Credit Card Blog

The Federal Reserve wants your comments regarding proposed legislation that targets unfair lending practices. These proposals take aim at two-cycle billing, raising interest rates on existing debts, and other practices that some card companies engage in.

This topic has already attracted plenty of comments. The Federal Reserve normally gets about 1,000 comments on issues such as this one. At the time of this writing, the credit industry overhaul topic already had 9,300 comments. It seems like everyone has something to say about the credit reform bills. Consumer advocates praise the reform, while the credit card industry says that stricter laws will result in less competition – and higher prices for card holders.

The Fed expects to make a final ruling on these proposed laws by the end of the year. You can comment on the credit card reform bills until August 4th. Other bills concerning credit disclosures can receive comments until July 18th.

To express your opinion about the proposed changes, go to www.federalreserve.gov. Click on “Consumer Information”, then on “Proposed Rules for Credit Cards and Overdraft Services”. Scroll down until you see “Regulation AA”, and click on “Submit Comment”. Just remember that any comment you leave will be visible to the public.

Manila was tapped to be the pioneer market for the new Citi Mobile service, which allows mobile phone users to make purchases on their credit cards via text messaging or calls. Citi hopes that this new system will complement and, in some cases, replace the traditional card-swiping system.

Citi is marketing the new service to mobile phone users with busy lives. They encourage customers to call or text merchants through Citi Mobile when they need to send deliveries, pay bills, or load up on units for prepaid phones and Internet services. The purchases are then charged to the customer’s credit card.

This mobile banking system was launched in the Philippines because of the high volume of text messages Filipinos send each day. Some have called the Philippines the “Text Capital of the World”, and for good reason: Filipinos sent approximately 1.5 trillion text messages last year alone.

But markets all over the world will be watching to see how warmly Citi Mobile is received. If all goes well, you can bet Citi’s global offices will jump on the bandwagon and offer the service in other areas.

A Calgary man was arrested and faces four years in jail for manufacturing and selling credit card skimming devices. Nicholas Wayne Joehle used his apartment as a base of operations, but did business from as many as ten Internet cafes in the downtown Calgary area. He sold the illegal devices over the Internet for about $5,000 each.

Skimming occurs when someone runs a credit card through a hand-held device that stores the account number, expiration date, and other information. Waiters and retail cashiers have been known to employ this method, quickly swiping a customer’s card when no one is looking. The devices themselves are so small that they can be used subtly. Other skimmers have implanted such devices in gas pump card readers, returning to collect the harvested information at a later time. It’s a fast-growing type of credit card fraud, and no one is immune.

To protect yourself, pay in cash if you feel uneasy about handing your card over to a waiter. Keep an eye on your card at all times. And always monitor your credit card statements and credit score for unauthorized activity. Thieves thrive when their victims do nothing; contact your card company immediately if you see anything suspicious.

More bad news about those high gas prices: they’re not just affecting drivers. Some gas station owners are refusing to take credit cards for fuel purchases. Why? As the price of gas keeps going up, so does the dollar amount that the stores must pay per credit card transaction. These interchange fees mean decreased profits, and some store owners have instituted ‘cash only’ policies.

Gas sellers typically mark up the price of gas by eleven or twelve cents per gallon. Rising interchange fees take away about ten cents per gallon. But stores that stop taking credit cards risk losing their business altogether.

These interchange fees affect other retailers as well, but many small convenience store operations are being hit hard. For example, Mr. Ed’s Chevron in St. Albans, WV, makes about sixty dollars in profit from its monthly gas sales. But after paying out a whopping $500 a month in interchange fees, the manager there has decided that it’s just not worth it to take credit cards.

“It kind of runs hot and cold, but I do know some stations have decided enough’s enough, and it’s cash only,” said Ed Stephens, VP of Englefield Oil Co., whose Duke and Duchess Shoppes are scattered throughout Ohio and West Virginia.

It looks like tough times ahead for gas station owners.

Kids do the darnedest things.

For example, six-year-old Bennett Christiansen of Aurora, Illinois, managed to get his own credit card from Bank of America.

Amy Christiansen, the child’s mother, said that all of her family members had been receiving offers of credit in the mail - including Bennett. For a bit of fun, she allowed Bennett to fill out and send in one of the applications addressed to him.

In a totally unexpected development, Bennett soon received a credit card with his name on it, even though he’d listed his birth date as 2002 and his income as $0. The child’s card carried a $600 credit limit.

Bank of America insists that they do not target or give credit to minors, but Mrs. Christiansen was understandably concerned about the ease with which her child obtained his first credit card. She’d better stay on her toes; Bennett’s 3-year-old sibling has also received offers of credit.

Many marketing campaigns for prepaid credit cards are targeted to the under 18 crowd.  In fact, anyone over 16 can deposit money on a prepaid credit card and then use it like a credit card when shopping or online.  Kids as young as 12 or 13 can often get a prepaid card as well, as long as Mom or Dad sign up for it.

Some advocates claim giving teenagers a prepaid credit card gives the opportunity to teach them responsible money management skills, while critics argue that we’re just showing them how tempting a real credit card can be and setting them up for disaster.

As far as the financial companies are concerned, it’s difficult to make much money on a prepaid credit card since they can’t charge interest on unpaid balances.  They typically charge a sign up fee and then fees whenever a deposit is made to the account- but the amount they earn is minimal compared to a traditional credit card.

Prepaid credit cards are beginning to make their mark in the corporate world, however.  Companies are branding the cards with their logos, and using them as employee incentives since they’re cheaper than checks or merchandise incentives, and sometimes a prepaid card is used in lieu of a paycheck.  The employee’s pay is loaded directly onto a prepaid card each pay period, and the employee can then use the money as they normally would.  (Prepaid credit cards work in ATM’s for cash withdrawals, too).

When a father of a Texas 13-year-old forgot to get his son a birthday present, the boy took matters into his own hands and order an additional card from his dad’s credit card company.  Apparently, if you know the answers to the security questions, anyone can get an additional card sent out in their name.

The teenager took a few buddies out on the town and charged $30,000 on his dad’s credit card account.  They capped off the evening in a motel room, where they ordered two female escorts, at just $1,000 a night (each).  The girls thought their clients appeared “young”, and so instead of their typical job duties, they played “Halo” on the Xbox with the boys. 

The call girls were released without charge, and the boy was sentenced to three years community service and convicted of fraud.  According to an article on Money.co.uk, when asked what the boy aspires to be when he grows up?  A politician, of course.

There have been a number of reports of individuals paying less on their credit card bills (or skipping the payment altogether) - and giving the reason that they need the money to keep gas in their tanks.

The higher gas prices are not only affecting American’s ability to drive to and from their place of employment, but it’s trickling down and affecting just about everything else in our lives, too.  If you are finding yourself skipping a credit card payment to put gas in your car - there’s a real problem!  Not only will you have a late fee on the card, but often the interest rate will be increased due to the missed payment.

Other people are using credit cards to help keep fuel in their vehicles.  Since we’re paying around $4 a gallon for gas, it’s costing us a small fortune to fill up.  When you put that amount on a credit card, week after week, your $4 a gallon ends up costing you even MORE, due to interest and finance fees on the credit card.

As always, using credit cards with rewards programs offers a way to earn something back, but they’re only beneficial if you can pay your balance in full each month.  Now is an important time to cut back on your excessive spending, particularly spending on high interest credit cards you don’t intend to pay in full at the end of the month, because the prices of our necessities are increasing.

Have you been the target of multiple direct mail credit offers in the past? Pre-screened offers of credit clutter mailboxes from coast to coast. A good offer is a good offer, but sometimes all those envelopes feel like overkill.

Well, if there’s one good thing to be said about the state of the economy, it’s this: credit card direct mailings have decreased.

Financial services have reduced their direct mailings by about 13% during the first quarter of this year. Mintel senior analyst Chris Zagorski said, “One of the main drivers definitely has to do with the economy. With credit lines tapped and people struggling to make ends meet, both consumer spending and savings are down.” In other words, if people aren’t spending money, it’s probably not economical to spend so much money marketing to them.

The reduction in direct mail offers still leaves consumers with a lot of mail. Financial service corporations sent out about 4 and a half billion pieces of mail during the first quarter of 2008. Yikes! If you’re still overwhelmed by the number of pre-screened credit offers you receive, you can do your own mail reduction by calling 1-888-5-OPTOUT (1-888-567-8688) or visiting www.optoutprescreen.com.

A home equity line of credit is a ‘revolving credit’, similar to a credit card in that you have a maximum limit that you are able to use, but that money can be used again as soon as it’s been paid off.  The major difference between a home equity line of credit and a credit card, however, is that home equity lines of credit are secured against your home.  If you fall too far behind on your payments, the lender can take possession of your home in order to recover the debt.

Previously, home equity lines of credit were made available with special checks that allow consumers to access the money when needed.  A check could be written and deposited into your checking account, or used to pay a vendor or when shopping at your favorite retailer.  More recently, many lenders have started providing the home equity line of credit on a credit card.

While having a card in your wallet that accesses your home equity line of credit is convenient - it can also be extremely tempting for many people.  If you take a HELOC to make improvements on your home, for example, and have more money than you need for the repairs, you may find yourself shopping for a new wardrobe with your HELOC credit card.  Think twice about doing this - is it really worth putting your home on the line for unnecessary purchases?