Credit Card Blog

With all the headlines lately, you’d think that the upcoming credit card reforms are the cure-all for the debt that plagues modern Americans. And you’d be half right; credit card companies should play fair, and if it takes a rolled-up newspaper (in the form of tough legislation) to make them behave, so be it! But reform is only one half of the equation. All the legislation in the world isn’t going to do much if consumers don’t control their spending.

If there’s one good thing to come out of the recession, it’s the fact that millions of us have had to take a good, hard look at our financial situations. It’s scary at first, especially if you’ve been buying things here and there and making minimum monthly payments. You might be shocked to see how much of your income is being eaten by interest, bank fees, and finance charges. The sour economy has given us an opportunity to rethink our spending habits, and the upcoming credit card reforms will make it even easier for us to reduce our credit card debt.

With that in mind, it’s important for us to remember what we’ve learned once the economy struggles back to its feet and credit becomes readily available once more: don’t carry more cards than you need; don’t carry a monthly balance on your cards; and don’t spend beyond your means. Cardholders will soon have new, more enforceable rights. Let’s live up to those rights with a new level of responsibility.

Capital One introduces the Progress Card for consumers with bad credit. It will be available in time for Christmas shopping but beware of the starting interest rate. In addition to no annual fee, cardholders are rewarded for paying on time and at or above minimum payment, by having their interest rate reduced by 5% every six months; but this rate starts out at 34.9%. This rate may seem astronomical but keep in mind, if after eighteen months you’ve been a smart Progress cardholder then your interest rate will be down to 19.9% which is just above average. By the fourth statement of responsible credit usage, some cardholders may be offered an increased line of credit.

To be eligible for a Progress card, you must be over the age of 18, with at least some credit history. If you’ve declared bankruptcy within the past year or have absolutely no credit ratings, then it’s likely your application for a Progress card will be rejected. The Progress card can be compared to a progress report with incentives and rewards for good management efforts.

Although quite out of character for the credit card industry, the Progress card may prove to be a revolutionary concept. With the unemployment rate about to surpass a historically high 10%, there are thousands of individuals desperate to find ways to reestablish their credit. Even though the Progress cardholder’s interest rate is reduced by 5% per month of smart usage, users should inquire of the lowest level the rate will reach. This card can be a wise and cost-effective tool for young adults trying to implement good credit or for those individuals in dire need of an opportunity to rebuild their credit score. The Progress card may be just that opportunity, not available elsewhere.

Recently, over 45% of American credit card consumers experienced either a rise in their interest rates, having their credit limit lowered, an increased minimum monthly payment, or reduced user rewards.

Congress is considering upping the compliance date on the CARD Act from February, 2010 to December 1, 2009. This may have a significant impact on retailers and holiday shopping of consumers. Many retailers may have to provide extra incentive for their customers in order to make up for the lag in credit card purchases. Already, consumers are using cash more and credit cards much less. Even with the CARD Act effective before Christmas, consumers dealing with a lowered credit limit and higher interest rates implemented before hand are not likely to charge their holiday purchases.

One recent shows reveals the following statistics:

• 113% rise in consumers facing possible lower credit limits.
• 42% rise in those having their minimum monthly payment increased.
• 33% are seeing their rewards program decline.
• 36% are experiencing increases on various fees.

Understandably, it’s these consumers and countless others who agree this bill should be enacted in December not February. Some representatives are angered and acknowledge the fact the numerous credit card companies are abusing this delay by raising interest rates, charging hidden fees, lowering credit limits, or all of the above. This acknowledgement is a start but needs to be followed by swift action.

With the number of consumers resorting to cash over credit increasing every day, credit card companies are searching for ways to keep and please their cardholders. Some are offering zero percent interest rate for six months or increased cash-back rewards for certain credit purchase amounts. As the holidays quickly approach, with the looming possibility of the CARD Act becoming effective, consumers may see credit card offers that are either completely out of the ordinary or absolutely astronomical.

According to the Wall Street Journal (citing a Nillson Report), there has been a surge in debit card use even while credit card charges have declined. That doesn’t seem too surprising when you think about it; we’re in a bad economy right now, and people want to pay off their credit cards as quickly as possible. Running their balances up would be counter-productive. Debit cards, on the other hand, are as good as cash at most places.

But some debit card shoppers have raised good points. For one thing, you have greater purchase protection when you buy things with a credit card. Some banks don’t go to bat for debit card customers, so any money that exits your checking account might be gone for good.

Debit cards can also get you into trouble if you don’t track your transactions meticulously. For example, while most charges post immediately, others might take days. This can create the illusion that you have more money in the bank than you actually do. And overspending with a debit card can subject you to numerous $30-40 overdraft charges in a single day.

The bottom line: If you pay off your credit card balances each month, you can safely continue to use your cards to collect reward points and other perks. But if you have big credit card balances that you need to pay down, start choosing debit for your transactions.

Transparent Financial Services, of Chicago, IL was awarded a grant from CEC (Chicagoland Entrepreneurial Center) to support TransFS’s rapid national growth. Clients of TransFS are businesses in need of financial services, such as locating a dependable credit card processor. Transparent Financial Services are recipients of this grant through the CEC’s Entrepreneur in Residence program. This program places startup companies displaying significant growth-potential with entrepreneurs who are experienced with business success.

Transparent Financial Services now have over twelve markets in the customer base of their comparison-shopping site offered to their clients through their credit card processing services. TransFS has a wide network of credit card processors bidding on each merchant’s services but, they are all bound by strict contractual stipulations. The system is carefully designed so that a client is not contacted by or connected with a credit card processor until they have officially chosen one through the services of Transparent Financial Services.

TransFS was established in 2008 and their client base of businesses now includes more than twelve various industries. The owners founded Transparent FS, while in Business school, after their many challenges as entrepreneurs trying to choose the best credit card processor and locating top quality financial service providers. They have developed a unique strategy which enables them to locate processing fees that are about 40% lower than average. TransFS has already saved some of their clients well over $72,000 per year in credit card processing server fees. Even their processing providers are rewarded when they adhere to contract regulations and earn TransFS certification, by becoming eligible for quicker contact with clients at reduced costs. Transparent FS also offers their services to all business clients free of charge.

On June 10th, one million Advanta card holders were be out of luck. That’s when the company, which focuses on small business credit cards, stopped issuing credit for good. This announcement caused Advanta card holders to hurry and redeem their reward points at the last minute. Now many of them are looking for financing alternatives for their businesses.

Advanta’s small business niche has been hit hard by the recession, and the card issuer’s numbers reflect that. Advanta watched its stock shares lose 90% of their value over the past year. With a default rate of 16% – roughly half that of American Express – Advanta posted a first-quarter loss of $76 million. That’s much less than some of the larger firms, but enough to make Advanta pull out of the race.

The credit card industry as a whole has been plagued with record levels of delinquency and default. Advanta is just another casualty of the recession, and probably won’t be the last. Small business owners who loved their Advanta cards must now try to find a replacement. Experts recommend small business credit cards and personal loans, both of which may be easier to obtain through local credit unions during the Recession.

Though credit lines dried up on June 10th, Advanta will continue to accept payments on existing accounts.

As small business loans have dried up, more entrepreneurs are turning to small business credit cards to fund their ventures. Though this is a common approach, you should be careful which cards you sign up for.

Banks are now offering new cards labeled specifically for small business use. However, if the business doesn’t work out and the credit card bill goes into default, banks have a back-up source of funds – you, the cardholder.

One advantage of running a small business is that, if set up correctly, the business’s assets and liabilities are separate from your own. But with this new generation of small business credit cards, banks can come after your personal assets if the bill goes unpaid.

It’s worth noting that the new Credit Card Holder Bill of Rights doesn’t specifically protect entrepreneurs or small businesses. Experts recommend avoiding these small business cards altogether and using personal credit cards to pay business start-up costs. Then, pay the credit card bill from the business’s money.

Chase is planning to launch at least four entrepreneur-targeted cards, and other banks will undoubtedly follow suit. Weigh all of your options carefully when deciding how to fund your small business.

In the past, American Express gift cards were subject to $2 monthly maintenance fees beginning one year after the card was purchased. Thanks to a push from customers who told AmEx the fees diminished the value of the gift cards, American Express has decided to change its ways.

Effective immediately, there will no longer be a monthly fee on AmEx gift cards. This is also true for cards which have already been purchased. So if you’ve been holding on to an AmEx gift card for a while, you can rest assured that your balance won’t slowly seep away.

There is still an upfront fee associated with gift card purchases, but monthly fees are a thing of the past. In fact, American Express has elected to do away with all fees after purchase.

Thanks to new legislation, other gift card issuers will have to rethink their own fee structures. In August of 2010, it will no longer be legal to charge dormancy fees on gift cards unless those cards have been inactive for one year.

Ann Minch started a debtor’s revolution on YouTube when she told Bank of America to stick her credit card debt in their bailout pipe and smoke it. Angered that her interest rate had jumped from 12.99% to 30% for no good reason, Minch went on an angry video rant targeting the bank.

The result? Bank of America renegotiated her interest rate within 5 days, and lots of other angry cardholders jumped on the bandwagon with horror stories of their own.

Some debtors are determined not to repay a cent of their credit card debt until the bank lowers their interest rates. Others want their accounts settled immediately, without the 180-day delinquency that Bank of America requires before settling an account. Many are angered that Bank of America continues to charge such high interest rates after receiving billions of bailout dollars – especially at a time when so many customers are struggling to find work and pay their bills.

YouTube user ‘efrasier21mbf’, a former assistant branch manager for Bank of America, posted a video of his own in which he supports the debtor’s revolt. He has harsh words for Bank of America due to the practices he witnessed during his time as an employee, and his own experience with an interest rate that jumped from 5.1% to 32% — even though he was never late on a payment. At the end, he offers the bank a deal: settle his account now for a large cash sum, or never see another penny on the loan.

Want to witness the debtor’s revolt? You can watch Minch’s original video here. Huffington Post also featured several follow-up videos here. (Warning: Some videos contain strong language.)

Small business owners often complain about the time consuming task of keeping track of their finances and purchases for tax time. It’s imperative that a business can account for each of their purchases – both for tax purposes and for strong management of their business.Using a business credit card can eliminate some of the time spent categorizing and tracking each of your expenses and purchases.

When you use a single credit card for all business purchases, your monthly credit card statement will give you a record of all of your expenses by the month, broken down by individual purchase. You can often get a year-end statement from the credit card company as well, with purchases already categorized by type and by month which will make your job (or your accountant’s job) of balancing your books much easier.For businesses that have a key employee or two, using business credit cards allows you to keep a close eye on the items they’re purchasing or paying for on behalf of your business. You can issue your key employees a card in their name, and then review the purchases made to each individual card on a monthly basis.Additionally, many credit cards designed for business use offer discounts for businesses – from office supplies to travel discounts to merchandise discounts or rewards. Select a card based on the type of purchases you need to make most often for the most benefits.