Bank of America's credit cards led to $5.7 billion in profit, or 23% of the bank giant's non-interest income, for BofA last year. They are the nation's leading credit card issuer with 40 million active credit card accounts. Now, BofA may be looking to parlay that into even greater earnings. They are considering developing its own payments network to rival Visa and MasterCard, according to Morgan Stanley analyst Betsy Grasek, who recently met with senior BofA officials, including Chief Executive Ken Lewis. Visa and MasterCard currently command 60% and 27% of market share, respectively. While official bank spokesmen are declining to comment on the issue, some bank employees in Charlotte, speaking anonymously, say that the idea is being studied.

Grasek estimates that BofA's annual earnings could get boosted by as more than $70 million if BofA had its own card payments network. This is because of savings realized on transaction fees. Grasek estimates that BofA could save approximately 0.8%–0.9% per transaction, which may total $240 million to $270 million annually, based on BofA's $302 billion credit card volume in 2005. Another $74 million in savings would be realized from debit card transactions. Annual operating costs are operated at $245 million to $270 million.

MSNBC: BofA ponders card to rival giants

When you have buried yourself under a mountain of credit card debt, it can feel as though you'll never get out from under it. The thought of owing so much money while being pummeled every month by high interest rates is overwhelming. But the truth is that people like you do pay off their credit card debt every year, and you can too (with a bit of discipline). Here are 33 tips to help you get through this tough time and come out the other side debt-free.

Continue reading "33 Tips to Dig Yourself Out of Credit Card Debt" »

Credit repair companies claim that they can erase your bad credit and repair your credit report, all for a small fee. They may even claim to remove bankruptcies, liens, and bad loans. But beware of these claims that sound too good to be true because most of them are. They take hundreds, perhaps thousands, of dollars from you and then make little to no improvement to your credit history.

Some warning signs of this type of scam include a company who charges you fees before they do anything for you. Legitimate credit repair companies will consolidate your payments and reduce your interest rates before they charge you anything. Also beware of any company that is not forthcoming about what you could be doing for yourself for free. They only want your money, not your peace of mind. Also watch out for companies that discourage you from contacting credit bureaus personally, that encourage you to dispute every entry on your credit report, and that advise you to create a false identity with an EIN instead of your Social Security number.

The truth is only time, consistent repayment of your debts, and new conscientious activity will repair your credit. For some reliable methods of repairing your credit yourself, see the FTC's article, Credit Repair: Self Help May Be Best.

One of the most insidious forms of credit card fraud occurs with a little device known as a skimmer. Skimmers are the size of a pager and can be carried by a scam artist to swipe your credit card and steal the information needed to create a counterfeit card with your name on it. Here’s how it works: You pay at a restaurant or other business and the clerk takes your card. In the back, the clerk swipes your card for the purchase and then swipes it secretly into the skimmer, which records the name and numbers.

The numbers in the skimmer can be downloaded into a computer and emailed anywhere across the globe. They are then used to make fake credit cards that are used by thieves in Europe, Asia, Latin America, and the US. Skimming is responsible for over $1 billion in losses each year.

Skimmers can also be placed on some older ATMs so that when you swipe your own card, the information is stored in the tiny bug and then retrieved at a later date by the scammer. To protect yourself, keep an eye on your credit card bills. Watch for any unusual activity and report it immediately. Also shred all your statements so that the numbers cannot be stolen.

When out and about, keep a close eye on your credit card as well, and report any suspicious activity to the Federal Trade Commission.

Unfortunately, phishing has led to the successful fraud of thousands of people over the last few years. Sophisticated scammers use e-mail to lure people into divulging their personal and financial information. In the case of credit card scams, there are basically two methods.

The first method involves a similar scam to the phone fraud scam described in yesterday's post. An e-mail that appears to be from a legitimate credit card company is sent to the unsuspecting potential fraud victim. The e-mail requests the person to click a link and verify personal information, usually in response to feigned suspected credit card abuse. Most credit card companies now state clearly to their members that they will never request this type of information via e-mail.

The second version of this scam involves e-mails from credit card companies, banks, or other financial institutions. The letter requests the reader to click a link and provide information such as your Social Security number, your mother’s maiden name, or your birth date. These items are then used to assume your identity and set up fraudulent credit card accounts in your name.

To avoid these scams, never reveal any information after following a link in an e-mail. If you think the e-mail is legitimate, go directly to the company’s website by typing the URL into your browser's address bar rather than by clicking the link. For more information on phishing scams, visit the Wikipedia.

The basic phone scam goes something like this: You get a phone call from someone claiming to be from Visa or MasterCard. They tell you there has been an unauthorized purchase on your card and ask if you are the one who purchased such an item. When you tell them it was not your purchase, they claim to be starting a fraud investigation. They then ask you to confirm that you have the credit card in your possession by asking you certain details about your card. The most recent scammers ask you for the three digit code on the back of the card, known by Visa as the CVV2 and by MasterCard as the CVC2.

The person on the phone with you is not a fraud specialist from Visa or MasterCard. But, this person calling already knows something about you. They may have your billing address, the last four digits of your credit card from a receipt, or even the entire credit card number. So they may also ask for an expiration date or a billing zip code.

While this scam usually occurs over the phone, there are also Internet versions, so beware. Never give someone information about your credit card statement or billing history over the phone or the Internet. Bottom line: a credit card company would not need to ask for this; it would already have it. Hang up and report the call to the credit card fraud reporting department. For a sample phone call from one of these scammers, visit Urban Legends.

If you are one of the millions of people with poor or damaged credit, you could fall prey to a popular credit card scam without knowing it. The number of credit card scams out there is growing, but there are five basic scams you need to be aware of before you take any action to repair or maintain your credit. This week, we will detail one scam per day that you should be aware of and also tell you how you can avoid falling into one.

Scam #1 is about secured credit card marketing.

These scams start with an offer for credit that sounds too good to be true. They may tell you that regardless of your past credit history, you can get a large line of credit. It may promise that all you need to do is send in a simple form or call a listed number and you will get your credit card.

Secured credit cards are those that offer you a line of credit based on an amount that you deposit. Basically, if you deposit $500, you have up to $500 in credit. This can help you to rebuild damaged credit over time, as your secured card can be transferred to an unsecured credit card with good payment history.

But too many companies try to take advantage of this idea. You can tell a fraudulent offer by a few details. First, if they require you to call a 900-number that charges you for each phone call, this is probably a scam. Second, if the ad leaves out important information, such as security deposits, monthly fees, high interest rates, or eligibility requirements like income or age, they are probably trying to lure you into applying and paying money you don’t know you have to pay.

To avoid these scams, look for details in the ads you receive and avoid those that leave out important information. Also never dial a 900-number to follow up on an offer. Doing so could cost you a lot of money, even for just a two-minute phone call. If you have any doubt about the offer you receive, contact the Federal Trade Commission. For a list of lawsuits against fraudulent companies, visit Crimes of Persuasion.