Archive for the ‘credit card’ Category

New FTC Rules Curb Shady Debt-settlement Companies

Thursday, October 14th, 2010

Millions of Americans are deep in credit card debt – a situation that spelled opportunity for shady debt-settlement companies.

In an effort to protect consumers from their fraudulent practices, the Federal Trade Commission (FTC) created new regulations which will go into effect on October 27.

These regulations apply to for-profit companies offering debt negotiation, debt settlement, and credit counseling. The rules don’t apply to nonprofit companies, but do apply to for-profit companies that claim to be nonprofit.

The primary provisions of the new regulations are:

* Agreements must be in the form of a written contract which outlines the work to be performed and the payment to be charged

* The company must reveal how much time it will take to see results

* The company must disclose the pitfalls of using a debt relief service

* Companies may not collect an up front fee

* Companies must successfully settle or negotiate at least one of the consumer’s debts and the consumer must make at least one payment to the creditor before any fees are paid.

* Fees must be based upon results. If a consumer has 5 debts and the company settles only one, they may not collect the full fee

* The rules covering telemarketing are expanded to cover calls made from the consumer to the company.

One detail not covered by the new FTC rules is the dollar amount of the fees to be charged for services rendered.

Since scammers continually work to find ways around regulations, consumers should be cautious. Not only will some for-profit companies pose as nonprofit companies, some will undoubtedly claim to be implementing government programs.

Thus, before you consider working with any debt relief company, do your research. Contact the Better Business Bureau, the FTC, or the Office of Consumer Affairs before signing a contract with any company. The Better Business Bureau has extensive files documenting thousands of consumer complaints about debt-settlement companies across the country.

Many consumers would be better off contacting their creditors themselves and trying to work out a repayment plan. Not only will they save money, they’ll have better assurance that their creditor won’t sue.

In general, debt relief companies will try to negotiate a smaller balance with creditors. If successful, they’ll collect funds from the consumer until they have enough to settle the debt entirely. This could mean a delay of several months, or even years before the creditor is paid. Impatient creditors may well bring suit before the balance is paid.

Mike Clover

Pay Attention to this Anti-consumer Loophole in the CARD Act

Sunday, October 10th, 2010

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 is now fully in place. The third stage of reforms went into effect on August 22, 2010.

But mainstream news doesn’t tell the whole story…

The CARD Act should be good news for consumers with credit cards, and in many ways it is, but the news around the reforms has been slightly misleading. To understand all of the provisions, you need the rest of the story.

For instance, you heard that interest rates cannot increase in the first year after opening a new account. That’s true, unless you had a 6 month promotional rate that expired, or unless you have a variable rate tied to the consumer price index, or unless you become 60 days delinquent.

After the first year, your credit card issuer can immediately increase your interest on existing balances for all of the above reasons, and they can increase your interest rate on future purchases as long as they give you 45 days’ notice.

This is probably the most deceptive of the terms so widely touted and applauded.

The truth is, the new, higher interest rate will apply to purchases made only 14 days after they send notice. How they turn 45 days into 14 days is a puzzle whose answer likely lies in some fine print somewhere, but this misconception is a dangerous one for consumers.

It sounds as if the new rate will apply, but they can’t bill you for it until the 46th day.

I’d say that’s pretty sneaky. And, call me suspicious, but I’d say they’ve promoted it falsely knowing full well that it would get consumers deeper in debt – at high interest.

Think about it…

If you believe that your rate will not go up for 45 days, you just might decide to go ahead with that major purchase you’ve been putting off. After all, if it’s something you really need and can’t put off forever – like a new refrigerator because the old one is gasping for breath – you’d naturally assume that it’s wise to get it while your rate is still low.

You’ll be “safe” if you make that purchase immediately, but if you do it on day 15 after they’ve mailed you the notice, you might as well have waited 60 days, because you will pay interest on that purchase at your new high rate.

Notice that the calendar will begin turning on the day they mailed the notice. If it didn’t arrive in your mailbox until a week later, you don’t have much time. So check the date on the correspondence, not the date you received the notice.

Author: Mike Clover

3 Credit Card Alternatives

Tuesday, August 17th, 2010

No matter where you stand in the credit card debate, “to use” or “not to use”, one thing is for certain and that is that the true cost of using credit cards and carrying a balance is very high. Many proponents of credit cards point to certain credit card benefits like rewards, convenience, fraud protection, etc. which everyone on both sides of the debate can agree are desirable things BUT is there maybe a way to have our cake and eat it too? While the goal of this article is certainly not to re-hash any of the pros and cons of credit cards let’s take a look at 3 credit card alternatives to see if we might be able to have some or all of the benefits of credit cards without the potential downsides.

#1 Rewards Debit Cards

Rewards like cash back, airline miles, and other perks seem to be one of the first things that many in the pro credit card camp will point to as the primary benefit to using a credit card. However, credit cards certainly do not have a monopoly on earning rewards. Rewards debit cards like the Perkstreet debit card offer cash back rewards just like a credit card BUT since the card is a debit card that is linked to a checking account there is no chance that the cardholder will overextend themselves on credit because there is no line of credit!


    • Cash back rewards
    • No line of credit (no chance for misusing credit)
    • Just as convenient to use as a credit card


      • Reduced fraud protection (as compared to credit cards with federal regulation protection)

      #2 High Yield Checking Accounts

      High yield checking accounts are a great way to not only have all of the convenience of a credit card (assuming that the high yield checking account you choose offers debit card access) while at the same time avoiding any potential misuse of credit, forcing one to save money and live within their means, and earning a relatively high rate of interest on money in the account at the same time! High yield checking accounts often have more onerous restrictions than typical checking accounts (i.e. balance requirements, spending requirements, etc.) but have interest rates that are currently averaging anywhere from 1% all the way up to close to 5%!


      • High interest rate on deposited funds
      • No line of credit (no chance for misusing credit)
      • Just as convenient to use as a credit card (assuming debit card access)


      • Reduced fraud protection (as compared to credit cards with federal regulation protection)
      • Restrictions and requirements for earning maximum interest rates

      #3 Secured Credit Cards

      Wait! I thought we were looking at credit card alternatives… Isn’t a secured credit card still a credit card? Well, kind of. There is no line of credit associated with a secured credit card as a secured credit card functions much like a debit card in that you can only use the card to spend money that you have first deposited into your account.

      OK… so if a secured credit card works essentially the same as a debit card then why not just get a debit card? One major benefit to using a secured credit card is that most secured credit cards report to the 3 major credit reporting bureaus which will in turn help to improve your credit score over time.

      If you already have great credit and are out for rewards, rewards, and more rewards then stick with a reward debit card or a high yield checking account because a secured credit card is not for you. However, if your credit score could use a little work then utilizing a secured credit card might just be a smart way to give your credit score a boost and help you to quality for lower mortgage rates, lower auto loan rates, better insurance rates, etc.


      • Ability to improve credit score over time
      • No line of credit (no chance for misusing credit)
      • All of the convenience of a credit card (and a secured credit card is still viewed as a credit card and not a debit card so much easier when trying to buy a cell phone, get a rental car, etc).


      • Little to no rewards
      • Some cards have high fees
      • Money deposited into account does not earn interest (similar to a regular checking account but unlike a high yield checking account)

      So… What Should I Choose?

      Well, there is no one choice that is best for everyone but it is always good advice to do your homework, research all of your options thoroughly, weigh the pros and cons of each type of financial product that you have available to you and then make an educated decision. Be an educated consumer and even (gasp) read the fine print for any type of financial product that you are considering before making the leap.

      What do YOU Think?

      What do YOU think is the best credit card alternative?

      What are some of the most important features for you to have in a method of payment?

      Do you have any other alternatives to using a credit card besides the 3 mentioned above?

      Author Bio: Joel Ohman is a Certified Financial Planner™ and a serial entrepreneur. Some of his current projects include a website for anyone that wants to compare car insurance and a website with some nifty online calculators. Joel is new to and would encourage you to check out the credit resources section of the site.

      New Law Restricts Credit Card Issuance to Youths

      Monday, June 8th, 2009

      Credit card issuers have been targeting college students for years – setting up tables on college campuses and offering everything from teddy bears to pizza coupons to entice them to apply for a card.

      Often, in their enthusiasm to obtain the “free” gift, students have applied for cards without reading the fine print. Thus, along with their new cards they got a first statement – one showing that they owed for a variety of fees. This could include an annual fee, an application fee, and possibly even a monthly access fee. If immediate payment of those fees wasn’t in the budget, the account immediately began gathering interest charges at a high rate.

      Thus, these aggressive card issuer tactics have been helping those students leave college and enter the workforce with a debt that can seem staggering, especially when added to student loans for tuition.

      This is about to change, due to the new Credit Cardholder’s Bill of Rights of 2009.

      Once the law goes into effect, students will need two things to even be approved for a credit card:
      • Adequate income and/or a co-signer
      • Completion of a certified financial literacy course.

      Credit limits will also be limited for students who do not have a co-signer. A student will be able to get a card which is the greater of $500 or 20% of their annual gross income. The total amount of credit extended from all of their credit cards cannot exceed 30% of their annual gross income for the most recently completed calendar years.

      Creditors will be prohibited from opening an account for any student who does not have a verifiable annual gross income, or who already has an account with that creditor or its affiliates.

      Your high school student will also be prevented from getting a card. The new law prohibits issuance of a credit card to any individual under the age of 18, unless a parent or legal guardian is designated as the primary account holder. (This does not apply if the youth has been emancipated under state law.)

      These new regulations are, of course, designed to protect students by preventing them from beginning their financial lives with an overload of debt. But financial analysts fear that this program, like so many others that appear beneficial at first glance, may backfire.

      Students in need of fast money may resort to using Payday lenders or pawn shops – both of which charge interest rates that even the most aggressive credit card issuer might find reprehensible.

      Author: Mike Clover your resource for free credit reports, credit cards, loans, and ground breaking credit news

      The Credit Cardholder’s Bill of Rights

      Tuesday, June 2nd, 2009

      A welcome end to retroactive interest rate hikes

      When the Credit Cardholder’s Bill of Rights go into effect next February, consumers will be protected from a host of money-draining practices.

      One that will save consumers the most and cost the credit card issuers an estimated $10 billion is the prohibition on retroactive rate increases.

      Banks will no longer be able to raise the rates on your existing balances unless your payment is late by 60 days or more. That means if you’re late on Card A, Card B won’t be able to raise your rates. This of course doesn’t apply to introductory rates, which you accepted with the clear understanding that the rate would raise on a set date.

      But even those introductory rates will have restrictions. In order to offer them, credit card issuers must keep them in force for a minimum of 6 months. No more introductory rates that expire and bump to the highest rate within 30 days!

      Even better news – if a cardholder becomes 60 days late and his interest rate is increased as a result, he can regain the lower rate by making 6 consecutive on-time payments. This particular provision doesn’t take effect until August 2010, however.

      Cardholders will also get 45 days advance notice of rate hikes and/or any other key contract changes. Under the current truth in lending law, credit card issuers must only give cardholders a 15 day heads-up. While I haven’t seen this in writing, the notice they give must have plenty of leeway, because I know dozens of people whose interest rates and credit limits were changed without them being aware until they received their bills.

      Perhaps this is one reason why the new laws will call for the terms of the agreement to be written in a large type size. Hardly anyone actually reads those lengthy notices written in a 4 or 6 point type.

      The bad news is that this provision doesn’t apply to changes in credit limits, so you will still need to go on line and check your spending limits before embarking on a quest for a house full of new furniture. You could get to the store and find that you don’t have the credit limit you expected.

      The good news in that bad news is that credit card issuers will no longer be allowed to slash the limit to a level that would trigger a penalty such as an over limit fee. That’s a practice that has become common in recent months and could become even more common in the months leading up to implementation of the new laws.

      Remember that credit card issuers will be using the next months to ramp up their profits, so be very careful to read everything that comes in the mail from any of your card issuers.

      Author: Mike Clover

      Were You Offered a Bribe to Close Your Account?

      Monday, March 23rd, 2009

      Not too many months ago, most consumers’ mailboxes were filled on an almost daily basis with offers for new credit cards. Most of them were emblazoned with “You’re approved” in bright red letters across the front as an enticement to open the envelope and say “yes” to the opportunity.

      Along with those offers were envelopes filled with cash advance checks from current card issuers. Some of them were already printed out in amounts of $3,000, $5,000, or even more. The message was clear: “Just sign the check and deposit – and go indulge your every whim!”

      Often those messages came with enticements such as free gifts, reward programs, and interest-free trial periods. But that was last year.

      Now, that deluge has slowed to a drip – and it only lands in selected citizen’s mailboxes.
      Instead of seeking new card holders, credit card companies are closing unused accounts, slashing credit limits, and raising interest rates so high that most consumers can hardly wait to pay their debts and get out from under.

      American Express, while also using those tactics, has taken an additional step: They’re offering significant “bribes” to current account holders to pay off their balance and close their accounts.

      American Express isn’t revealing how many consumers received the letters offering them a $300 pre-paid credit card in exchange for paying off their accounts between March 1 and April 30.

      Although other card issuers, such as Chase, offer similar (smaller) bribes to customers in default, American Express is targeting those customers who might go into default. One or more of the various scores kept on each of us has indicated that they’re a higher than average risk.

      This is just one more step being taken by card issuers who are seeing near record numbers of defaults and charge-offs.

      The result for consumers is anything but good. Low interest rates on both credit cards and mortgages require high credit scores. High credit scores rely on many factors – one of which is the ratio of debt to available credit. So every time a card issuer closes an account or reduces a credit line, the consumer’s credit score takes a hit.

      This is a self-perpetuating cycle with no end in sight as yet. Hopefully the credit bureaus will begin taking notice and adjusting scores accordingly. However, there’s been no news of that happening.

      One has to wonder – when the credit card companies “weed out” all those consumers who have been carrying balances and paying interest, they’ll be left with those who pay their balances in full each month. That will cost them money, so the next logical step will be to begin closing those accounts as well.

      Then where will their income come from?

      Author: Mike Clover your resource for free credit reports, credit cards, loans, and ground breaking credit news.

      Credit Card Issuers Slash Rewards

      Tuesday, January 20th, 2009

      Credit card companies once vied for your business by trying to out-do each other in offering rewards. Now they’re responding to the worsening economy but cutting back on rewards programs.

      American Express has dropped its offer of free domestic airline tickets to companions of Platinum and Centurion cardholders. In November, Chase cut its cash back rewards program from 3% of the purchase price to 1%. And Discover is now forcing cardholders to return their cash awards of they have a payment more than two months late.

      Megan Bramlette, managing associate at the bank consulting company Auriemma Consulting Group, was quoted in USA Today as predicting more and more trimming of credit card benefits.

      Some are seeing a drop in overall consumer debt as a good thing – it fell 3.4% in November alone – but this may not have been because Americans wanted to borrow less. It may have been a result of actions taken by the credit card companies:
      • Increased interest rates
      • Reduced credit limits

      Those actions have a snowball effect on consumers. Not only is a smaller amount of their monthly payment going toward paying down principal, the reduced credit limits are reducing their FICO credit scores.

      Many consumers wanting new credit cards, car loans, and mortgages are being turned down because their FICO scores no longer fall into acceptable limits – even if they were well above limits a few short months ago.

      Credit card companies are running scared in the wake of the financial crisis, and they have come to the realization that many Americans are now broke. In response, some are opting to mitigate their losses by accepting payoffs of less than the original balance – some at 50% or less.

      According to a recent report in the New York Times, Bank of America worked with over 700,000 consumers in 2008 – lowering interest charges, dropping fees, and sometimes reducing loan balances.

      2009 will be a year of cutbacks and even hardships for many consumers – while presenting opportunities for others. As fewer are able to obtain mortgage loans, and more foreclosures come on the market, home prices should continue to decline. In addition, auto makers are offering loans with little to no interest, just to get those cars moving off the lots. Thus, consumers with high credit scores and money in the bank may be in a position to “choose their bargains.”

      Even consumers with no interest in borrowing this year should be working to maintain high credit scores, because no one knows what the future will bring. So don’t wait until you need credit to see what your credit report says.

      Not only are the rules changing, so that your score could have dropped without your knowledge, experts say that 25% of all credit reports contain errors that could damage your credit. Get your free credit report with scores today – just to be safe. your resource for free credit reports, credit cards, loans, and free credit repair advice.

      Citigroup Credit Card Promises – Made to be Broken?

      Tuesday, January 6th, 2009

      In an effort to fend off greater regulation, Citigroup executives made a commitment to Congress in early 2007. That commitment was a pledge that it would no longer reserve the right to raise interest rates at any time for any reason. They did reserve the right to increase interest rates when an account expired.

      This pledge was, of course, also made to tens of millions of their credit card customers.

      Now Citigroup has changed its mind. It plans to start raising rates for those customers who have not had an increase in at least two years. Citing a “difficult market environment” and a $1.4 billion third quarter loss, Citigroup claims this move is necessary to prevent further cuts in profits.

      Chief administrative officer John P. Carey was quoted as saying “We are carrying out this repricing in order to continue lending in this environment.”

      If you are a Citigroup customer, you should have received notice of this increase with last month’s statement. But did you read the fine print?

      Cardholders have until the end of January to turn down the higher interest rates. If they decline the rate increase, they will pay down the balances on their accounts under the old interest rate and will be able to continue to make charges until their cards expire.

      After that, cardholders who declined the rate increase would have to pay off their balances or transfer them to a different lender.

      Citigroup representatives said that it plans to raise its customers’ borrowing rates by two or three percentage points. This will cause some borrowers to pay 20% rather than 17% – and will cause others to pay even higher rates.

      New York’s Democratic Representative Carolyn B. Malone, who proposed the House credit card legislation, was quoted as saying “Banks appear to be repricing cards for economic reasons – theirs, not their customers’. Apparently a deal is only a deal when it doesn’t cost the financial institution too much money.”

      This action is a breach of trust that Citigroup apparently hopes consumers will either disregard or forget. But will we? Only time will tell.

      Should you receive notice of a rate increase – from Citigroup or any other credit card issuer – consider whether you have the ability to say “No” to the increase.

      Saying no will mean you’ll have to move that balance or pay it off when your credit card expires. So look at the remaining time on the card, calculate how much you’ll save, and make an informed decision.

      Reports did not state what action would be taken if a consumer refused the increase and was unable to pay off the balance when the current credit card expired. At the very least, the interest rate would increase. At the very worst, the account would be subject to legal action or turned over to a collection agency.

      Begin reading everything that comes from your credit card issuers – and act from a position of knowledge. That includes keeping a close watch on your credit report.

      Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.