Credit Card Blog

Have you ever been to a restaurant, deli, or store and noticed a sign stating a “Minimum Purchase for Credit Card” by the register?  Some businesses wish to set a minimum dollar amount for anyone using credit to pay for purchases.  Both Visa and Mastercard forbid this practice to companies who accept their credit cards as payments.

It’s also not legal to charge an additional tax or fee to customers using credit cards (which vendors like to do in order to help pay for their own fees for processing credit cards).  Laws allow venders to give a discount to customers who pay with cash, but both  Visa and Mastercard prohibit adding surcharges for use of their cards.  American Express discourages it. American Express does prohibit discrimination of their own card in establishments that accept all credit cards, though, in that the merchant can’t waive a “minimum purchase” for Visa or Mastercard but turn around and charge one to customers who want to use American Express.

The Michigan Daily reported about these practices in October, Minimum Injustice.

If you mention to the manager that the practice of requiring a minimum payment to use a credit card is illegal, chances are they’ll look into it and remove their sign.  If not, you may want to report them to ensure consumers are not being unfairly charged, to the appropriate issuer:

Visa USA
Consumer Relations
P.O. Box 8999
San Francisco, CA 94128

MasterCard International
Public Relations
2000 Purchase Street
Purchase, NY 10577

American Express
Customer Service
PO Box 297812
Ft. Lauderdale, Fl 33329-7812
1-800-297-1234 (U.S.) 336-393-1111
(collect) 8:00 a.m. to 12:00 a.m., EST

United Airlines flyers, take note: the era of the “cashless cabin” has arrived. Beginning March 23rd, United will no longer accept cash for onboard purchases. This move has paved the way for other airlines who will soon require plastic for purchases made during flights.

The arrival of a cashless system has been a long time coming. United said that it has tested this system over the past year, and has received a positive response from customers.

This change takes place soon after United announced that it will launch a new credit card with MBNA. United wants customers to use the credit card for onboard purchases so that they can take advantage of competitive interest rates and reward points.

Credit cards are a good finance option for travelers. Unlike cash purchases, credit card transactions offer fraud protection. They also protect consumers from merchants who don’t deliver the goods they promised.

It looks like the idea of a cashless cabin is taking hold; Southwest and Alaska Airlines have announced that they will soon follow suit. If you’re preparing to fly, brings your cards along for safe and convenient purchase power.

It seems like everyone is trying to manage their financial risk these days. American Express is taking a novel approach to risk management by paying cardholders $300 if they pay off their balance and close their account by April 30th, 2009.

It might seem counterintuitive for a business to pay customers to go away. But with many credit card companies facing record losses, risk reduction is a top priority.

American Express is targeting this new offer at customers who carry balances on multiple cards. These days, the more balances a customer has, the more risky they appear to lenders, including card issuers. The more cards customers have in their wallets, the more likely they are to default on one or more as the economy worsens.

If you’re an American Express card holder, be sure to pay attention to all communications you receive from the card company. You might be offered the chance to reduce your credit card debt and pocket some cash.

Keep in mind, though, that closing a line of credit will impact your credit score in a negative way. For the best results, pay off your credit card, keep the account open, and let AMEX keep their $300.

Be careful how you use your credit cards. Any slight change in the types of purchases you pay for using a credit card can trigger credit card monitoring systems that result in a higher interest rate – or the opportunity to close your account.

Apparently, certain use is triggering credit card companies to decide you are higher risk. If you used to go to upscale restaurants and pay with credit card, and now you frequent lower-priced restaurants – you’ll be flagged. You might get a notice in the mail that you’re a risky customer to the credit card company due to your need to reduce your expenses.

Paying for discount store items on credit or calling your credit card company to request a lower interest rate are also potential triggers that show signs of “risk” for credit card lenders.

Banks are experiencing record numbers of defaults on credit cards and are desperately looking for ways to minimize their own risks – and even if you have great credit and make all of your payments on time, you could be affected.

They come out of the woodwork at the same time every year. Tax season is open season on taxpayers everywhere. That’s because scammers will stop at nothing to trick you into divulging your personal information.

The scams usually happen over e-mail. The scammers pretend to be from the IRS. The reason for their communication, they claim, is to get in touch with you regarding money owed to you by the government. This money could be in the form of unclaimed tax returns or stimulus checks.

Don’t fall for it. Once you give your Social Security Number to these crooks, they’ll be able to swipe your identity and use it to apply for credit cards, get fake IDs, and hijack your bank accounts. Some victims of identity theft don’t even realize a crime has occurred until their credit is ruined. It’s much easier to prevent ID theft than to clean up the mess afterward.

The old trick of sending out phony e-mails to harvest personal information is called ‘phishing’. Never follow links contained in your e-mails. They might take you to an incredibly legitimate-looking web site. But even the web site is a clever fake, designed solely to record your personal details.

The IRS will never contact you by e-mail. They do their business through regular mail. If you do receive a phishing e-mail, forward it to phishing@irs.gov.

Store credit cards, also known as private label credit cards, have long been an option for cardholders who had trouble qualifying for general credit cards. Even with their lower credit limits and higher interest rates, private label cards remained popular for shoppers who frequented specific stores.

Now store credit cards are facing a higher percentage of charge-offs and delinquencies than any other sector of the credit card industry. G.E., a multi-billion dollar private label card issuer for Wal-Mart, Lowe’s, and others, put its card business up for sale in December of 2007. Nine months later, with no buyer in sight, G.E. gave up its sales effort.

This trend has led to a downward spiral between private label credit cards and retail sales. Fewer people shop with their store credit cards, so retail sales decline. As sales decline, less credit is made available to customers. The crisis perpetuates itself.

Why are we seeing such dismal numbers for private label cards? Consumers, many of them out of a job and forced to choose which monthly bills to pay, often neglect their credit card payments in favor of necessities like food and shelter. Also, consumer spending as a whole has slowed down. People simply don’t want to take on more debt in this economic climate unless they have to.

Even if you pay your credit card bills on time that doesn’t exclude you from interest rate increases. This is one of the blights on the credit card industry. And frankly one over which you have no control. It’s not a good feeling to be penalized along with other people who do not pay their bills in a timely fashion.

Changes in Rates. While the prime rate has decreased from 6% last February to 3.25% most credit card rates have not followed suit and have not been lowered as well. This is especially troubling in these economic times when credit card holders are looking for ways to get some relief.  In fact, according to numerous blog posts and consumer complaints, as well as reports by big media – most people are experiencing interest rate increases regardless of how they pay their bills!

Floating costs. Banks have experienced excessive cost floating with the varying economic cycles. They claimed that they had to be able to make rate changes in order to keep credit flowing to consumers, but most people find it impossible to obtain credit.

Overall increases. The danger the credit card companies face in increasing rates is that borrows who are already struggling with payments may turn to defaulting on their loans. Surprise rate increases across a broad contingent of cardholders can break family budgets.

This push-pull situation between cardholders and credit card companies is not easily solved in this economic climate in which we find ourselves. For the consumer, the best advice is to continue the search for better credit card offers and by being responsible through paying down your own credit card debt. You are the only one who is going to be able to improve your situation and make your financial picture more secure.

It is true: a high school aged child can obtain a credit card, and they do not have to be 18 years of age. This truth should make all parents stand up and take notice that credit card companies are actively pursuing their children as customers. Once children are hooked on credit cards it makes it easy for them to fall prey to them as adults as well.

Card Usage is Widespread. One-third of all juniors and seniors have credit cards and are actively using them. One of the most concerning parts of this is the privacy issue. Emergency medical treatment can now be kept from a parent simply with the use of a card. A traffic ticket which is paid with a credit card can be concealed from a parent. These are alarming and concerning issues for any parent.

Minors are Exempt from Forcibly Paying the Debt. Credit card companies cannot force a minor to pay credit card debt. While this law exists for the protection of minors it sends the wrong message about responsibility.

Children should be educated early. With these practices in place it becomes more important than ever to teach children about credit and how it is used and how it can be misused as well. A little bit of education now can prevent headaches in the future. Especially as students enter college where marketing to college students has become a favorite pastime of credit card companies along with heavy involvement from universities.

Help prevent problems in the future by training your children in the proper use of credit so that when they become adults they will be able to handle credit wisely.

Beginning February 14th, consumers will no longer be able to access their Experian credit scores or credit reports through the Fair Isaac Corporation (FICO). This is a move which surprised some, but which others insist is the logical result of bad blood that has been brewing between FICO and Experian for some time.

The FICO credit model is the model most widely used by lenders to determine if a consumer is credit-worthy. Experian will no longer distribute its FICO credit scores to consumers or other agencies. It will continue to distribute them to lenders, leaving consumers in the dark with no access to their Experian score. (Experian will supply a proprietary credit score to consumers, but it’s not the one lenders use to make credit decisions.)

In 2006, FICO filed a lawsuit against all three of the major credit bureaus, accusing them of anti-competitive practices. The suit was eventually dropped against Experian, but there is some speculation that the lawsuit contributed to the current parting of ways.

Consumers can still visit myfico.com to receive their TransUnion and Equifax credit scores and reports.

If you are trying to pay off a credit card, here is a method that you can adopt which will pay the balance off much quicker while avoiding excessive interest charges.

High Interest, Long Term. If you have a balance of $5,000.00 on a credit card with 17% interest and a 3% minimum payment, you will incur interest charges of $4,119.00 and a 14 year term of paying off that card! That is if you only pay the minimum amount due every month.

Increase Your Payments. Now add this into the mix: make a half payment every 14 days and you will eliminate the balance in three years and 18 weeks and only pay $2,521.00 in interest. How does saving over half in interest and paying off much sooner sound?

The requirement here is that you begin by making sure that your regular monthly payment is paid by the due date. If you fall short of this, then you will still end up with late fees, high interest rates and a spotted credit record. So, if you begin this process, stick to the rules and make it work.

The reason that this works is because credit card companies are required by law to credit each payment that they receive when they receive them. What you are doing, then, is paying extra towards the principle on the balance. But, adding to that is the fact that since you are making an extra payment every two weeks, you will end up with 26 payments per year which is equal to 13 monthly payments, not 12. A complete extra month’s payment is applied to your balance. Now, that is smart thinking.