Credit Card Blog

As credit card companies reduce consumer spending limits and people become more conscious of how much they’re spending on credit cards, same-as-cash installment plans and online payment alternatives gain in popularity.  Some of the more popular online payment method alternatives to credit include eBillme, Bill Me Later, PayPal and ShopText

eBillme lets customers make purchases using their banking account without entering thei rbank card or checking account number on the store’s website.   The company promotes itself as a secure payment option that does not require a credit card.

Bill Me Later was purchased by eBay for $945 million in October.  It’s an online payment option offered by about 1,000 retailers now, and more on the way.  Bill Me Later will require the name, address, birthday and last four digit of a shoppers social security at checkout, and then authorizes or denies credit within seconds. If approved for the “credit” the consumer is sent a bill, which is due on a certain date or can be paid with multiple payments, often in a same-as-cash (no interest) period.

Unlike a credit card, which offers a specific line of credit, “we make decisions based on [a single] transaction,” said Bill Me Later spokeswoman Sara Parker.  Using Bill Me Later requires good credit, but helps people who are trying to be disciplined with their credit card use.

ShopText is looking to give consumers a way to order the things they see on TV or online by texting on their mobile phones.

PayPal is one of the leading online payment systems that allows people to choose to pay from their bank accounts or credit card without revealing their financial information to the retailers.  Paypal also offers credit to qualified users and is tied in to the user’s Paypal account.

I think we can expect to see more same-as-cash or online installment plan methods of paying that don’t require the use of a credit card in the future.

Well, I guess the saying is “good things come to those who wait”, and apparently consumers can expect good things regarding new legislation in the credit card industry in the year 2010.

After more than 60,000 people wrote into the feds demanding changes,  the biggest changes to hit the credit card industry were put in motion and will take effect in July 2010.   Some of the changes include:

• blocking card companies from applying higher interest rates on existing balances.
• Late fees could not be charged without giving consumers at least 21 days to make a payment.
• Banning of two-cycle billing
• Any payment consumers make beyond the minimum must be applied to the balance with the highest interest rate or spread proportionally to all balances.

While these changes are good news for existing cardholders and will prevent the mysterious charges that sometimes occur on existing credit card statements, it will actually serve to raise the rates most new credit cardholders receive when applying for new credit.  Consumers will probably not notice as many 0% offers in their mailboxes because the credit card industry won’t be able to afford to offer the lower rates (since it can’t increase rates on existing customers!)

According to a study  by law firm Morrison & Foerster, these new changes in the credit card industry may reduce the credit card industry revenues by $12 billion per year.

With the Fed poised to announce stringent new credit card industry laws tomorrow, the future of credit cards might be changing. Banks are waiting to see how tough the new legislation will be. So far, it sounds like a good deal for consumers, but not for card companies.

Most of the controversy surrounding the new laws centers on one rule: that credit card companies cannot raise interest rates on existing balances as long as the card holder doesn’t fall 30 days behind on their payments. Insiders speculate that this rule alone will cost the industry $12 billion per year.

Consumers, who have long felt that banks use unfair practices in regard to credit cards, wrote in to the Federal Reserve when the legislation was still in its planning stages. More than 60,000 people told the Fed how they felt about the industry – and most of them demanded change.

How will such a change affect future card holders? Edward Yingling, chief executive of the American Bankers Association, says, “[The new legislation] will in some fundamental ways change the product.” That is, new card holders probably won’t see the low-interest teaser rates that were so common before. Rates in general will probably go up for new customers as the credit industry tries to recoup some of its losses.

The market is changing, and we’ll just have to wait and see how much of it changes for the better.

Bank of America announced last week that credit card executive Bruce Hammonds will retire at the end of December. Hammonds has worked in financial services for four decades, and was one of the original founders of credit giant MBNA. When MNBA was acquired by Bank of America in 2006, Hammonds became head of the bank’s global card services.

What does Hammonds’ retirement mean for Bank of America? CEO Ken Lewis said of Hammonds, “We have all marveled at his coolness under fire, his incredible knowledge of the credit card industry and his quiet but effective way of communicating with associates, customers and investors.”

Maybe Bank of America could learn a few things from Hammonds. Namely, it’s not a good idea to keep offering easy credit in today’s economic climate, especially with record losses looming over the credit industry and more losses predicted to follow. Still, Bank of America has been reportedly offering up to $50,000 in unsecured credit lines with an introductory 0% APR.

A spokeswoman from Bank of America stated, “[We] believe that Bank of America is well positioned to work through this current economic cycle.” For the sake of their customers, let’s hope so.

The text message comes from mofcusrv.org, and purports to be from Mobil Oil Federal Credit Union. “You need to verify your Mobil Oil FCU account,” it reads. “Unusual activity.” Then it lists a toll-free number where you can call in to verify your Mobil credit card number, PIN, and expiration date. Problem is, once you’ve given this sensitive information to the “customer service rep”, they hang up. They’ve gotten all the information they were fishing for, and now they’re done with you.

This is the latest variation of an old scam that has recently been reported in South Texas. It seems that the scammers are texting massive amounts of people, hoping to find a few that are actually members of the Mobil FCU. Once they receive the information, they duck and run.

Whenever you receive a phone call, e-mail, or text message of this nature, it’s probably a scam. Reputable financial institutions will contact you through the mail and won’t expect you to give out your information over the phone. If the call sounds legitimate but you’re just not sure, call the business’s official phone number yourself to ask about unusual account activity. Chances are, this will be the first they’ve heard of it.

Joseph Saunders, CEO of Visa, Inc., the biggest credit card network in the world, lost his credit cards on Thursday. Maybe it was the jet lag; he was expected to make a presentation in New York after traveling cross-country from San Francisco. Upon arriving at the airport, Saunders noticed that something was missing.

“I’m supposed to start off, and say that I’m very happy to be here, and I guess I am. But it’s 4:15 in the morning as far as I’m concerned, and I lost my wallet on the way here,” Saunders said. “It’s rather embarrassing when somebody steals my credit cards.” The quip was met with laughter.

Neither Saunders nor Visa cared to provide further details. But what do we really expect them to say? After all, this could happen to anyone.

If your own credit cards turn up missing, the Federal Trade Commission advises you to report the loss as soon as possible. If you report the lost cards before someone uses them to make fraudulent purchases, you won’t be held accountable for any amount. If you make the report after someone has used the card to make purchases, you could be accountable for $50 per credit card. After you’ve made the report, continue to check your statements carefully for unauthorized charges.

In a report gathered by Symantec’s Security Technology and Response (STAR) organization, stolen credit card details and bank accounts  are among the most advertised goods in the ”underground” economy online.

This report reveals that the potential value of stolen goods advertised on the Web is estimated to be more than $276 million – and this is just between July 2007 to June 2008.

For some criminals,  stolen credit card numbers are purchased for as little as $0.10 to $25 per card!  Symantic reports the average stolen credit card limit advertised online is more than $4,000 though.  In addition to credit card numbers being sold in this underground economy, stolen bank account information sells for between $10 and $1,000 and the average advertised stolen bank account balance is nearly $40,000! 

In the last several months, The Federal Reserve has received more than 62,000 comments on the upcoming rules designed to prohibit certain unfair credit card practices and overdrafts, mostly from consumers who support the rules. It expects to finalize them before Jan. 1st, 2009. 

The proposed changes to credit card rules would prohibit banks from increasing the rate on existing credit card balances (except under limited circumstances).  Right now, most credit card terms and agreements state that the issuer can increase the interest rates on existing and future purchases any time they want. 

Credit card issuers seem to be responding to the new rules by increasing consumer credit card rates now, before the new rules go into effect.  Individuals who don’t make late payments but carry a balance from month to month are seeing increases to their credit card interest rates when in the past, rate hikes were typically only given out to individuals who made a late payment or two.

Banks do have to notify consumers if they plan to increase interest rates, so keep your eye out for notices that warn you of the rate hike.  If you get a notice – call the bank and ask to lower the rate.  You will be successful about 50% of the time, because it is cheaper for a bank to keep an existing customer than it is to find new ones.

Credit card fraud is alive and well, and the ill-gotten cards are being used to fund terrorists. Other cards, sold for as little as a dime apiece, give buyers access to credit limits of $4,000 or more. That is, $4,000 of other people’s money.

Symantec just released a report that found most of the Internet’s illegal sales involve stolen credit card information. Second place went to stolen bank accounts, with an average balance of $40,000 apiece. The credit cards are often sold in bulk at deep discounts, while the bank accounts can sell for $1,000 or more.

Skimming, identity theft, and cloning of credit cards could have played a part in the heartbreaking attacks on Mumbai. Terrorists are known to use credit card fraud to fund their operations, according to Jeremy Simon, a contributing reporter to US News and World Report. Credit cards were found in the backpack of one of the terrorists that attacked Mumbai.

When we get careless with our personal and financial information, we might get nervous about someone making unauthorized purchases or opening a line of credit in our name. But we seldom think of how our information could be used to harm other people. Please do your best to keep your information safeguarded, for yourself and all the rest of us.

Credit agency TransUnion released some discouraging figures on Wednesday, proving that consumer debt and delinquency are still on the rise. That’s not news to anyone who’s been reading the headlines lately, but TransUnion also released some interesting facts about which states are the most delinquent, and which are the most – and least – indebted.

According to TransUnion Trend Data, a sampling of 27 million consumer records throughout the nation, Nevada residents are the most delinquent in all the fifty states, followed by Florida. The relatively high rate of credit card delinquency in those states (1.79 and 1.45 percent, respectively) is tied to the housing and mortgage crisis. Both states suffered from the fallout. On the other end of the spectrum, consumers from Vermont and North Dakota were the least likely to be delinquent on their credit card payments.

Which state’s citizens are the most indebted? Alaska, with an average credit card debt load of $2,486. Tennessee and Alabama round out the top three. People from Iowa and the Dakotas carried the least amount of credit card debt.

As a country, we’re not faring so well. The total average credit card debt is up 1.4 percent from the previous quarter, and 7.7 percent from a year ago. Ezra Becker, principal consultant in TransUnion’s financial services group, finds it remarkable that the demand for credit cards is higher than the available supply. Experts blame the recession and the fact that many people are suddenly finding themselves unemployed and with fewer resources available. In response, they turn to credit cards to make ends meet.

The figures from this study pertain to the third quarter of 2008, which ended September 30th.