Credit Cards » Credit Card News » Credit Card Bill Passed By U.S. House Of Representatives
Date April 30, 2009

Credit Card Bill Passed By U.S. House Of Representatives

Category: credit card news

Consumers angry and frustrated by the tactics recently employed by credit card issuers can find some comfort knowing relief is on the way. Today the House voted 357 to 70 in support of the Credit Cardholders’ Bill of Rights. Lawmakers are in favor of legislation which protects credit card users from sudden hikes in interest rates, hidden fees and unfair billing practices.house-of-representatives

The House adopted a series of amendments before passing the bill. One amendment would require credit card issuers to warn card holders who are close to exceeding their credit limits while another requires maintaining low introductory rates for at least six months. Incorporating Federal Reserve regulations which take effect in 2010 the House went a step further by adding restrictions for credit cards for students.

President Obama backs efforts to make changes in an industry that has recently increased what some people consider abusive, manipulative and unethical billing practices. Supporters hope to have legislation signed into law by late May after the Senate considers its own version next week. If signed into law legislation would be implemented within 90 days.

Banks who are already reeling from the mortgage crisis and the rising level of defaults have objected to legislation regulating the industry claiming it will only result in higher interest rates for all consumers and fewer chances of obtaining credit.

Some of the issues covered by the Credit Cardholders’ Bill of Rights include:

  • Requires credit card companies to give 45 days notice of intended increases in interest rates. This give the consumer the opportunity to either pay off the balance or look for other opportunities for financing.
  • Protects responsible cardholders who pay on time from being penalized unfairly.
  • Prevents card companies from increasing rates unfairly on existing balances.
  • Allows cardholders to set limits on their credit card accounts.
  • Requires credit card companies to allocate payments to higher interest balances or distribute the payment evenly to balances with different interest rates. Presently credit card companies apply payments toward low interest balances allowing higher interest balance to continue to grow.
  • Stops double cycle billing where card companies charge interest on debt consumers have paid on time.
  • Prohibits imposing excessive fees to cardholders.
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Date April 29, 2009

Visa Commercials Promote Debit Cards

Category: Credit Score, Low Interest Credit Cards, Money Management, Obama, People and Credit, Rewards Programs, Shopping, Statistics, Visa, bailout, economy

Visa has noticed the trend of increased debit card use during this recession. They’re running several TV ads that promote Visa debit cards for everything from buying pizza, going to an aquarium with your daughter on a Tuesday, and paying for products online.

On April 29th, Visa Inc. reported that their branded debit card total dollar volume of purchases surpassed credit card purchases for the first time during the last three months of 2008 – making the debit card transactions processed by Visa 50.4% of their total transaction volume in the same period.

It’s no mystery why consumers are turning to debit cards over credit these days. Consumers are becoming more conscious of their spending, and people don’t want to rack up any more credit bills if they can help it. Debit cards are popular over cash use, because American consumers have a preference for the convenience plastic provides – beginning in 2003, credit and debit card purchases bypassed cash and check purchases.

“A big group of consumers like the discipline that debit spending can bring them, and that is particularly relevant in this kind of environment,” said Tim Murphy.  Murphy looks after MasterCard Inc.’s main payment products.

Unlike credit cards, which allow consumers to charge more than they can afford to pay when the statement comes and carry the balance from month to month, debit cards only let you spend what you have in your checking account. A Nilson Report provides data for the increase of debit cards since 1987:

nilson

Banks are helping to encourage debit card use through the offering of rewards programs. While debit card rewards programs are not as generous as most credit card programs – it’s still a good incentive that helps people choose debit over credit. Credit card use is expected to decline even more, as Americans continue to monitor and rein in their spending habits.

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Date April 28, 2009

Credit Card Companies Cry Unfair

Category: Obama, People and Credit, credit card news, economy

President Obama has advised credit card companies that as President, he would be supporting stricter regulations on the credit card industry and its practices. Coming up in July 2010, tougher regulations on deceptive practices by credit card companies will go into effect. Consumer felt some relief but the credit card executives began to whine.

While many credit card companies are hard at work, raising customer’s interest rates at the drop of a hat or cutting credit from loyal, good-credit customers, the executives still feel as though they have been through enough already with the Federal government. They feel they have already had to work overtime to comply with the new set of rules, even if they don’t start until mid-next year. They also complained because so many customers are defaulting on their contracted financial obligations because consumers are facing job loss and the inability to survive from paycheck to paycheck. They reason that by raising interest rates of the “good” customers, they can make up for the loss from the credit_card2amount of defaults. These executives conclude that what they are doing will help to keep them in business.

Luckily, President Obama wasn’t in agreement. Instead, Obama reasoned that there needed to be more consumer protection while still enabling the credit card companies to make a profit. The new rules will certainly benefit credit card holders for many reasons. One of the major changes will dictate that the credit card companies can no longer raise the interest rates on any existing balances. Late fees can also not be charged unless a reasonable time has passed before a credit card holder hasn’t made a payment. It is these practices that are now taking place that are leaving more consumers struggling with credit card debt.

Essentially, the government wants to help rehab the relationship between the consumer and the credit card issuers. There will be the need for clearer agreements the average consumer can understand in an effort to prevent unknowing applicants get taken advantage of by big business. The President wants the situation to be fairer for all involved and the new regulations for 2010 should be a good start.

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Date April 27, 2009

Who Will Win The Battle Over Credit Card Regulations?

Category: Credit Card Management, Money Management, credit card news

Consumers waiting for positive changes within the credit card industry should know that not everyone supports restrictions on credit card practices. The President and Congress support regulations which would protect consumers from the heavy handed practices that are currently taking place.  Not surprisingly banks are resisting the idea of forced regulations within their industry.  Various government officials continue to push for changes that protect consumers.

Don’t expect changes to happen overnight or without more resistance. Banks argue that they will get paid one way or the other. In fact without restrictions in place now they (banks) could easily raise battle-credit-cardinterest rates higher than they are currently and decrease available credit across the board. It is painfully clear that consumers and their financial well being is not a point of concern for banks. That realization on it’s own is enough to anger Americans who have lost jobs, homes and their life savings in the last year. Now when you remember that many big banks have received bailout money to support their business, it is almost unbelievable the lengths they are willing to go to avoid regulation. While bank executives and government officials argue over unfair practices consumers remain at the mercy of the credit card giants. To offer consumers some level of protection, Senate Chris Dodd and Senator Chuck Schumer have proposed an immediate credit card rate freeze. The House of Representatives is also considering legislation (Credit Cardholders’ Bill of Rights Act) which also contains provisions which prohibit credit card practices that punish responsibly customers.

Banks may be threatening restricted credit as a result of regulation however they also know they are very vulnerable right now as well. When it comes right down to it, that is what banks should have been doing for the past several years. Americans have become accustomed to instant credit regardless of your actual ability to pay off your debt. It may take some time to readjust that mindset but changing the way we think about money and debt is long overdue in this country.

Hopefully the banks and government officials can hammer out an arrangement that can benefit all parties involved, especially cash strapped consumers. In the meantime credit card holders who are barely hanging on financially will have to wait for relief. Take this time to learn more about responsibly credit use, debt elimination and money management skills that can help guide you through this period of your life.   Remember our economy has gone through valleys and peaks before and will again. Consumers should remember the treatment they have received at the hands of their lending institutions and use that lesson to avoid becoming indebted in the future.

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Date April 26, 2009

Credit Card Processors Muscle Merchants For Cash

Category: credit card news

Since credit cards were first introduced in the 1970’s consumers have become increasingly dependent on the increased purchasing power they provide. As a result more and more small business owners who previously accepted only cash or checks have embraced customers paying with credit cards. In fact today you can use a credit card to buy just about anything, including fast food which traditionally was a cash only business.

Merchants accepting credit cards as payment open themselves to increased business and profit but not without a fee. Now in what has been referred to as the worst economic downturn in decades, credit card processors are increasing the price of convenience and in some cases putting small business out of business. The number of businesses filing for bankruptcy is on the rise and the current state of the economy does not bode well for companies struggling to stay afloat. Some credit card giants have responded by demanding a cash reserve from merchants who process credit cards. This move may be good for the credit card processor but also the final blow for many small businesses.

When a consumer uses a credit card to pay for a purchase the transaction must first be approved or authorized to guarantee the merchant receives payment. When a credit card is swiped, information is transmitted to a processor which acts as a middle man between credit card issuers and merchants. The processor is responsible for issuing credits to the merchant and debits to the issuer . By approving the transaction the processor also becomes responsible for customer refunds. Once a refund is issued to a consumer the credit card company  pulls money from the processor who in turn pulls money from the merchant. This is where the cash reserve comes into play. When a business files for bankruptcy someone has to take a loss and in most cases it is the processor. By requiring a cash reserve the processor is then protected in the event a business fails or does not have the financial resources to cover a refund.

The size of the reserves vary and can easily equal up to two months worth of transactions. More importantly if a business does not pony up the required reserve the processor can simply hold payments owed to the merchant until the reserve is met. For a large business the reserve can easily reach millions. Financial institutions claim these cash reserves are required only of businesses that present a “high risk” and consumers benefit by being protected if they seek refunds.

Unfortunately this strong arm tactic will either break small businesses who are already struggling to make it through the recession or prompt merchants to no longer accept credit cards as a method of payment. While credit card companies and processors continue to make decisions based on the need to reduce risk, it appears they are overlooking the two most important factors for their future success. Without consumers using credit cards or merchants who accept credit cards the need to eliminate risk will become a moot point.

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Date April 25, 2009

Canadians Looking to New Credit Card Rules, Too

Category: Credit Card Management, Credit Score, Money Management, Obama, People and Credit, bailout, credit card news, economy, payment systems

Americans aren’t the only ones dealing with credit card problems. While President Obama met with executives from flagscard issuers including American Express Co. and Bank of America Corp. to review credit-card policies for fees and interest rate limits, the Canadian government Prime Minister Stephen Harper is responding to consumer groups and lawmakers who insist the banks should have lower rates, and more information for consumers for understanding how the credit cards work. Namely, consumers should know clearly what their interest rates are, and not be faced with interest rate increases for unknown reasons.

Finance Minister Jim Flaherty, will announce new rules for credit cards next week that will include regulations for issues that are unfair to consumers. Some of these changes will include a required 21 day grace period for all credit cards, which means that if the payment is sent within the 21 day window there is no interest accumulated. Currently, grace periods vary from one bank to the next. Banks and credit card companies will need to indicate clear interest rate change information – so that they’re unable to simply increase credit limits whenever they want.

“We have to make sure the system operates fairly, and everybody knows the rules,” Jim Flaherty said during an interview with Washington.

The Bank of Canada cut the overnight rate to a record low of .25% earlier this week, but most banks are charging almost 20% interest on unpaid bills which isn’t giving cardholders much needed relief from the interest-rate cuts.

Canadians, just like Americans, are living off credit cards more frequently than ever before. The neighbors to the north are also experiencing record numbers of people losing their jobs, and will be facing huge credit problems if the trends continue. Canadian bank credit card balances have increased from $41 billion from August of 2008 to $49.9 billion currently – which is an increase of almost 40% in a year’s time, according to a report by Deloitte.

According to Moody’s Investors Service, credit card losses rose to 3.1 percent of the average balances in the third quarter, which is the 7th consecutive period of increases. While still training the United States card losses of 6.6% of balances, the number is still too high.

Up to three parliamentary committees in Ottawa may be holding hearings on credit card and bank issues, with the committee reports being watched closely by Flaherty to determine whether additional governmental regulations will be needed.

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Date April 24, 2009

Chief Economics Adviser Gets Some Sleep During Meeting With President and Credit Card Executives

Category: Obama, bailout, credit card news, economy

In a meeting held in the Roosevelt Room of the White House with President Obama and credit card executives on summersweb1April 23rd, 2009, the chief economics adviser, Lawrence Summers was caught taking a nap at the table. Of course, the photographers had a good time with this, snapping pictures left and right of the man has he nodded off, holding his head on his hand and eventually sliding right off his hand before waking up.

Reporters all over the internet have also had a good time with the story, and comments from readers express outrage that in a time when the economy is doing so poorly and millions of people are wondering how they’ll keep food on the table our chief economics adviser is snoozing on the job. Some have gone as far as saying his ability to nap during the meeting just shows a lack of concern for American citizens – since Mr. Summers needn’t worry about where his next paycheck will come from.

The Caucus reported the story yesterday, with a couple of photographs, including the one seen here. While inappropriate to nap during a meeting, people should cut the man a little slack. The world happens to be in a major economic recession, and you can bet the chief economics adviser has been kept busy working with the President to come up with solutions to the troubled economy. Aides reported that Mr. Summers has hosted a number of midnight telephone calls, in addition to working the normal day hours – it’s human to become tired and need to sleep when the body and mind aren’t given enough time to rest.

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Date April 23, 2009

President Obama and Banks Meet To Discuss Credit Card Practices

Category: credit card news

Credit card consumers may be relieved to hear that President Obama and top economic officials will meet with the credit-obamaheads of 14 major banks to discuss unfair credit card practices. Since the beginning of the financial crisis credit card companies have implemented many practices to try to reduce their level of risk. Unfortunately most of these aggressive practices are putting Americans finances at higher risk as they continue to struggle with increased unemployment, loss of savings and other fallout associated with the recession.

With the possibility of tighter government regulation on the horizon administration officials would like bank executives to take action voluntarily but will point out that President Obama supports legislation to force regulations on unfair or predatory lending practices.

Here are a few of the issues that are likely to be addressed:

Increased Interest Rates- Many consumers are under the false impression that you are guaranteed your current interest rate unless you fail to meet your end of the credit card agreement. This is not the case, in fact many consumers have been caught off guard because credit card companies can raise the interest rate at any time for any reason. This is more frustrating when you consider the fact that the Federal government has brought short term interest rates close to 0% for banks who are borrowing money.

Slashing Credit Limits- In an effort to reduce the damage of customers defaulting on their credit card agreement, credit limits are being reduced- sometimes below the current balance on the consumers account. This can result in consumers being charged over the limit fees in addition to increasing the debt to credit ratio which accounts for 30% of your FICO credit score.

Closing Inactive Accounts- Consumers who have not used their credit card recently may be surprised to discover they no longer have that option at all. Credit card companies are closing inactive or unused accounts. Again, this increases the debt to credit ratio leaving many consumers taking a hit to their credit score.

Payment Allocation- Currently credit card companies apply consumer payments to low rate balances while higher rate balance continue to rack up interest charges which allows the balances to grow. New regulations would require any amount over the minimum payment to be applied to either higher interest rate balances or evenly distributed to all balances.

Targeting Students- Sallie Mae recently released survey results indicating more and more college students are using credit cards to pay for college expenses. As a result students are graduating college with not only student loans but also higher levels of debt which can make finding financial stability very difficult in post college years.

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Date April 22, 2009

New Study Shows Americans Fear Credit Fraud Most

Category: Credit Card Management, Credit Score, Money Management

While many Americans are struggling to survive during an economically trying time, many consumers may be credit-signsurprised to learn what they fear most. Beyond the concerns of war, acts of terrorism, and health crisis on the rise, it a legitimate fear of credit card fraud. Research conducted in early 2009 indicates that as many as 68% of the 1,000 respondents surveyed have a greater fear of being the victim of credit card fraud and having someone access their credit or financial information than of any other problem currently spotlighted in the world today.

As technologies develop and people are required to keep up with the times, credit fraud is a very real danger. So many consumers are already working to pay off their debts and improve their credit rating but at the same time, know they must continue to protect their information and not become a victim of fraud. Knowing that one breach of financial information can cause disastrous results for your own credit, consumers are stressed about staying diligent regarding their credit.

According to the company,Unisys Securities, that conducted the survey  found that “Adults in the U.S. are most likely to worry about fraudulent use of their credit and debit cards and identity theft. Americans are least concerned with their personal safety”. Younger Americans are less concerned about personal and financial safety and indicate they are most concerned with meeting their personal financial obligations. Older Americans (65+) are less concerned with online financial safety because it is likely less of that age category do not shop online or use the internet for other financial transactions. It is the middle-aged American’s who concern for credit card fraud is at the highest.

Fearing credit card fraud is a reasonable concern and consumers need to be aware of what security risks are implicated each time a credit card is used or financial information is supplied for services, such as a loan or other transaction.

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Date April 21, 2009

Prepaid Credit Card Use Continues To Rise As Consumers Attempt To Avoid More Debt

Category: credit card news

As the credit crisis continues there are more and more people looking for ways to reduce their debt or avoid going deeper in debt. As a result, the use of prepaid cards is soaring by an expected 3 billion more dollars than last year. The reason for this increase in popularity- consumers are looking for the convenience of traditional credit cards without the risk of increased debt.credit-cards

Prepaid credit cards are not new in the industry however in previous years they were most attractive to people who either chose to not use unsecured credit cards or people trying to build credit. Since prepaid cards use the consumers own funds to establish available credit, credit history is not as big of a factor when applying for a prepaid card. For consumers who have good credit, the option of having a credit card that puts a cap on their spending (without incurring more debt) is very appealing in the current economic climate.

As prepaid credit cards continue to rise in popularity, consumers should know that using this type of card is not without a downside. While you provide the funds upfront, there are fees associated with the account. Consumers can expect to see application fees, processing fees and various other fees that can quickly reduce the amount of money you have remaining on your card to use for purchases.

If after reading the fine print on your prepaid credit card application you decide you are not willing to pay money to use your own money, you may consider looking  into other ways to prevent incurring more debt. Adjust your spending habits, cut costs and seek out other money saving strategies if using a prepaid credit card is not for you. Other consumers who do their research and find a prepaid credit card that has reasonable fees may be willing to pay a few dollars to have the convenience of using a credit card for purchases that otherwise would require a payment at the end of the month.

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Date April 20, 2009

More Focus on Financial Knowledge

Category: Credit Score, Money Management, credit card news

With so many consumers struggling with debt these days, there seems to be a major increase in the amount of credit-card-scanorganizations that are working to improve the financial literacy of the country at large. April is dedicated to be Financial Literacy month, with National Credit Education week being observed April 20-26 so there are many launches of new educational programs to help with debt.

Research shows that many Americans are not fully prepared to deal with their own financial issues. Many of the new programs are targeted towards students who are already struggle to pay for their education while still struggling with debt. According to research done by Sallie Mae, the largest student loan provider, more that 84% of undergraduates have at least one credit card, with nearly have of all college students having 4 or more credit cards, each with a balance.

While consumer debt is on the rise, student debt is even more so and there are several program being established to help students prevent debt from taking over their lives as well as learn how to deal with debt they have already incurred.

Programs like Student Debt Alert was launched earlier this month. It promotes the improvement of student loan programs and educates students about Grant Aid. The American Bankers Association started the Teach Children to Save Campaign, which works with younger students in teaching them the importance of financial literacy, including advice on the importance of budgeting and depositing money into a savings account regularly.

Getting an early financial education is an important part of a student’s learning process and will serve young adults well in the future. For non-student consumers, there are websites like Ask Dr. Debt, which has been referred to as the “Dear Abby of Debt” and provides users with tools to help with credit card and debt questions. A database of frequently asked questions helps consumers seek answers to popular questions concerning debt. There are also calculators and other tools to provide help with personal financial management.

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Date April 19, 2009

Dialing for Lower Credit Card Interest Rates

Category: Credit Card Management, Low Interest Credit Cards, People and Credit, credit card news, economy

Finance experts everywhere insist that you can often lower your credit card interest rates simply by calling and requesting a better interest rate or a modified payment agreement with lower monthly payments. While this may be possible for some people, many people who seem to need the slight financial break the most are finding it impossible to get a lower interest rate on their credit cards when they call and ask.

“I tried calling my credit card company for a lower interest rate. I was told they couldn’t do that and phone-and-creditthere was nothing they could do to help!” William Brewer of Oklahoma says.

If you try to call your credit card companies and the customer representative seems unwilling or claims to be unable to assist you – don’t give up so easily. Ask to speak to a supervisor, manager, or someone who IS authorized to consider the request for a lower interest rate or modified repayment terms. Remain polite, but be firm – the customer service representatives are likely reading from a script.

People who are most likely able to reduce their interest rates are people who are less likely to need it – those who haven’t missed any credit card payments and have a better than average credit score. Credit card lenders have an elaborate sharing system through their computers. They know what your FICO credit score is, they know whether you’ve paid your other accounts on time or late, and they know how much debt you’re currently carrying. The riskier you are, the more you would benefit from a lower interest rate to help get yourself back on track but the less likely a credit card company is to lower your interest rate when requested.

As the number of delinquencies and defaulted agreements increase, lenders are getting tougher and are unwilling to work with people. Unfortunately, raising interest rates on people who are already struggling to make their payments, or being unwilling to work out modified payment agreements in times of financial need doesn’t make it any easier (or possible, even) for some customers to make their payments and it seems the lenders are just shooting themselves in the foot by making it impossible for people to make payments.

If you do attempt to call your credit card companies to request a lower interest rate or modified payment agreement – do not mention the fear of losing your job as the reason for the request. That puts you in an immediate high-risk situation. If you’ve been making your payments on time previously, simply remind the company you’ve been a good customer and would like to remain their customer but are seeking the best interest rates – if they can’t lower your rate, mention you might transfer your balance to a competitor who can.

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Date April 18, 2009

Who Pays for Credit Cards in a Divorce?

Category: Bad Credit, Credit Card Management, Money Management, People and Credit, credit card news

It’s common for divorcing couples to have credit card debt that must be assigned to one spouse or the other during the divorce judgment. What is often left out however, is protection for each spouse for not being held responsible for any additional credit card debt incurred by the other person – or from having to pay off the credit card debt assigned to the other spouse in the event the spouse doesn’t pay their share of the joint credit card debt.

Are you surprised that this is a possibility? Creditors are not obligated to respect the terms of your divorce judgment when it comes to payments. If you were married when the debt was created, they are legally able to come after you for the payment if it is not paid, even if the divorce judgment assigned that particular debt to your spouse. Prior to meeting with your lawyer to assign debts, it is recommended that you obtain a credit report for each of you to make sure there are no credit cards or accounts opened that one of you are not aware of, to ensure they are assigned appropriately during the judgment.

How to Cut off Liability for Future Debtfinancial-problems

For all credit cards that have both your names on the accounts, you should either close the accounts entirely so that they can no longer be used, or at a minimum remove your name from the accounts that your spouse will continue to use. Removing your name from the account will not relieve you of responsibilities for debts incurred prior to the divorce, but if the spouse goes on to add more debts to the account after the divorce, you will not be held liable for those debts.
If you fail to remove your name from any joint account that is going to be used by your ex after the divorce, the payments (or lack of payments) will be reported on your credit report as well as your spouse – and you will be equally responsible for payments, interest, penalties and any legal fees resulting from the use of that card.

Protect Yourself From Future Financial Problems

One method of further protecting yourself is to insist that any joint account that will be held by your spouse after a divorce be refinanced. This is often as simple as applying for a new card in just one person’s name, and then transferring the balance. The money transferred from the old account to the new account is now the legal responsibility of the person who was assigned that debt in the divorce. If they fail to pay it – it will not fall back on the other person.

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Date April 17, 2009

Can We Live in a World Without Credit Cards?

Category: People and Credit, Statistics, Student Credit Cards

About 25% of Americans living a cash-only lifestyle prove that it is in fact possible to live a life without credit cards. For the rest of us relying on the convenience of credit cards and the access to money when we may not have the cash flow available – we wonder how it’s possible to sustain a life in these modern times without using plastic.

The creators of the FICO credit score, Fair Isaac Corporation, claims approximately 20 to 25 million people in the US do not have credit, with another 35 million living in the US with a very limited credit history. These numbers boil down to some surprising statistics: one in every five Americans do not have access to credit.

cut-up-cardsOf course, there are two groups of people in the category of non-credit card users: people who don’t have credit cards because they don’t want them; and those who just can’t get credit cards because they have bad credit, or due to their immigration status, or other reasons.

The Federal Reserve Board Survey of Consumer Finances of 2004 showed that 58% of households having credit cards had balances on their cards. With the current state of the economy, studies have been showing that the use of credit cards is declining (whether that is due to inability to get new credit or a desire to avoid getting into (more) debt is unknown).

“In college, I got my first… and second… and third credit card. Every where I turned their were people set up on campus giving away free stuff if we applied for their credit card. I mainly used my credit cards to fill in where student loans left off and my own income wasn’t quite enough when it came to paying for college tuition and required textbooks – but after four years of relying on the credit cards to fill in those gaps, I graduated with about $6,000 in credit card debt,” says Stacy Jamezegour. “The credit card debt was on top of the $45,000 in federal and private student loan debt!”

Jamezegour goes on to explain that some of the credit card debt also came from repairing the vehicle she used to get to and from work and college – since all of her full-time income was paying for college and living expenses she was unable to establish an emergency fund. She believes that she would not have been able to finish college had she not had credit cards available to “fill in” the gap of what she needed to pay and what she had available through student loans and her income.

Others who have used credit cards and then paid them off later vow never to go into credit card debt again. They are able to live a credit-free lifestyle, and once adjusted, say there is really no need to carry a credit card in your wallet. “I used a home equity loan with a low interest rate to pay off my high interest credit card debt,” Jason Michaels explains, “instead of making multiple payments to several credit card bills each month, I just make one, lower payment. I will never use credit cards again.”

Like many people who have sworn of credit cards after bad experiences or have decided never to use them in the first place, Michaels uses a debit card with a MasterCard logo connected to his checking account to handle any purchase that would traditionally be done on a credit card – like reserving a hotel, or to pay for items online or by phone. This counters the argument of credit card users that you really need them for certain expenses or reservations.

Credit card companies have made billions upon billions of dollars off consumers using credit cards incorrectly. As people began relying on credit cards as “additional income”, forgetting that it would have to be paid back, or otherwise allowing the debt to become too much to handle – interest payments and over-the-limit fees and other finance charges we a welcomed result by the industry. As consumers become more knowledgeable and take better control over their financial situation – consumers and credit card companies alike may discover that it is in fact, possible to live in a world without credit cards.

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Date April 16, 2009

Capital One Survey Shows Consumers Are Changing Their Spending Habits

Category: credit card news, economy

The United States recognizes April as National Financial Literacy Month. This is in an effort to highlight the importance of financial literacy and educate consumers on the importance of developing healthy financial habits.

Capital One, in recognition of Financial Literacy Month surveyed over 1000 American consumers to learn more about their spending and saving habits. The results indicate consumers are definitely making efforts to better manage their finances and save more money. The following results from the survey give an overview of the changing spending habits of American consumers.

  • Fifty percent of those surveyed have been clipping coupons to save money.
  • Fifty percent of consumers are canceling or postponing their vacation.
  • Sixty-two percent are cutting entertainment expenses.
  • Sixty-eight percent are not dining out as often.

This news is encouraging and indicates that American consumers may finally “get it” when it comes to the excessive consumerism that has taken over our society in the past few years. Unfortunately not all survey results are as positive. While most Americans are making temporary adjustments to their spending habits to survive the current financial crisis, other results indicate consumers are not really making the long term lifestyle changes required for financial security. 

  • Forty-seven percent of respondents are putting less money in their savings account.
  • Forty-one percent have reviewed their credit report, even though most of the respondents are aware they have access to a free annual credit report.
  • Twenty percent have never reviewed their credit report.

These results indicate that there is indeed a need to focus on financial literacy in this country as consumers continue to struggle with increasing the amount of money in their savings accounts. In addition to not increasing their savings, it would seem consumers are not taking advantage of reviewing their credit report. Your credit score is important in so many areas and the information on your credit report can affect your score. By not viewing your credit report you are unable to notice and correct erroneous reports or view activity that may indicate identity theft.

Americans must not only focus on the short term benefits of altering their spending habits but also recognize how the positive changes they implement now will have long term benefits financially. To properly manage your personal finances you need to not only spend your money wisely but also save and invest in your future.

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Date April 15, 2009

Credit Card Interest Dropped a Bit

Category: credit card news, economy

The annual interest rates of three of the more popular categories if credit cards have dripped a bit last week after two weeks of increasing rates. Overall, the interest rates for most credit cards remained pretty steady.

The two cards with dipping interest rates include the balance transfer cards which consumers are offered to aid in consolidating debt from other credit cards. The highlight of the balance transfer card is often a low introductory rate. Consumers take advantage of the low interest rates during the introductory period and pay off the balances before the regular interest rate returns to the account. This gives consumers the advantage of paying off credit card debt without incurring additional finances charges. The drawback is carrying a balance after the introductory period has ended. That rate was down to 13.13% on average, which is a marginal drop from the week prior’s average of 13.15%.

The other category of credit cards with dropping interest rates included the cash back reward cards which decreased from 13.86% to 13.83%. The cash back rewards cards offer consumers cash back in their pockets for each eligible charge put on the credit card. Consumers who utilize the credit card’s cash back rewards system often receive between 1%-5% back in cash based on eligible purchases made with the credit card.

Traditional low interest cards, which are reserved for consumers with very strong credit histories, still offer APR’s lower than the national average at 11.6%, leaving it unchanged from the week prior. Consumers are still struggling to contend with the changes made in the credit card industry, including the higher interest rates and reduced credit limits on their accounts.

The decline in interest rates is slight and does not offer much relief from the burgeoning debt by credit card users. It is becoming increasingly common for consumers to find themselves living off of credit cards as families struggle to survive through job layoffs and the economic difficulties the nation is still facing.

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Date April 14, 2009

Reports Show More Students Paying Loans With Credit

Category: credit card news

Reston, VA – There are now more concerns for student finances than ever before. Sallie Mae Servicing is reporting that more students are using credit to make their regular tuition payments for school. Last year, around 30% of those in college were using credit for tuition, a large jump from years prior.

The average amount being charged for expenses directly related to higher education is around $2,200 being charged on plastic. Not only is the increase in usage become a huge concern, it is also worrying to realize that the average student has 4.6 credit cards and over half of students attending college have 4 or more active credit card accounts.

What is of most concern is the collateral damage to students who are getting in over their head in debt during their college years, with an inability to pay off such debts during or shortly after college, thus leaving credit damage a big reality for most students. Right now, the average credit card balance carried by a college student in the United States is around $3,200, which ranks higher than during any other year.

The result of the decision to charge tuition and college expenses on credit is that students could end up paying double for their college degree than if they used other methods, such as financial aid, to pay for their schooling due to the additional finance charges and penalties for late or missed payments.

Credit card use during a college career can make or break a new graduate’s financial future and alternative methods for paying for college are recommended. While it may be increasingly difficult to afford a higher education, students should be encouraged to avoid carrying credit card balances from month to month and invest time into finding alterative methods to finance their degree, their school supplies, and the required educational textbooks.

Other issues the study uncovered is that 60% of college students were surprised at how high their credit card balances actually were, with another 40% saying they charged their card for items they knew they did not have the cash to pay off the bill. Only 17% of student surveyed said they regularly pay off their balances in full. 1% admitted to having others such as a spouse, parent, or other family member footing the credit card bill, leaving 82% carrying month-to-month balances that accrued interest charges.

The report was conducted by Sallie Mae to bring to light the importance of keeping college students informed on the importance of keeping credit card balances low and the educational aspect of using credit wisely. For more information on the full results of the full study, visit Sallie Mae’s website.

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Date April 12, 2009

NextSpace on Cooper Street in Santa Cruz, California Saw Unexpected Jump in Business When Fiber Optic Internet Was Vandalized on April 9th

Category: credit card processing

Could you survive a day without Internet access? On Thursday, April 9th, vandalism of fiber optic cables in Santa Cruz, California cut out Internet and cell phone service for most residents and business owners. ATMs didn’t work, some banks were forced to close their doors while others allowed one customer in at a time and attempted to assist them without the use of their computer systems, and most shops couldn’t process credit or debit card payments.

Some shops would jot down customer credit card information to process once the computer systems were restored, but for customers who didn’t trust strangers with their credit card details, they went without or resorted to using checks – something that many people have almost forgotten how to do!

The Wells Fargo branch on Mount Hermon Road was able to use emergency protocols to continue servicing customers, although things moved at a snail’s pace and customers were waiting in line outside the branch for their turn. Customers of downtown Wells Fargo and Comerica branches weren’t as lucky to wait though, and couldn’t use their bank at all as they had to close down for the day.

A graphic designer planning to take a conference call while sipping a coffee at LuLu Carpenter’s coffee shop was unable to reach her client without cell phone or internet access. Kevin Marlar of Marlar Construction said work came to a standstill as he waited for people to show up with building plans – nothing could be faxed, bids couldn’t be received.

Our society has come to rely on internet and cell phone communications for everything from basic communication to payment processing to keeping a business running. When those communications stop – so do many businesses and the routines of everyone are affected.

Some businesses took advantage of the lack of internet and communication services and turned it into an opportunity for enterprise. The co-founder of NextSpace on Cooper Street took to riding his bike through downtown Santa Cruz, shouting out that the internet works at NextSpace – and provided day passes to individuals wanting to use the co-working office space and lounge. NextSpace uses Comcast internet, which apparently doesn’t rely on the same fiber optic network that the rest of Santa Cruz uses, because it was one of the few providers that still offered services on Thursday.

“We saw a ton of people,” Kabanagh, the chief operating office of NextSpace, said. “The refugees from the land of no Internet.” Interested in visiting NextSpace?


NextSpace Tour from Margaret Rosas on Vimeo.

Also interesting was newspapers reported that their newspaper boxes emptied quickly as people purchased newspapers along Pacific Avenue in order to get news on a day when they couldn’t get it from their internet connections.

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Date April 11, 2009

Banks in Better Financial Position Want to Pay Back Government Loans to Avoid Restrictions

Category: Obama, bailout, economy

obamaOn April 3rd, President Obama came out of a meeting with senior economic advisers and said, “what you’re starting to see is glimmers of hope across the economy.” Banks that are now in a better financial position are looking to pay back the bailout loans they received in order to avoid the restrictions that are attached to that money – increases in executive pay, for one, and hefty premiums banks agreed to pay when they first received the bailout funds.

The Obama administration’s next step for fighting the recession is to complete stress tests of banking institutions – similar to the testing that took place with General Motors before the forced resignation of the chief executive. The balance sheets of the weaker banks will be examined over the next three weeks for “toxic assets”, like mortgages that no one is willing to purchase at this time. Banks are resisting this process because they will have to show big losses when they relieve their financial statements of deteriorating mortgages and mortgage-backed securities. Analysts have estimated that US banks have more than $1 trillion in mortgages on the books – but only a small percentage have been labeled as likely losses. Goldman Sachs economists estimate that banks are valuing their mortgages at an average price of 91 cents on the dollar – but this is much higher than investors would be willing to pay for them at this time.

Despite the resistance, senior officials are pushing forward with the plans as they are expected to prove pivotal for the next phase of the bailout effort. The new $500 bill to $1 trillion plan will make use of public subsidies to encourage private investors to purchase mortgage assets and help provide some economic relief.

The Treasury has plans to subsidize purchase of these “toxic assets” of mortgages and mortgage-backed securities with low-cost loans to buyers to help cover the upfront expense – but there is a large percentage of analysts that warn that most banks will remain reluctant to sell the assets and this becomes one of the Obama administration’s biggest challenges for pushing forward with this bailout plan.

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Date April 10, 2009

Visa Introduces a Cellphone System To Pay With Credit

Category: Visa, credit card news, payment systems

In Malaysia, Visa has introduced a cellphone payment system that uses a chip in a cell phone to communicate the visa-cell payment transaction with the merchant terminal. Japan currently uses a similar phone payment scheme, and it is expected that this technology will be rolled out into other countries in coming years.

Here’s how Malaysia credit card buyers use their cell phones to make payments:

  • They buy a phone having the special field communication chip in it (like the Nokia 6212).
  • They connect the phone with their bank via the mobile Internet to set up the payment account.
  • When they’re ready to pay for something, they wave their phone within 4 cm of the merchant terminal, which is exactly like swiping the magnetic strip of a credit card through a terminal.

Currently, the United States has a similar payment system used in a handful of retail establishments which uses an R.F.I.D system. Think about Mobile SpeedPass – where you could flash your special keychain at the gas pump and automatically pay for your gas. This system creates tags in credit cards or for keychains, so instead of swiping the credit card through the terminal itself, you simply wave the tag or keychain to make the payment. The use of the R.F.I.D system is not very widespread yet, as there are concerns over unintentional purchases – for example, what happens if you walk by a terminal but did not make a purchase? It’s possible you could be paying for the person who is currently checking out.

The cell phone equivalent being used in Malaysia offers password encryption for the payment capabilities within the cell phone. That way, if a thief runs off with your phone, they can’t also go on a spending spree using your phone.

The system is currently expanding to make it possible for the phones to handle multiple payment accounts – so users could pay for their parking and public transit through one payment account, their groceries on another. Additionally, these phones will soon make it possible to allow both credit and debit transactions to take place through the phones, simply by selecting which account to use when you pay using the phone.

What is the purpose of using phones for payment instead of credit cards? Visa is hoping to appeal to individuals who have their phones accessible at all times, and therefore find it easier and quicker to pull out their phone at the retailer checkout line rather than finding their credit card in their wallet.

In the United States, Visa is currently testing various ways of enhancing credit cards by using text messaging services and coupons for Visa merchants. For Android smartphone users, they can receive coupons on their phone for retailers near their current location right on their phones – and there are plans to roll out the coupon system to other smartphones in the near future.

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