Credit Card Blog

The Inside Scoop on Store Credit Cards

2006-07-11T17:10:03Z

It seems like every retailer is offering its customers its own credit card nowadays. While the incentives to applying for a new store credit card are often enticing — many stores offer 25% off the first purchase, no interest for one year, or monthly discounts or gifts to cardholders — having so many store credit cards in your wallet can put you into debt in a hurry, if not seriously hurt your credit score.

High debt is often a problem for holders of store credit cards, since they generally charge much higher interest rates than bank-issued cards. Unless you plan to pay off the full amount of the balance each month, expect high finance charges, likely enough to render obsolete any cardholder incentives you may have received.

Having a different card for each store you shop in may earn you some store rewards here and there, but holding so many cards does not look good to creditors and thus, your credit score is likely to take a beating. Consumers should balance their card portfolios carefully and only apply for cards with genuine value, according to the National Retail Federation's senior VP Mallory Duncan.

The reason why stores are able to offer such huge incentives to their cardholders is because they reap huge savings on the transaction fees that Visa, MasterCard, Discover, and American Express charge. Visa and MasterCard charge a fee of 2% for each transaction, which comes directly out of the retailers' bottom lines. When a retailer co-brands with Visa or MasterCard, often times that fee is halved. When they offer their own independent card, the retailers can avoid the transaction fees altogether. While some of these savings are passed on to their customers, consumers should still exercise sound judgment when offered a new store credit card. More is not always better.

Bank of America to Offer Pet Credit Cards

2006-05-23T16:53:57Z

Since there never can be too many credit card offers, Bank of America is teaming with Hill's Pet Nutrition to offer a new PetRewards Visa card that will feature an image of the cardholder's pet. The card will carry no annual fees and its holders will earn rebates on veterinary clinic expenses, pet food, and donations to participating animal shelters.

Credit Card Reviews

2006-05-18T16:57:44Z

We have launched our individual credit card reviews at Find Credit Cards. Please refer to our credit card index to see reviews of each card we offer.

PressRow Theme

2006-05-10T21:25:40Z

For all you bloggers out there, Find Credit Cards has sponsored the design of a new Wordpress theme. The PressRow theme may be downloaded and implemented in your blog free of charge.

Credit Card Application Security

2006-05-03T23:46:20Z

If you're like many Americans, you probably receive two or three credit card solicitations in the mail each week. Most likely, you want to get rid of them. But be warned: you shouldn't just throw away an unwanted application. Someone could rummage through your trash and fill out the application for you, since your personal information is already preprinted on it. That person would then have an account open in your name and run up the bill, possibly without you realizing it until it was much too late. It's a classic case of identity theft.

Most would tell you that tearing them up into several pieces and tossing them in the trash is sufficient. But recently, John Crudele of the New York Post, a la Cockeyed, decided to test this method of application disposal to see how effective it truly was against fraud. In his column Tearing Through Credit Cards' Security Measures, Crudele describes step by step how he tore up his application into several pieces, taped the pieces back together, filled out the application using a different address, and still received a new credit card with an $18,000 credit line. Somehow, Cockeyed was able to get past Chase while Crudele was able to sneak through the cracks at American Express. It makes you wonder just who exactly is receiving these applications and what kind of training they get. In any case, both Cockeyed and Crudele suggest using a cross cut shredder, since tearing up the application by hand obviously does not work.

Another option is to opt out of credit card solicitations altogether. The three national credit bureaus have set up a toll-free phone number for consumers to call to opt-out of further credit card solicitations with one phone call. Just call 1-888-5-OPT-OUT and follow the instructions. In a week or two, you'll receive a letter in the mail. Just sign and return it and you'll be taken off their lists forever. Use of this toll-free number is endorsed by the Federal Trade Commission. See Sharing Your Personal Information: It's Your Choice for more information.

Bank of America May Challenge Visa, MasterCard

2006-04-17T15:59:13Z

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

33 Tips to Dig Yourself Out of Credit Card Debt

2006-04-11T21:56:58Z

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.

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First things first. Stop spending on those cards. You are only leading yourself further into debt. Sometimes when people rack up the credit card bills, they tend to shop even more to alleviate the stress associated with debt. Unfortunately, this is a vicious cycle. To make a change, you first have to admit you have a problem, and then decide to do something about it.

Cut up your credit cards. For some people this is the only way to keep themselves from charging more. So get rid of the plastic altogether to avoid temptation.

Do not apply for more credit cards. It may be tempting to get another card with a fresh credit limit, but in all probability you will only pile more debt on yourself. Spend only what you have in your checking account for now.

Open a savings account. While you are spending only from your liquid assets, you should also be socking some away for the future. When you can’t use your credit cards for an emergency, you will have a back up savings account for those unexpected car repairs and doctor bills.

Make a budget. You need to be realistic about what you bring in each month and what you spend. Chances are, you’ve been in some denial lately about how much money you really have at your disposal. So sit down and take stock. Figure out how much you must have to pay bills, buy groceries and gas, and other necessities. You can save and spend the rest.

Set some financial goals. In order to get out of your present difficulties, you need to have some goals in mind. Do you want to have a certain amount paid off by the end of the year? Do you want to open a retirement fund? Decide on the things that are most important to you and get them down on paper.

Pay bills first. When you get paid each week, sit down and immediately write out checks for your bills. This will ensure you have enough left over to live on and won’t feel the need to scramble for money at the end of the month.

Call the credit card companies. You may be able to negotiate a lower interest rate and get rid of some of your late fees if you agree to a firm payment schedule. If you can make an agreement with them, you will have to stick with it but it could save you hundreds of dollars in the long run.

Look into credit card debt consolidation. If you have debt spread out over several cards, you may be able to move your debts to a single balance transfer credit card with lower interest. But as always, read the fine print. This interest rate could skyrocket if you are late with one payment or at the end of a trial period.

Always pay more than the minimum balance on your credit cards. If you only have to pay $25 per month to keep it going, pay $30 or even more. Even this small amount difference will help you to reduce your principal. Often, the minimum balance due will only cover the interest you have accrued over the last month, so if you were to only ever pay the minimum, the debt would never be paid off in full.

Get copies of your credit report. There are three credit bureaus that hold records of your credit history—Experian, Equifax, and TransUnion. These companies will provide you with a free credit report each year. So take advantage of this and see what the credit card companies and other financial institutions are being told about your credit history. The Federal Trade Commission recommends Annual Credit Report to obtain your free reports.

Dispute any errors on your credit report. When you receive a copy of your credit report from any or all of the major reporting agencies, you should receive a dispute form that allows you to dispute an entry. Go through all areas of the report and write to the company if you find a mistake. Not reporting mistakes could cost you.

Find out your credit score. When you get your free copy of your credit report, you should also be able to get your credit score for a small fee. This score will often determine your eligibility for loans and future credit cards. Knowing what your credit score is, and understanding how to fix it, will help you face your financial problems more confidently.

Avoid credit repair companies. Certainly don't believe everything they promise. In general, these companies are only after your money. The nonprofit credit counseling firms range from ‘reputable’ to ‘Scam City, USA’, but if someone asks you for hundreds of dollars to fix your credit, walk the other way.

Do not raid your retirement. This money is your absolute last resort. Perhaps the only reason to draw from it is if you are truly going bankrupt. Which brings us to our next tip.

Look into all your options before filing for bankruptcy. It may seem like the easy way out, but if you could pay off your debt with a reputable counseling service or through an agreement with each company, your credit will be much less damaged down the road.

Avoid getting a home equity loan or second mortgage to pay off credit card debt. There are other means of paying off credit card debt slowly and surely without jeopardizing your home.

Resist the temptation to apply for bank loans to pay off credit card debt. This will only postpone the problem. Instead, get with the credit card companies to negotiate lower interest on your existing debt.

Cut out superfluous expenses. Remember that budget you made? Chances are you can cut out $100 or more of expenses each month without even noticing what you're missing. Putting that extra money toward a better life will feel better than ‘buyer’s remorse’ for the junk you used to buy.

Pay with cash—not a debit card. People tend to spend less when they use cash as opposed to plastic (even ‘debit’ plastic). Consider it a psychological aid to counteract any impulse buys you might make.

Qualify for future credit cards by making payments regularly. A good payment history is the best credit you can get. If you can pay your car loan, your mortgage, and your other bills on time, this looks good to credit card companies who previously may have been hesitant to offer you a line of credit.

Create a holiday fund. Most credit card debt is accumulated at the holidays when people spend beyond their means. So start early in the year creating a fund that cannot be touched until December. Most banks now offer this type of interest bearing account. You will deposit money throughout the year and then have a nice nest egg to spend at the holidays without racking up more debt.

Don’t shop when you are angry. In fact, don’t shop when you are feeling any strong emotion. You will be tempted to spend money you don’t have to make yourself feel better.

Have some savings automatically deducted from your paycheck. Most companies allow this service. You can have anywhere from one to five percent of your paycheck sent directly to a savings account. You probably won't miss it, and it can add up quickly.

Don’t avoid the phone calls. Most people let the answering machine get the calls from collectors. Try to talk to these people and set up some sort of payment plan so they will stop calling. Setting up a deal will help relieve a lot of stress as well.

Keep good records. When you get correspondence from credit card companies, keep a record of what you do in response. Write down dates and times of phone calls along with details of payment arrangements.

Get organized. Find a central location for all your bills. Keep the most current bills in a place where they are easily accessible. Also create a calendar of your bill due dates to stay on top of deadlines.

Reward yourself. When you pay off a credit card or other bill, set up a reward system for yourself. Go on that spa day you have been dreaming of or take the guys out for a game of billiards. (Or even better, do something fun that doesn’t cost anything!) Knowing you have a reward waiting will give you extra incentive to keep paying down the debt.

Be polite. Remember that you are the one who got yourself into this mess. The collectors and credit card companies are only doing their jobs.

Be patient. Your debt will not go away overnight. You may be paying on this debt for months or even years. But when you finally pay it down, you will have a great feeling of accomplishment, not to mention a cleaner credit history.

Be persistent. Don’t give up after a few months of making regular payments. You may feel like you aren’t making much of a dent in the total amount owed, but even $5 or $10 can make a big difference in interest payments down the line.

After six months, get your credit reports again. You should do this at least every six months or so. Order a report from one credit bureau at the beginning of the year, another report from a second bureau a few months later, and a third from the last agency. You can stagger the free reports throughout the year so you can check your payment progress. Make sure that credit card companies are reporting your on-time payments.

Ask for help. If you have relatives or friends who have gotten out from some deep debt, ask for their advice and experience. And don’t hesitate to take advantage of all the great credit repair resources online at the Federal Trade Commission.

Got any other good tips you’d like to share? Leave a comment.

Top Five Credit Card Scams #5: Credit Repair Companies

2006-04-07T19:54:14Z

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.

Top Five Credit Card Scams #4: Skimming

2006-04-06T12:56:52Z

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.

Top Five Credit Card Scams #3: Phishing

2006-04-05T18:04:58Z

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.

Top Five Credit Card Scams #2: Credit Card Information Request Via Phone

2006-04-04T20:33:56Z

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.

Top Five Credit Card Scams #1: Secured Credit Card Marketing

2006-04-04T00:16:11Z

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.

VantageScore Credit Scoring System a Bunch of Malarkey

2006-03-22T11:23:50Z

Did you hear the good news? It was announced last week that Equifax, Experian, and TransUnion have teamed up to develop a new credit scoring system. Scores using the new system, dubbed VantageScore, will be available for purchase from the three major credit bureaus within a few months. Unlike FICO's scores that range from 300-900, VantageScore scores will range from 501-990 and can be compared to a typical academic grading system: 901-990 = A; 801-900 = B; 701-800 = C; 601-700 = D; and 501-600 = F. But do we really need a new credit scoring system?

One of the advantages being touted by the new system is scoring consistency across credit bureaus. Currently, your credit score will usually vary from one credit bureau to the next. A common algorithm should make the scores consistent across the board, right? Well, not exactly. Just because all three bureaus will be using an identical scoring algorithm does not mean that the results will be the same. There will still be discrepancies between scores from different credit bureaus because the data that is plugged into the algoritm differs from one credit bureau to the next. Some creditors report to one bureau. Others will report to two or all three. So a consumer will have a different credit report, and therefore a different score, from each of the three bureaus. This will still continue, even under the new VantageScore model.

What's more is that the vast majority of lenders have been using Fair Isaac's FICO credit scoring model for decades. A switch to the new VantageScore model is unfeasible and unlikely. Perhaps the 501-990 model put into the context of a typical academic grading system is a bit simpler to understand, but in fact, it's all quite arbitrary. For lack of a better comparison, I find this somewhat analogous to the United States government attempt at metrication by replacing the standard measurement system of feet, miles, gallons, etc. with the decimal-based metric system.

Bottom line: Admittedly, this is a great PR stunt by the credit bureaus to get us consumers to buy their new scores, but in truth, it doesn't seem like it's worth all the fuss. Just because the scoring system is changing doesn't change your credit history. Bad credit is still bad credit; good credit is still good credit; and one foot still equals 0.3048 meters.

Is Fujitsu Software to Blame for Debit Card Data Theft?

2006-03-20T20:42:43Z

Last week, OfficeMax became the focus of reports of the debit card fraud wave that had resulted in over 200,000 debit cards needing to be replaced by Bank of America, Citibank, and Washington Mutual. Visa and MasterCard had both acknowledged that a merchant had been the target of a data theft, although neither would identify the merchant. Police reports, however, have shown that the common denominator in the vast majority of the 200,000+ victims of the fraud wave had shopped at OfficeMax.

More recently, Visa issued a warning to retailers that a certain version of some Fujitsu debit card transaction software may be storing sensitive customer data, including PIN codes. Fujitsu Transactions Solutions' customers include Best Buy, Staples, and ... OfficeMax. Although, it is unknown whether or not these retailers are using the allegedly faulty version of the software. Could Fujitsu actually be to blame for the debit card fraud?

Neither OfficeMax nor Fujitsu are taking responsibility for the security breach. Fujitsu claims that no sensitive data could be stored by its software alone; additional tweaks would have to be made to the programs. OfficeMax claims that they had found no evidence of any data theft on their end. So the mystery continues.

Most likely, the breach will be traced to some source in due time. Meanwhile, it is baffling to see that there could possibly be such a huge crack in the system of debit card security. Especially with identity theft becoming more and more prevalent, one would think that retailers and software developers would take extra precautions to ensure that their customers were being taken care of. Ultimately, the responsibility lies with the retailer. No matter at which exact point in the chain the security breach occurred, it is the retailer's responsibility to seal these cracks. They are the ones with whom the customer has the relationship and they are the ones who will take the brunt of the poor PR should something like this happen. I know one thing for sure: I won't be using my check card at OfficeMax any time soon.

Paying off Debt with 0% Balance Transfers

2006-03-17T18:32:46Z

Usually when you hear about 0% balance transfers, you think of consolidating high interest credit card debt into a new 0% credit card. But what about other debt, such as a car loan or even a home loan? What if you were to transfer that balance onto a 0% balance transfer credit card, essentially financing your debt at a 0% rate? Most would advise against this for two reasons: Firstly, the 0% APR would only apply during the introductory period, which is generally 12 months. Secondly, it is a huge risk to do this because if for some reason you aren't able to pay the debt off within the introductory period, your interest rate on the debt would go through the roof.

This risk however does not bother LAMoneyGuy, who is planning to refinance his car loan by obtaining a 0% balance transfer credit card. Admittedly, the 0% balance transfer arbitrage risk for him is minimal, since he currently has enough money in his savings account if he needs it in 12 months. Some more interesting thoughts on this are at Blueprint for Financial Prosperity.

So if LAMoneyGuy can do it, shouldn't you too? Some advice — at Credit Card Blog, we tend to be risk-averse. In fact, we are extremely risk-averse. We would never advise playing the 0% balance transfer arbitrage game unless you have in hand some emergency cash, as LAMoneyGuy does. You never know what might happen with your cash flow situation several months into the future. Should it dry up for some reason, you could be left with some pretty hefty interest on your new 0% balance transfer card a year from now. As usual, be aware of the risk and play it smart, or don't play it at all.