Credit Card Blog

There’s been a lot of talk about the swine flu lately. Fortunately, it’s now been determined that the H1N1 virus is no deadlier than the usual virus we battle each flu season. Still, if a virus of any sort were to result in a major pandemic, human health is not the only potential casualty. If tragedy struck, consumer spending could fall sharply. Banks could close their doors. What affect would this have on card holders?

Kimberly Palmer of the U.S. News & World Report recently quoted an interview with Dennis Moroney of TowerGroup. The research director for bank cards suggested that, in the face of a pandemic, many bankers and tellers would be too afraid to come to work. Banks would close and ATMs would remain empty, denying people access to much-needed cash.

Still, Moroney was cautiously optimistic in the interview. In the past, a pandemic could have resulted in a huge financial meltdown. Now, with the help of telecommuting and the Internet, Moroney believes that a pandemic would cause inconvenience and a disruption of service, but little else. Unless the pandemic stretched on for a prolonged period of time, he did not feel that such a scenario would have a real material impact.

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

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.

With an increasing number of people without jobs and struggling to make ends meet, the rate of credit card fraud is on the rise.  Here are some tips for preventing credit fraud:

• Open your account statements as soon as they arrive and look closely at the transactions. Match all of your receipts against the statement to make sure there are no unauthorized purchases on the account and report any that you don’t recognize immediately.
•  Shred receipts and account statements before discarding because some may contain your credit card number.
• Never give out your credit card number to people calling to ask for it by phone, you don’t know if they are really who they say they are.  If you need to make a payment by phone with a credit card or bank account, call the company yourself so you know you are dealing with the right people.
• Obtain a free credit report from each of the credit bureaus at least once per year to ensure it is accurate.
• Keep a firesafe, locked box to hold personal documents such as social security cards, birth certificates and bank records.
• Report a lost or stolen credit card immediately so that it can be canceled.
• If your expiration date is getting close on debit and credit cards, contact the card issuer if you haven’t received a card replacement – it’s possible it was taken from your mailbox by a thief.
• Don’t use obvious passwords for online banking accounts.
• Don’t leave your receipt at the ATM or gasoline pump.
• Don’t put your credit card payments in your home mailbox to be picked up – take it to the post office instead.
• Look for the “https” before the URL of websites you want to buy from to ensure they are encrypted and secure  before making a purchase online.

There has been some recent debate over whether or not it’s fair for bartenders to require a patron to leave a credit card in order to open a tab. The general consensus among card holders is that the practice is only carried out in order to keep people from skipping out on a tab. Therefore, if the establishment is upscale or not at all crowded, asking for a credit card upfront might be considered rude. Small pubs and very busy bars can ask for credit cards with no breach of etiquette.

Some patrons found that if they forgot to collect their credit cards before leaving, a 15-25% gratuity was added to their tab. Bar owners claim that the automatic tip charge is justified because of the inconvenience. However, this policy has to be stated in writing on the bar’s menu or posted in a visible place for patrons to see. Then, when a drink order is placed, the patron is assumed to have agreed to the policy.

The best advice for card holders who want to get their drink on is this: Don’t be offended if you’re asked to provide a credit card, and don’t forget your card when you leave. If you do go home without your card, call the pub and ask when it would be most convenient to come and retrieve it.

Have most of us forgotten what the holidays are really about?  It’s not about running out to Wal-Mart and the mall to buy as much as your credit card limits will allow you to purchase for everyone on your gift list, is it?

Sure, everyone – especially kids – love to wake up to a Christmas tree that’s positively hidden behind the piles of presents, but there are other (possibly even BETTER) ways of celebrating the holiday season.

Instead of racking up even more credit card debt that the majority of Americans are struggling to pay already, why not spend less on each gift you buy (and if possible, pay with cash), and have a get together with family and friends instead?  Bake and share cookies and pies, have a party in someone’s home where everyone enjoys time with one another instead of exchanging expensive gifts.

Have you received an offer for credit card insurance? Some card companies have been calling their customers and offering insurance that’s supposed to help out in the event of the customer’s disability or death. The downside is that some customers are getting signed up for this insurance without actually agreeing to take part. The cost? A hefty $100 a month.

Credit counselors are warning card holders to steer clear of this expensive insurance. It’s some of the most costly insurance available, and once you’ve signed up for it, it can take a long time to disentangle yourself. Card holders have complained that it took one to three months to cancel the credit card insurance and stop the monthly charges.

Should you trust credit card insurance offers? Some might be okay, if expensive, but other offers smack of a scam. It’s best to seek out death and disability benefits through your employer or a well-known insurance provider. Until credit card insurance is more credible, depend on your cards only for reservations and purchases.

The last time you made a purchase with your credit card, were you asked to show your ID? If so, the merchant you bought from may have been violating their contract with Visa, MasterCard, or American Express. According to most contractual agreements between merchants and credit card companies, all a cashier is supposed to verify is the signature on the back of your credit card. Once they’ve compared that signature to the one you wrote down to complete the sale, no further ID should be requested.

Of course, most merchants ask for ID anyway. That’s because most employees and managers don’t realize that they’re not supposed to. Minimum purchase amounts are also a no-no according to most written agreements, but many merchants have a lower limit on how much you can purchase with a credit card. It’s a practical way to make sure they don’t lose money on card processing fees.

What can be done about minimum purchases and ID requirements? Not much, really. It doesn’t make sense to harass a merchant for trying to ensure the security and profitability of a transaction. File this one under interesting trivia rather than reasons to protest.

The Federal Reserve is proposing that “unfair and deceptive” lending practices by credit card companies come to an end – and consumers have until August 4th to make comments or complaints regarding this issue.  (Visit the Federal Reserve website to comment).

Changes to policies would put a stop to some of the more common, and perhaps most abused credit card practices by credit card lenders, like raising interest rates on debt you already have, calculating finance charges on two months of credit card activity instead of a single month, and applying consumer payments to the lower-interest-rate balances first.

While changes to these policies will be welcomed by most cardholders, hopefully the Federal Reserve will also deal with a common practice of credit card companies mailing statements out so that it’s impossible to get your payment back before the due date.  Have you ever received your credit card statement two or three days before the due date?  Even if you ran out to the mailbox that day with your statement and check to be mailed, you would stand little chance of it being received and processed before the due date… many times a late payment results in an interest rate hike and/or a late fee of $39 or more.

If you want to be heard on these issues, visit the Federal Reserve before August 4th and let them know what you think.

The debate is raging over 401K debit cards. A bill is being introduced to the US Senate which would ban these cards entirely. Some customers maintain that they should be able to do what they want with their money. Proponents of the bill agree, but point out that there are some serious and little-known drawbacks to putting one’s 401K savings to use on a regular basis.

Those in favor of pushing the bill into a law cite various reasons for their disapproval. The mechanics behind the debit cards are a little disturbing. For example, each time a 401K debit card is used to pay for a transaction, a separate loan is taken out against the customer’s retirement savings. These different loans can be subject to different repayment terms. Typically, 401K debit card loans must be repaid within five years. With dwindling resources, customers are more likely to default on these loans.

Also, customers face ten-to-one losses when they withdraw money from their 401K. That is, a withdrawal of $1,000 leads to $10,000 in lost retirement funds. The 401K debit cards facilitate these losses by making it easier than ever to withdraw from the account.