Credit Card Blog

The economic crisis and credit crunch have caused many shops to close their doors and auction off their goods. So what becomes of consumers who have credit card accounts with now-defunct merchants? If a store goes out of business, are you still responsible for your credit tab?

Experts say yes, but only if you’ve actually received the merchandise or services you paid for. If you never received your purchase, dispute the charge. Many stores actually issue their credit cards through banks, so take up your case with the appropriate financial institute.

If the store gave you a Visa or MasterCard, you’ll definitely want to pay up. That means your card was issued by a bank, not the defunct store itself. If you fail to pay, your delinquency will be shared with credit reporting agencies, and your credit score will suffer as a result.

Sorry to get your hopes up, but it looks like payment is the best policy, even if a store has gone bankrupt.

On December 18th, 2008, the Federal Reserve passed legislation that has a lot of card issuers crying Uncle. Beginning in mid-2010, double-cycle billing and universal default will be plagues of the past. Interest rates for existing balances will no longer increase. Cardholders will have a reasonable amount of time to make a late payment before they are penalized. Banks insist that these regulations will leave them at a loss, making it harder for the average consumer to find good credit terms. But some consumer groups are criticizing the Fed for playing too nice.

Their beef is with both the timeframe and the content of the reforms. By taking effect in 2010, the legislation permits unfair practices to continue throughout a period when many Americans are facing extreme financial difficulty. Also under fire is the absence of regulation for fees and penalties. These are often very high, and consumer groups want them to be more fitting for the actual expenses incurred by card issuers.

Other suggestions include legislation prohibiting credit card marketing geared at persons under the age of 21. Consumer advocate groups point out that most college students are in debt when they graduate due to student loans, and don’t need the additional debt from aggressively-marketed credit cards.

What do you think? Are the upcoming reforms good enough, or does the credit industry need more regulation than the new laws provide?

It seems that the credit crunch has forced everyone to downsize in some way. Companies are downsizing their payrolls, and many businesses are moving to smaller offices with lower rent. If you’re preparing to downsize the number of credit cards you carry in your wallet, think twice. You might be setting yourself up to downsize your credit score.

Your FICO score, which should be 700+ for loans at prime rates, takes into account how much available credit you have versus how much money you owe. When you cancel a credit card (or if one gets canceled by the lender due to inactivity), you no longer have as much available credit as before. As a result, your credit score can fall. To prevent this from happening to you, consider keeping your cards active by making a small purchase every six months and paying the balance in full.

You are the final authority on whether canceling a credit card is the right decision. If you need a very high credit score because you want to take out a loan or buy a house in the coming years, then you might need the added boost of lots of available credit. But if you’re not looking to borrow, or if the extra cards are too much of a spending temptation, cancel them to keep yourself out of debt.

In a surprising turn of events, it’s now being reported that many credit card issuers have gone soft on customers with bad debts. Forgiveness isn’t a concept you normally link with debt collectors, but banks have started to give these agents a lot of leeway when it comes to settling old debts.

The result? Customers might be able to pay off their defaulted loans for pennies on the dollar. Bank of America lowered balances and interest rates for more than 700,000 delinquent customers in 2008.

Why the sudden rash of leniency? Don’t worry; lenders still have their own best interests at heart. They know that millions of Americans are weathering tough financial times, and they’re preparing for a tidal wave of defaults in early 2009. With such a bleak time ahead, lenders want to recover what money they can – even at reduced costs.

If you’re behind on your payments or have a credit card balance that was written off as bad debt, talk to your lender or a collection agent to see if your own debt can be resolved at a discount.

Woolworths department stores in the UK have fallen prey to the global credit crisis. Once a popular chain of 815 discount department stores, Woolworths is slated to close its final 200 locations at the close of business on Tuesday. What happened?

Many things have been blamed for the downfall of Woolworths, including poor senior management and failure to modernize. But in the end, the credit crunch was the straw that broke the retailer’s back. Woolworths had been in trouble for some time, but its shares plummeted 92% due to the credit crisis. Without available credit, and with banks pushing for repayment, Woolworths was simply out of luck.

The chain’s demise isn’t the first, nor will it be the last. Try going out for dinner at your local Bennigan’s or buying some gadgets at Sharper Image. They’re simply not there anymore. Until banks can lend with confidence, who knows which chain will be the next victim?

Sadly, Woolworths, or “Woolies” as it’s affectionately known in the UK, would have turned 100 this year. Thanks to the credit crunch, we won’t be wishing the retailer a happy anniversary. Instead, we’re wishing it a fond farewell.

How many of us have been victims of Identity Theft and fraud with credit card accounts?  The latest Javelin Strategy & Research report for 2007 stated that there were over 8 million victims.  There is a downward trend in these numbers and one of the reasons is that technology is becoming more and more sophisticated in helping prevent Identity Theft and fraud.  Also, consumers are becoming more aware of the problem, and are protecting themselves and their identity.

A recent announcement that we could see credit cards in the future which feature a keypad and security number in a window which changes regularly will further help prevent Identity Theft and fraud instances.  The technology has been developed and is being rolled out in trial form in the UK within a year.

What this means is that it will be safer to use credit cards online to make purchases.  Now, when a potential thief obtains a credit card number, it will be completely useless without the attached keypad and changing security number contained therein.

While this is good news, you still must remain on your guard at all times for possible fraudulent use of your identity and credit information.  Even the most simple of steps can help.  Changing your password for your website access on a regular basis (every month or so).  Ask for a new card with a new number regularly.  Depending on your comfort level, once every six months is not out of line.  Protect your social security number from prying eyes.
All of this is encapsulated in a strategy of becoming a ‘moving target.’  It is much more difficult for you to be a victim if you change your access via the methods above.  Thieves will simply move on to an easier target when they realize that it will become a chore in order steal your identity.

The use of credit cards is not a bad thing as long as individual consumers can learn to control their spending and maintain their accounts properly.  But, the news that credit card usage among seniors is on the increase is disturbing on a number of fronts.

First, senior citizens are supposed to be one of the most solvent groups in our nation.  To hear about the increased use of credit cards and the carrying of that debt is alarming.  But not just the increase, but also how they are using them: to pay for medical procedures, medication and other essential bills for survival.  Is this not yet another sign of the financial times in which we live?

Next, this exposes the concerns about personal finances and the desperation that Americans have come to in order to fund the payment of these types of bills with high-interest credit.  In other words, the options are running out.

If you find yourself in this situation, make caution your friend as you move into this area.  Make sure you understand completely the ramifications of using credit in this manner.  Make sure you have a plan for making payments on time, or paying off the debt as soon as possible.   Look for ways to liquidate assets first before loading up on credit card debt.
Work with your creditors to make arrangements to pay off medical and other debts over time, rather than placing it onto credit cards.
If credit cards are the only way out, then shop around to get the best rates and deals available.  There is a lot of competition among credit card companies and you can use that to work in your favor.

Do you ever get nervous when a store clerk asks you to run your card a second time through the card reader?  How you really know that the first swipe was not successful?  Even worse, most of us do not know when billing errors have occurred until we get our statements in the mail or look at them online.

Macy’s recently experienced a ‘software glitch’ that caused them to double-bill their customers who used debit cards during a two-hour window in December 2008 right before Christmas.  While they have taken care of the issue and cardholders were not penalized for the fees incurred because of this, it underscores the fact that credit card customers must be ever vigilant in not only the use of their cards, but also in watching their account activity for suspicious transactions and charges.

One card which offers instant email generation of account transactions is Paypal.  If you hold a debit card or credit card through them, you will get an instant email upon its use which includes the location where used and amount charged.  That is a very nice feature, indeed.  Other companies might offer the same option through a text message to your cell phone.  It is a great way to keep in touch with your account activity.  Being able to monitor charges going onto your account instantly is of great benefit and gives the cardholder a certain amount of peace of mind.
Now, more than ever, credit card customers have to be aware of, and on the watch for suspicious activity including double-billing.

You would think that college administrations would be advocates and protectors of their students to whom they have been entrusted to teach and prepare for the real world.  Think again.
We are learning that some universities are actually ‘in bed’ with credit card companies and banks in order to offer credit cards and accounts to their student bodies.  And, they stand to profit handsomely from this arrangement.  One Big Ten school has a seven year, $8.4 million contract that gives a bank direct access to student’s names, addresses and use of the college logo all for the purpose of attracting and signing up students to obtain their credit cards.  The school benefits by the number of students who sign up.  Not only that, the university stands to realize more income if the students carry a balance on the cards.

If this isn’t shady marketing, then there is no such thing.  The very fact that the university would give up the listing of student’s names and addresses is alarm enough.  Universities are afforded a certain amount of trust in their dealings with their young people, but apparently it no longer is important to them.

The lesson here is for parents and guardians of vulnerable students to be on the look-out for these parasitical acts and alert them to the tactics being used.  Students will need to learn at an even earlier age that credit cards are to be taken seriously and they need to understand the risks inherent in owning one.  Many parents used to think that high-school education should not include training on personal finance issues.  Now, it no longer seems like such a far-fetched idea.