though he’d listed his birth date as 2002 and his income as $0. The child’s card carried a $600 credit limit.

Bank of America insists that they do not target or give credit to minors, but Mrs. Christiansen was understandably concerned about the ease with which her child obtained his first credit card. She’d better stay on her toes; Bennett’s 3-year-old sibling has also received offers of credit.

Many marketing campaigns for prepaid credit cards are targeted to the under 18 crowd.  In fact, anyone over 16 can deposit money on a prepaid credit card and then use it like a credit card when shopping or online.  Kids as young as 12 or 13 can often get a prepaid card as well, as long as Mom or Dad sign up for it.

Some advocates claim giving teenagers a prepaid credit card gives the opportunity to teach them responsible money management skills, while critics argue that we’re just showing them how tempting a real credit card can be and setting them up for disaster.

As far as the financial companies are concerned, it’s difficult to make much money on a prepaid credit card since they can’t charge interest on unpaid balances.  They typically charge a sign up fee and then fees whenever a deposit is made to the account- but the amount they earn is minimal compared to a traditional credit card.

Prepaid credit cards are beginning to make their mark in the corporate world, however.  Companies are branding the cards with their logos, and using them as employee incentives since they’re cheaper than checks or merchandise incentives, and sometimes a prepaid card is used in lieu of a paycheck.  The employee’s pay is loaded directly onto a prepaid card each pay period, and the employee can then use the money as they normally would.  (Prepaid credit cards work in ATM’s for cash withdrawals, too).

When a father of a Texas 13-year-old forgot to get his son a birthday present, the boy took matters into his own hands and order an additional card from his dad’s credit card company.  Apparently, if you know the answers to the security questions, anyone can get an additional card sent out in their name.

The teenager took a few buddies out on the town and charged $30,000 on his dad’s credit card account.  They capped off the evening in a motel room, where they ordered two female escorts, at just $1,000 a night (each).  The girls thought their clients appeared “young”, and so instead of their typical job duties, they played “Halo” on the Xbox with the boys. 

The call girls were released without charge, and the boy was sentenced to three years community service and convicted of fraud.  According to an article on Money.co.uk, when asked what the boy aspires to be when he grows up?  A politician, of course.

There have been a number of reports of individuals paying less on their credit card bills (or skipping the payment altogether) – and giving the reason that they need the money to keep gas in their tanks.

The higher gas prices are not only affecting American’s ability to drive to and from their place of employment, but it’s trickling down and affecting just about everything else in our lives, too.  If you are finding yourself skipping a credit card payment to put gas in your car – there’s a real problem!  Not only will you have a late fee on the card, but often the interest rate will be increased due to the missed payment.

Other people are using credit cards to help keep fuel in their vehicles.  Since we’re paying around $4 a gallon for gas, it’s costing us a small fortune to fill up.  When you put that amount on a credit card, week after week, your $4 a gallon ends up costing you even MORE, due to interest and finance fees on the credit card.

As always, using credit cards with rewards programs offers a way to earn something back, but they’re only beneficial if you can pay your balance in full each month.  Now is an important time to cut back on your excessive spending, particularly spending on high interest credit cards you don’t intend to pay in full at the end of the month, because the prices of our necessities are increasing.