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July 12, 2009

Credit Companies Fighting Tooth And Nail For Interchange Fees

With the release of credit card bill, credit card holders can now expect at least some semblance of fairness from their credit companies. Merchants and other businesses do not have such luxury, however.

Credit Companies Fighting Tooth And Nail For Interchange Fees For merchants and other businesses, accepting credit card payments from customers can be a financial pain. Every time a customer uses his or her credit card to pay for a purchase, the credit company issuing the credit card will charge the merchant a percentage of the purchase. The fee, known in the industry as “interchange fees”, ranges between 2% to 5 %. When credit cards were relatively new, the purpose of interchange fees was to pay for the administrative expenses a credit company incurs for processing a payment via credit company. However, modern technology have drastically lowered the cost of credit card payment processing. Credit card companies still continue charging interchange fees, though and, according to figures, since the year 2001, the revenues that credit companies see from interchange fees have risen up to 120%.

Complaints against the unfairness of interchange fees are usually met with the explanation that the fees are essential for covering the cost and the risks of credit card transactions. According to them, these have grown significantly through the years. Critics are, however unimpressed, saying that it is the credit companies who have increased these themselves by proliferating credit cards to consumers.

Merchants are currently fighting back against the credit card companies over the issue of interchange fees. The current system is very much tilted towards the credit companies. They set the interchange fees unilaterally and the fees are not issued at a flat rate so that interchange fees can be higher for more prestigious types of credit cards.

The merchants currently have the Credit Card Fair Fee Act in the works at Congress. The Senate version gives merchants the power to negotiate the interchange fees with the credit companies. Disagreements are to be settled by an independent, three person arbitration panel. The bill would also require credit companies to provide better transparency measures for transactions with merchants. The House version of the bill is basically the same.

Credit companies are actively fighting the Credit Card Fair Fee Act. They are lobbying against the passage of the bill and are running several advertisements which basically say that merchants ought to pay their share. Merchants are arguing that they are already paying their share and have had to pass on the costs to consumers because of the high cost of that share. Credit companies are countering that, should they lower their interchange fees, merchants may pocket the money and not pass on the savings to the consumers. At the end of the day, it is the consumers who get hit worst.

July 8, 2009

Credit Card Terms Likely To Change Against Cardholders As New Bill Approaches Activation

Last May, President Barack Obama signed into law the credit card bill. The credit card bill introduces several regulations that aim to help credit card holders get fairer treatment from their credit card companies. The bill contains regulations that will stop the arbitrary raising of interests and fees, minimize the offering of credit to high risk consumers such as those below 18 and force credit card companies to have clearer and more easily understood languages on their credit card agreements and bills.

Credit Card Terms Likely To Change Against Cardholders As New Bill Approaches Activation Many of these changes would certainly help in reinvigorating the finances of many an American consumer. Unfortunately, the bill will not become active until February of next year. In the meantime, credit card companies are doing their utmost to change their credit card terms in an effort to earn as much as they can now and to prepare for the credit card bill when it becomes active.

Right now, many credit card companies are raising interest rates to very high levels. They are also increasing their fees for most credit card transactions such as balance transfers and cash withdrawals. This is because, when the credit card bill becomes active, credit card companies won’t be able to raise their interest rates and fees just as easily. Because credit card companies also see that credit is going to be harder to secure next year with the bill in place, they are also cutting available credit right now. Thus, many credit card holders are finding that they have less and less credit available in their credit cards.

The effect of these drastic steps among consumers is quite devastating. Many credit card holders are already having a hard time paying off their debts. With the increasing interest rates and fees, many are finding it more and more difficult to continue paying their bills off. It is not hard to see that the number of delinquencies and charge-offs may soon rise. With their available credits cut off, card holders are also finding that they have lost what little financial leeway they had to maneuver. More and more credit card holders now find themselves in a high risk of going bankrupt.

Credit card companies are also not reserving these drastic steps for their less than stellar borrowers. Credit card holders with high credit scores are getting hit just as bad. What’s more, what the credit card companies are doing are also having a large negative effect on most credit card holders’ credit scores.

While a lot of people are thinking that the activation of the credit card bill will save them from credit card problems, the credit card industry is now making sure that that is not the case. Credit will become more expensive by then and only time will tell if that is a good or bad thing.

July 3, 2009

Agents To Carry Transaction Fees For United Airlines Tickets

United Airlines has recently circulated notices to some of their travel agents stating that they will no longer be taking the burden of credit card fees when customers purchase tickets through credit cards. The fees will have to be paid by the travel agents, instead.

Agents To Carry Transaction Fees For United Airlines Tickets United Airlines is the United State’s third largest airline. Their latest announcement will affect a large number of agents when it begins on July 20. Credit card transactions for tickets carry transaction costs which used to be handled by the airline company. These charges range from two to three percent of the transaction amount. Once the content of the notices come through, the travel agents themselves will have to carry the costs of credit card transaction charges.

According to the notice, travel agents will have to pay the transaction fee for corporate or leisure customers who buy their tickets from them through Mastercard, American Express, Visa or some other credit company. The travel agents are being instructed to report these purchases as cash transactions. The company also warns travel agencies that, if they try to pass the credit card transaction fee to United Airlines, the company will charge their accounts with a charge of seventy five dollars per ticket.

The agents are naturally in an uproar over United Airlines’ actions. Traditionally, it was the airlines responsibility to shoulder the costs of credit card transactions. Once the transaction costs are moved to the travel agencies, the agencies the cost of operating could be too high for them. Most likely, these agencies will pass on the cost to their customers.

Jean Covelli, Travel Team president from Buffalo, N.Y. Said that the credit card fee should be shouldered by the entity running the business, meaning United Airlines, as the cost of being the makers of the product. According to Covelli, their agency carries multimillion dollar accounts which means that the addition of a three percent transaction charge would be a formidable burden for them.

Although unpopular, the move is quite understandable considering United Airlines’ current economic condition. Last year, UAL Corp., parent company of United Airlines, saw a loss of 5.35 billion dollars. During the first quarter of this year, their losses were at 382 million dollars. Analysts have already stated that United Airlines is just behind US Airways in terms of exposure to the risk of bankruptcy protection. The airline has seen an alarming decline in traffic, most of which were in their highly profitable first class and business class tickets. As a result, the airline is aggressively looking for ways to cut costs.

June 20, 2009

Loan Payments Using Credit Cards A Bad Move But Getting Popular

As the economic crisis continues, more and more American consumers are finding themselves barely able to pay for basic utilities. Mortgages, car loans and student loans are becoming more difficult to pay off as less and less cash is available. Many American consumers are turning to paying off these loans using credit cards and the service is getting even more convenient as it has just gotten online.

Loan Payments Using Credit Cards A Bad Move But Getting Popular Currently, there are a few online companies that are offering credit cardholders the chance to payoff their loans and bills online using their credit cards. These companies offer cardholders who pay their bills every month many attractive incentives. One such company, ChargeSmart, allows cardholders to pay for auto loans, auto leases, mortgages, student loans and utilities online using their credit cards.

Philip Mikal, Chief Operating Officer of ChargeSmart said that the company is not targeting borrowers having debt problems. According to him, while the company has processed more than 1,000 transactions since its launching, only 1% to 2% have been for delinquent accounts. He stressed that the majority of their customers were smart spenders who wanted to maximize their rewards program by using ChargeSmart’s service.

Major credit companies are also seeing that loan and utilities payment are an untapped source of income for credit card transactions. American Express was one of the first companies to see this opportunity and embrace it. In 2003, the company allowed luxury rental payments and, in 2006, it allowed luxury condominium down payments. In May of 2007, American Express introduced its Express Rewards Mortgage program to encourage even more cardholders.

IndyMac Bank and American Home Mortgage were the first lenders to offer American Express’ service. When these two companies collapsed during the sub-prime mortgage crisis, American Express found itself highly exposed. However, it may have not given up on the idea just yet. Sarah Beron, spokeswoman for American Express stated that the company is evaluating the Express Rewards Mortgage program to determine what it will do next.

The problem with these kinds of practices is that it violates a long held rule in finance: Never borrow from Peter to Pay Paul. There is wisdom in this rule. When credit cardholders use their credit cards to pay their loans and mortgages, they are only digging themselves deeper into debt. If the practice continues, it could endanger not only the credit cardholders but it could bring the sub prime loan crisis into the credit card industry, further worsening the credit crisis.

June 18, 2009

Debit Card Gaining Popularity, Now Includes Rewards

As more and more American consumers see the risks of using credit cards for their purchases, debit cards are fast becoming the plastic of choice in the U.S. As a matter of fact, the switch from credit cards to debit cards has been a growing trend among consumers for a few years now.

Debit Card Gaining Popularity, Now Includes Rewards In most cases, debit cards have many similarities to credit cards. They are essentially similar in form. They are supported by Mastercard and Visa. They also offer the same convenience of paying with plastic instead of cash and allowing cardholders to withdraw money when needed. The main difference between the two is that, when a cardholder completes a purchase using a credit card, he or she is taking out a loan to pay for that purchase while, when a cardholder uses a debit card for that same transaction, he or she is using his or her own money to pay for the purchase.

With credit cards, accumulating debts is virtually inevitable. With debit cards, its impossible because, unless you opt for an overcharge feature, once you’ve zeroed your account, you cannot make anymore purchases unless you deposit more money into it. Debit cards have therefore become the preference for people who want to have the convenience of credit card transactions while still keeping a tight control in their finances.

Debt card usage is definitely on the rise. Statistics from CardData show that while purchases from Mastercard and Visa credit cards increased to 40% since 2004, debit card purchases increased to 120%. Attempting to cash in on the trend, credit card companies are doing their best to attract more customers through the traditional hook they use for credit cards: rewards programs. These days, debit cards, much like credit cards also offer reward points and cash back programs for cardholders. However, there is a difference.

Debit cards generally have a weaker rewards points program compared to credit cards. For example, instead of earning 1 point per $1 spending, debit cardholders need to spend $2 to earn 1 point. Debit cards that offer rewards also come with an annual fee which increase as much better benefits are added. Also, while debit cardholders use a PIN to execute regular transactions, for reward transactions they have to opt for a signature transaction to get the reward.

Although debit cards present a great way for consumers to keep their finances in check, for the credit savvy, it can mean losing out on the attractive rewards programs of credit cards. Therefore the choice is between losing control of your finances and getting rewards points for purchasing with plastic. Consumers will have to choose which one is more important for them.

June 16, 2009

Weak Credit Card Security Increases Credit Card Fraud Risk

If you are a credit cardholder, surely one of your main concerns is the security of your credit card transactions. Credit card fraud is a very real and very common threat that has victimized many a cardholder. Nobody wants to be victimized by a seemingly random crime that has the effect of stealing your credit identity and charging you with the purchases of someone else.

Weak Credit Card Security Increases Credit Card Fraud Risk Security wise, credit card transactions in the United States needs a lot of work, security experts say. The existing setup for credit card transactions are optimized for speed and convenience, not security. These are, after all the major requirements that credit card companies and merchants need to meet the demands of credit card purchases. While credit card companies are implementing security checks, they are not as robust as security experts would expect them to be.

As serious a risk as credit card fraud is, you would expect there to be tighter measures to keep it in check. Currently, the U.S. sees more than 50 billion credit card transactions per year, a major security risk. Surprisingly, the government has left it to the credit card companies themselves to design the proper security rules to keep these transactions secure.

In 2006, American Express, Discover, JCB International, Mastercard and Visa created the Payment Card Industry Security Standards Council. Through this, they created a uniform set of security rules for credit card transactions applicable to merchants. The result was the PCI standard which still exists today as the standard for security that every merchant doing credit card transactions must attain.

According to Avivah Litan, an analyst from Gartner Inc., security upgrades for PCI compliance have cost retailers and other involved payment processors around $2 billion. PCI compliance has also gained widespread acceptance with 93% of the major U.S. retailers and 88% of medium retailers having PCI compliance.

Unfortunately, many security experts have found that the PCI compliance standards are too lenient and does not really reflect the actual security risks involved. Furthermore, PCI compliance audits are known to be inconsistent. Certification courses are also merely cursory and can take as short as a weekend. Bigger retailers can also provide PCI compliance evidence by themselves which makes the process open to major mistakes and fraudulent evidence. Also, retailers having less than 6 million annual transactions are allowed to do evaluations on themselves. These comprise around 99% of all retailers.

All of this means that whenever you use your credit card transaction, you are basically gambling against the odds that the merchant your are using has secured the transaction for you. As long as credit card transaction remains this lax, you probably should consider cash payments as your primary payment option.

June 8, 2009

Unrivaled Convenience With iPhone Credit Card Processing

iPhone find one more reason to enjoy their smart phones with iPhone credit card processing.

Unrivaled Convenience With iPhone Credit Card Processing CellCharge, specialists in enabling cellphones for credit card processing, offers iPhone owners the most convenient way to process credit card transactions for merchants. The service is a great way for small businesses to add credit card transactions to their payment options without having to invest a large amount. They can also process payments anytime and anywhere, as long as they have their iPhone with them.

Setting up an account with CellCharge is also quite easy. First, merchants have to have the proper iPhone software to do CellCharge credit card transactions. The iTunes store has the CCTerminal and the ProcessAway iPhone application available for just this purpose. These two are also the recommended software applications of CellCharge. The two iPhone applications are low priced and are very user friendly, even for beginner-level users. For merchants, ProcessAway is a much better application because of its inclusion of a “tip” feature.

Merchants who want to get ahead of the competition should really consider CellCharge’s service. It is a well known fact in th industry that credit cardholders are spend much more than those who pay with cash or checks. They are also more prone to impulse buying and are more generous tippers as well. With the ease and convenience of paying through an iPhone application, merchants can receive payments anywhere and anytime.
With the current economy the way it is, merchants are also going to appreciate the fact that CellCharge does not charge hidden fees. This is something that merchants should be aware of about credit card processing through cellphones. Some credit card companies who offer this kind of service actually have a hidden service fee which merchants are rarely aware of. The only fee that merchants will have to worry about are the interchange fees which are dependent on Visa and Mastercard. Of course, should these companies raise the interchange fee, then merchants using the CellCharge’s service will see a rise in their transaction fees, but that is hardly company’s fault.

The service being offered by Cellcharge is also quite flexible. Unlike other companies which charge extra for transactions which are called in through phone, Cellcharge has a toll-free number that merchants can call to run transactions through. The number of users doing transactions through phone is also not limited to only a single user. Thus, three or four merchants could run transactions through the phone. Even better, the merchant can also run transactions through his or her iPhone at the same time as well. Merchants who are interested in the service that CellCharge offers can do a search online and visit their website to see what they have to offer and to sign up.

May 31, 2009

Interchange Fees May Be Next Target for Legislation

The recent passage of the credit card bill from Congress was cause for celebration for credit cardholders, though the legislation itself won’t become active until nine months have passed. Now, the government is looking into other credit card practices that seem unfair to consumers and how best to legislate them.

Interchange Fees May Be Next Target for Legislation Currently, the Government Accountability Office is studying credit card usage among American consumers. They are interested in one particular practice and its effect on merchants and credit cardholders: interchange fees.

Interchange fees are fees that merchants pay whenever a customer uses a credit card. Essentially, when a merchant’s customer uses his or her plastic to purchase an item, the bank of the merchant pays an interchange fee to the bank of the credit cardholder so that the transaction goes through. This is true not only for credit cards but also for debit cards as well. The interchange fee for every transaction is usually at 1% to 2% of the total amount of the credit cardholders’ purchase. Thus, for a transaction of $100, the merchant has to pay anywhere from $1 to $2.

Most people take interchange fees for granted, as they are often buried within their transactions. However, some are taking keen interest in them. Consumer advocates are very much aware of how much interchange fees affect daily purchases of credit cardholders. Merchants are also quite aware of them, being the group who has to shoulder the payment or pass it on to their customers. The credit card companies are also very much aware of the profits that they are getting from interchange fees. Although a 1% charge may seem minimal to the regular consumer, it can mean millions to a credit card company that sees profit from it from thousands of credit card transactions every day.

The recently passed Credit CARD bill (Credit Card Accountability, Responsibility and Disclosure Act) actually has a provision that can be used to address interchange fees. The provision requires investigation on fees that merchants have to pay so that their customers can use credit cards. The main thrust of the provision is to provide disclosure to consumers on the credit card industry’s practices.

Some have noted, however, that disclosure is not enough for change to happen. Although informing credit cardholders of credit card industry practices seems like a good first step, there is still a need for stronger legislation. It ultimately depends on whether there is a change in the way credit cardholders use their credit.

May 26, 2009

Rapid Rise On Credit Card Fraud Seen

Credit card fraud has long been one of the most controversial problems of the credit card industry. The nature of the crime is doubly troubling as credit card fraud, more often than not, involve the theft of information of a personal nature which can be hard to secure again once it has been compromised.

Rapid Rise On Credit Card Fraud Seen Some types of credit card fraud can also be difficult to detect and, since consumers only see the summary of their purchases when their bill comes, finding out that they’ve been a victim always comes after the fact. This makes credit card fraud much more difficult to track and the perpetrator much more difficult to apprehend.

CQR Consulting is a firm specializing in information security. Their security specialist, Steve Darrall, recently released a statement saying that the total cost of fraud in 2008 has risen by at least 51% compared to the figures from 2007. These figures were taken primarily from credit card fraud involving counterfeiting cards and card skimming.

The information security firm has also noted that CPN or card-not-present credit card fraud along with card counterfeiting and skimming is the most common type of credit card fraud that is threatening cardholders today. Card-not-present credit card fraud is when the illegal transaction occurs without the cardholder or the card itself present during the transaction is done. This is most common in credit card transactions involving telephone or mail orders. Internet or online transactions are also commonly used for card-not-present credit card fraud.

Financial institutions are not standing still and, currently there is a strong push in the financial industry to increase their information security and reduce their risks for fraudulent credit card transactions. Financial institutions are also encouraging their respective merchants offering card payment services to improve their defenses against credit card fraud. This usually involves making necessary information storage equipment more secure and minimizing as much as possible the amount of personal data about the credit cardholder that the merchant will have access to.

According to Darral, there are two initiative that the financial industry is pursuing in order to improve the security of both cardholder and card transaction information. One is the PCI-DSS or Payment Card Industry Data Security Standard. This is developed primarily by the major credit card companies and it will be applied to all organizations that process, store or transmit data pertaining to cardholder payments regardless of the size or the transaction numbers. The other is the Payment Application Data Security Standard. This will be applied to software applications which are made to store, process or transmit data pertaining to card payment.

May 17, 2009

Settle Your Debts Easily with Debt Consolidation Loans

If you are one of many Americans having debt problems, then you know that the situation is becoming worse and worse as the economic crisis continues. As the available cash in American households begin to dwindle, the more debts a household has, the more problematic the situation gets. If you have a similar problem, you might want to consider consolidating your loans.

Credit Cards and Debt

Credit cards have become the de facto standard for a large number of financial transactions in the U.S. The ease of use and convenience that credit cards offer is incomparable to having to carry a large amount of bills and coins on your person whenever you have to go and make a purchase. Unfortunately, that convenience and ease of use also makes credit cards financial traps that many people have fallen into.

Credit card transactions have a way of making the cardholder forget that the transaction actually translates to debt. This debt often adds up alarmingly and, before they know it, cardholders find themselves deep in debt.

High Interest Debts and Multiple Debts

The interest rates of credit cards have been soaring these past few months. Although some cards still offer affordable and low interests, they are the exception rather than the rule nowadays.

Paying off your debt also becomes doubly hard when you owe debt to multiple lines of credit. Usually, each line of credit you have to pay off will have a different set of rules and interest rates.

Debt consolidation can answer your debt problems.

If you find yourself having to deal with large debt payments and juggling multiple debts every month, you ought to see what debt consolidation can do for you.

Basically, debt consolidation can do two things for you to make your life easier. First, it can greatly reduce your monthly debt payments. This can help you catch up with your debts without sacrificing necessary expenses. Secondly, a debt consolidation program can simplify your debt payment scheme so that you have to deal with only one or two debt payments every month.

How does it work?

Debt consolidation is basically the same as taking out a loan to pay off all your debts. You will then have to pay only the loan that you took out instead of all the debts that you previously had. This can help you in a number of ways.

Usually, the loan that you take out in a debt consolidation program will demand lesser monthly payments from you. Also, by taking out one loan to pay off all your other loans, you will now have only one loan to pay off.

Debt consolidation can be a lifesaver in this troubled economy. If you are someone who is getting hit bad with debts, you should visit a debt consolidation agency and see what they can do for you.

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