Credit Card Blog

Even in difficult economic times, it’s not impossible to stay out of debt this holiday season. Use a few simple tips to keep yourself ahead of the game:

• Even though times are tough, remember to pay yourself first. This is always a good idea and in today’s economy, it is critical.It isn’t easy, but put money in savings and pay all your bills before you set aside money for holiday gifts.

• Next, develop a budget based on what you have not what you want. Buy only what you can actually afford. You may have a wish list- and certainly your children will- but this year, everyone may need to settle for a few less packages under the tree

• Don’t purchase the first thing you find- shop around. Sales will likely be big this year to encourage retail spending. Comparison-shop, save your receipts and try to find the best deal possible.

• Remember to keep your checkbook balanced. It’s very easy to just run and shop, but this year it is even more important than ever to keep very careful records. Don’t fall behind when it comes to balancing that checkbook. If you do, the next thing you know, you’re going to be looking at red ink. No one wants to increase their expenses with nasty overdraft fees that multiply like snowflakes in a blizzard.

• Finally, don’t open a brand-new credit card just to get the 10% discount. It may sound wonderful right now, but sooner or later, that extra credit card could cost you a lot more than you think. Do you really want to spend the New Year paying off yet another credit card? Do yourself a favor and pass up that offer- it most definitely will come again.

Congress is hard at work trying to find a way to restructure the way credit cards operate. They may have good intentions, but keep your eyes open, because they may actually cause more harm than good.

We all know the government is bailing out big-time banks and now, perhaps, the auto makers. Jumping on the bandwagon, some representatives from the retail industry came up with a great idea. Why not lower the disease that retailers pay to credit card companies when people buy merchandise on credit? The theory as this savings would be passed on to the consumer. Think again.

The fee for using a credit card is usually less than 2%. It provides for the electronic network that allows major credit cards to be accepted. Retailers get their share of the pie right off the bat, while the credit card company takes the risk if the customer doesn’t pay the bill. However, small merchants are struggling and some members of Congress feel that reducing the fees will help the average consumer.

Keep an eye on the Conyers-Cannon bill (HR 5546). This bill would waive antitrust regulations for as many as 15 million retail companies and allow them to force banks and credit card companies to provide basically free credit. The Justice Department doesn’t like the idea, because they believe antitrust laws make sure that markets are fair and competitive and protect consumers. That won’t stop Congress, however, because some members are espousing a theory that by reducing expenses for retailers, it will ultimately lower prices for consumers.

It won’t work. Why? The authors of the bill did not include amendments that that would make sure the savings are passed on to consumers. Instead, it would only increase the earnings of the huge corporations, while all the little guys would once again be left out in the cold.

If Conyers Cannon becomes law, credit card companies will lose profit, in turn, they will as restrict credit even more smaller providers might even drop out of the market altogether. And it will leave merchants in struggling communities unable to offer credit cards to their customers. Once again, only the big guys will win credit card companies will most likely recoup their losses simply by raising interest rates on cardholders even higher than they already have

The last thing anyone can afford is Congress to continue to try and solve the economic crisis by bailing out the rich and ignoring the poor.

This year’s tight economy could make the holiday season more difficult for many shoppers. Typically at Christmas time you see credit cards come flying out of wallets at every possible opportunity. People, don’t worry about tomorrow, they just spend, spend, spend, in order to have a fabulous Christmas for friends and family

This year, however, we may see things a little differently. Many consumers are deciding to shop only with cash this year. To make it even more difficult banks are limiting credit card offers, approving fewer applications and reducing credit lines for current customers.

Typically, retailers make a fortune at Christmastime. However, with jobs declining all across the country the stock market bouncing around, but typically falling and global fears about this economic crisis, many people are friend afraid to use their credit cards this year.

There may be an answer to your holiday shopping needs this year, without resorting to your credit cards. Layaway, the process of setting aside your purchases with a small down payment and then making regular payments over a period of several weeks before you take your purchases home is making a comeback. Many big retailers such as Sears, Kmart, T.J. Maxx and Burlington Coat Factory still offer layaway and, in fact, Kmart company spokeswoman, Caroline Goldberg, says Kmart’s layaway request has increased this year.

If you do use your credit cards this holiday season, be careful, especially with store brand credit cards. They can carry a pretty hefty interest-rate and there may not be many new credit card accounts issued. This year, many store owners are counting on current cardholders to make it a Merry Christmas for them

Think the mortgage crisis doesn’t affect you if you don’t have current problems with your home loan? Think again.

This year, you can expect the fallout from the mortgage crisis to affect your Christmas shopping if you typically use credit cards to handle those expenses.

Although credit card companies are closing accounts left and right, cutting credit lines and raising interest rates, it may not be enough. Even though credit card debt is only a fraction of the mortgage problem, major card issuers like J.P. Morgan, Chase & Co., Citigroup and others cannot afford more losses. With the unemployment rate heading towards 8%, lenders are fearful that they will not be repaid when extending credit.

According to the US Federal Reserve reports, 60% of American banks have tightened up their credit card standards since July. Even those continual credit card offers sent in the mail are falling to the lowest point in over three years. The Wall Street Journal reports that many credit card holders will see an interest increase by an average of three percentage points and the increase will affect millions of customers.

Lenders are also being extremely careful in opening new accounts to avoid the subprime crisis from beginning all over again. Thanks to tightening standards, especially in areas like California and Florida who were hardest hit by the housing crisis, residents in these states may feel the biggest fallout.

We’ve all been there: exiting a department store, juggling gifts as we brave the cold, preparing to step out into a crowded parking lot, only to be greeted by a Salvation Army volunteer. Bell ringing, kettle gleaming, the volunteer smiles warmly. We think about donating a few dollars, but soon realize that we’ve got no cash on hand. It’s a common dilemma in our increasingly cashless society.

Now the Salvation Army has come up with their own solution. Expanding on an idea that’s already in play in Charlotte, NC, and Phoenix, AZ, the charity will be experimenting with cashless kettles in 12 new locations throughout North Texas. The organization says that by adding card-swiping technology to its storefront kettles, it took away the frequent excuse of not having cash on hand. Another benefit of this system is the paper trail it creates. People who make credit card donations get a printed receipt proving that they contributed to the charity. These receipts can be collected and used for tax deduction purposes. 

Of course, anyone from any state can use their credit card to donate to the Salvation Army by giving through the organization’s official web site. You can also set up your own online red kettle to raise money for those in need.

“Citigroup is reneging on a promise it made to tens of millions of credit card customers in good times.” If that lead-in to this New York Times article sounds a bit harsh, that’s because it is.

Citigroup once vowed before Congress that it wouldn’t raise rates until an account expired. That was in the early part of 2007. Now it’s late in 2008, and the credit crisis has caused Citigroup to go back on its promise, earning them a harsh tongue-lashing from critics.

If you’re a Citi cardholder who hasn’t had a rate hike in the past two years, you can bet that one’s coming. Customers will see their interest rates jump 3%, putting some of them over the 20% interest mark. It might be a good time to shop around for a new credit card.

On the other hand, the economic climate is making many companies do things they deem necessary to retain profitability. American Express has hiked rates and laid off thousands of employees, and some financial institutions have folded altogether. Still, Citi is finding very little sympathy.

Representative Carolyn Maloney of New York says that she understands why Citi is doing this, but she doesn’t like it. Says Maloney, “Apparently a deal is only a deal when it doesn’t cost the financial institution too much money.” Ouch. 

Have you received a letter from your credit card company? Sometimes we toss these out, thinking they’re just advertisements for card services or prescreened offers of credit. But you should open everything your credit card company sends you these days. It might have important information about your account.

Times are hard, and even banks are wary of lending to one another. With little available credit and record levels of default, many credit card issuers are trying to do whatever they can to recoup their losses.

Many times, the letters they send you will contain information about your credit limit. Namely, it might decrease significantly and with little warning. You don’t even have to be a delinquent borrower to experience this effect; if you’re considered a credit risk for any reason, your limit could plummet – and take your credit score down a few notches as well.

Letters from your credit card issuer might also contain amendments and changes to your cardholder’s agreement. Credit card companies reserve the right to make changes when they deem necessary. For the convenience of carrying a credit card, we have to agree to those terms. Still, it can be frustrating when your fees and interest get hiked for no good reason.

Old-fashioned negotiation is one way you can fight back against unfair changes. Talk to a supervisor and ask them to work with you. (Note: this only works if you’ve been a good customer.) You can also keep a variety of cards, and transfer your balance to more favorable ones when terms get tough.

Will you be shopping online this holiday season? How do you plan to pay for your purchases? Many shoppers don’t think it matters, but credit cards and debit cards have very different levels of buyer protection.

When you pay for online purchases with credit cards, you maintain your rights to dispute charges and refuse making payments while a charge is being investigated. Additionally, by reporting suspicious charges to your card issuer, you can only be held accountable for the first $50 in unauthorized charges made to your card.

Debit cards give you a bit of protection, but with limits. For example, you could be held accountable for the full amount of unauthorized charges made to your debit card unless you report the charges to your bank within 48 hours. Also, the money will be removed from your bank account, leaving you strapped for cash in the middle of the holiday season.

Major online retailers and auction sites like Amazon and Ebay are frequent targets for hackers. If you’d rather not enter your card information directly on a web site, consider using a payment processor like Google Checkout, or a third-party service like Bill Me Later. (Just be sure to pay off your deferred balance on time, or Bill Me Later will tack on some hefty interest charges.)

It’s been a busy and somewhat dismal season for American Express. After reporting a 24% drop in quarterly profits, AmEx announced that it would lay off 7,000 employees. That’s not exactly surprising, considering the company is trying to cut costs wherever it can to survive the drawn-out economic downturn. AmEx also stated that it would reduce costs by spending less on consultants, business development, travel, entertainment, and rewards programs. The company seems determined to make ends meet despite experts’ speculation that it’s not strong enough to stay the course.

Perhaps the most surprising move by American Express was the decision to become a bank. Chief Executive Kenneth Chenault said of the maneuver: “Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”

The Federal Reserve gave its blessing for AmEx to shift from credit card issuer to bank holding company. The move will give AmEx more stable funding in the form of deposits, as well as greater access to government relief, though representatives did not say whether or not American Express would be taking part in the $700 billion bailout package. Goldman Sachs and Morgan Stanley also made the switch following the Lehman Brothers bankruptcy.

If you can’t pull money from your home equity, and you can’t get it from the stock market – what’s left?

Credit cards, of course.

Consumers have always relied on credit cards to keep themselves afloat during difficult times and right now, the times are showing that this consumer spending resource is pretty much spent.

Risky customers and in some cases, even prime borrowers, have had their credit limits slashed.  Many customers are unable to open new lines of credit. The credit card companies are even reducing their marketing efforts – have you noticed less credit card offers in the mail? According to CBS News, HSBC  sent out 54% less direct mail advertisements and Citibank has sent out 45% less.

For years (decades, even) credit card issuers were never overly consumed with risk.  It didn’t seem they limited the amount of money they would lend or who they would lend too with any strict rules.  But now, as reports come in that the private sector is not willing to invest or lend money to the credit card issuers, it appears our love-hate relationship with credit cards is about to just be “hate”.

From Seeking Alpha: “For the first time in 14 years, no one has been willing to buy bonds backed by credit card loans….You see, credit card issuers like Bank of America (NYSE:BAC), JP Morgan Chase (NYSE:JPM), and American Express (NYSE:AXP) lend money on credit cards. Then they bundle those loans up and sell them off to institutional investors like insurance companies, hedge funds, and mutual funds looking for income. That way they can lend more and more without taking on much of the consumer debt or the risk themselves.”

Now that investors are no longer willing to take on the risk of financing credit cards, and credit card issuers aren’t willing to take on more risk – it seems consumers are about to experience even less access to credit.