Credit Where It’s Due

It’s one of life’s more bitter ironies that people will fall over themselves to lend you money when you don’t need it, but will treat you like a plague victim the moment you do. That’s never been more true than it is today, and the consequences of having a poor credit report have never been so far-reaching.

Of course, everyone knows that if your credit score is low, you’re likely to have to pay higher mortgage, auto loan, and credit card rates–assuming anyone will lend you anything at all. But nowadays you may also struggle to find work because employers increasingly check job applicants’ credit reports before offering a post.

Last week, Rep. Luis Gutierrez (D-IL), who is Chairman of the Subcommittee on Financial Institutions and Consumer Credit, summed it up well when he announced a congressional hearing into how scores are formulated, and how they’re used. He said: “Consumers’ credit scores and credit reports have become their passports in our financial world.”

Credit Score Management

According to the Federal Reserve, your credit score is calculated using five criteria:

1. The frequency with which you pay your bills on time
2. How much outstanding debt you have compared to your credit limits
3. How long your credit history goes back
4. Whether you’ve made multiple credit card applications (or have applied repeatedly for any credit) recently
5. The “mix” of credit that you have–a balanced blend of credit cards and installment loans is regarded as healthy

Credit Cards and Credit Scores

That second item on the list explains why so many consumers have recently seen their credit scores fall, even though they’ve done nothing wrong. The scoring system places a heavy emphasis on credit utilization ratios: the gap between how much an individual actually owes and his or her credit limits.

And, of course, over the last year or two many credit card companies cut back credit limits as they sought to… er, limit their exposure to the credit crunch. So many people’s credit scores fell as their credit utilization ratios were squeezed. This was exacerbated by cardholders who voluntarily closed accounts in response to higher credit card rates and fees, which adversely affected their ratios.

Credit Report Misconceptions

Yesterday’s Chicago Tribune exploded a number of myths surrounding credit reporting. Here are some helpful facts gleaned both from that feature and other sources:

• Closing credit card accounts can harm your score both through lower credit use and the shortening of your credit history.
• Checking your credit record won’t hurt your score no matter how often you do so.
• Lenders use hundreds of different scoring models so regularly check your reports with Equifax, Experian, and TransUnion.
• Negative items aren’t removed from your record as soon as you settle delinquent debts. Most remain for seven years, and some types of bankruptcy can stay on your report for a decade.
• Bills that you’re disputing can still harm your credit report. Try to resolve all disputes before the due date.

It’s always a good idea to have all the facts about your personal credit.

Credit Card News Good for Once

After a couple of terrible years during which credit card rates were hiked, fees imposed or raised, and terms unilaterally changed, millions of Americans are used to loathing card issuers. But maybe things are changing.

Many credit card companies are launching charm offensives to win back the hearts and minds (or, at least, the pocketbooks) of their existing customers, and to woo new ones–providing they have great credit scores.

New Credit Card Application

The latest example of this charm offensive came earlier this week from Wells Fargo & Company, and Visa Inc., which together launched a new SMS/email credit card application, called Rapid Alerts, for those of their customers who have both Wells Fargo Visa credit cards and cell phones.

The new app sends the customer almost instantly an SMS text message or email every time a card is used, always providing that the transaction fulfills criteria that the cardholder has pre-selected on the Wells Fargo website. According to the press release that announced the new service, customers can choose to receive alerts based on:

• Transactions that exceed a dollar amount chosen by the cardholder
• Transactions initiated internationally
• Card-not-present transactions, such as purchases made online or by telephone
• Cash withdrawals from an ATM machine
• Declined transactions
• Gasoline transactions

Controlling Credit Card Use

This seems to be remarkably valuable in two ways. First, it provides those who are, ahem, less than highly organized about their finances with another tool to help them better monitor and control their credit card use. Can’t find the transaction print-out for that flat-screen TV you bought last week? Well, check your cell phone to see how much it was, and whether the dinner you can afford tonight will start with lark’s tongues in aspic, or begin and end with a Big Mac and fries.

The second way the Rapid Alerts service is valuable is its power as a security tool. How many victims of credit card theft or cloning have gone for weeks before noticing that someone’s stealing from their account? Now, those with Wells Fargo Visa credit cards can elect to know at once about transactions, which allows them to nip any illegalities in the bud.

Good credit card news has been so rare of late that it’s worth rewarding this rare example by giving a Wells Fargo spokesperson his say:

We believe Rapid Alerts will give customers added peace of mind that they will be notified almost immediately when transactions occur. We piloted Rapid Alerts in 2009 and received an overwhelming positive response from participants who said text alerts were an invaluable tool for monitoring their accounts. We want to help our customers succeed financially, and this is just one more tool to help them get there.

Credit Card Debt

As reported here last week, it’s becoming increasingly clear that credit card debt remains a serious problem for many millions of Americans. So yesterday’s advice from Keloland Television should prove timely for many readers. It suggests that, if you’re struggling to pay down your credit cards, you should:

• Budget even more carefully than usual so that you know precisely how much you have to spend.
• Look for ways to cut costs and/or boost income, perhaps with a second job.
• If possible, stop charging altogether, but certainly try to avoid adding to balances.
• Call your credit card companies. Be honest about your problems and ask for lower rates.
• Look at the options provided by balance transfer credit cards with a zero or low rate.

However, Keloland Television warns about a catch with many balance transfer credit cards: “If you don’t have the whole balance paid off at the end of the transfer period then you’re charged interest from day one on the whole balance.”

The report also advises that you list the balances outstanding on all your cards. Then, pay the minimum on them all, and, say, an additional $25 a month (or whatever you can afford) on the smallest. Once that’s paid off, pay off the next smallest balance using the $25 or whatever, plus the minimum payment you no longer have to make on the first account. Carry on until all balances are zero.

Credit Card Rewards Programs

Also yesterday, the Los Angeles Times provided advice for those who use credit card rewards programs. It warned that many of these are being watered down, and companies are introducing or hiking fees. And it recommends reviewing your rewards as follows:

• If you use your rewards for flights, try to concentrate your flying with a single airline partnership alliance
• Think about transferring miles between programs
• Consider swapping to a hotel program or cash-back credit card because points with these are often easier to redeem

Student Credit Cards

Recent credit card regulation has tightened up the rules surrounding cards and young people. Perhaps most importantly, credit card companies are no longer allowed to issue cards to anyone under 21 years old unless that person can prove that he or she has the independent means necessary to make payments or can find an adult to co-sign the credit card application.

Although many welcome this and other rules as a valuable way to prevent naive and inexperienced young people from getting excessively into debt, it does bring a whole new set of problems for parents. As the New York Times pointed out last week, they now have to decide whether to:

• Co-sign a credit card application and risk their own credit scores
• Make their offspring an authorized user of one of their own cards and be ready to mop up after them
• Insist their child use cash, a debit card, or a pre-paid credit card and possibly encounter resentment

Each of these has the potential to cause ructions in any family, and the Times suggests that parents should make their choice based on their past experiences with their child. And, perhaps, student credit cards should be reserved for those who have already proved themselves financially responsible.

Credit Card Debt

As reported here last week, it’s becoming increasingly clear that credit card debt remains a serious problem for many millions of Americans. So yesterday’s advice from Keloland Television should prove timely for many readers. It suggests that, if you’re struggling to pay down your credit cards, you should:

• Budget even more carefully than usual so that you know precisely how much you have to spend
• Look for ways to cut costs and/or boost income, perhaps with a second job
• If possible, stop charging altogether, but certainly try to avoid adding to balances
• Call your credit card companies: be honest about your problems, and ask for lower rates
• Look at the options provided by balance transfer credit cards, with a zero or low rate

However, Keloland Television warns about a catch with many balance transfer credit cards: “If you don’t have the whole balance paid off at the end of the transfer period then you’re charged interest from day one on the whole balance.”

The report also advises that you list the balances outstanding on all your cards. Then, pay the minimum on them all, and, say, an additional $25 a month (or whatever the most you can afford is) on the smallest. Once that’s paid off, pay off the next smallest balance using the $25 or whatever, plus the minimum payment you no longer have to make on the first account. Carry on until all balances are zero.

Credit Card Rewards Programs

Also yesterday, the Los Angeles Times provided advice for those who use credit card rewards programs. It warned that many of these are being watered down, and are introducing or hiking fees. And it recommends reviewing your rewards as follows:

• If you use your rewards for flights, try to concentrate your flying with a single airline partnership alliance
• Think about transferring miles between programs
• Consider swapping to a hotel program, or cash-back credit card, as points with these are often easier to redeem

Student Credit Cards

Recent credit card regulation has tightened up enormously the rules surrounding cards and young people. Perhaps most importantly, credit card companies are no longer allowed to issue cards to anyone under 21 years old unless:

1. that person can prove that they have the independent means necessary to make payments, or
2. he or she can find an adult to co-sign the credit card application

Although many welcome this, and other rules as a valuable way to prevent naive and inexperienced young people getting excessively into debt, it does bring a whole new set of problems for parents. As the New York Times pointed out last week, they now have to decide whether to:

• co-sign a credit card application, and so risk their own credit scores
• make their offspring an authorized user of one of their own cards, and be ready possibly to mop up after them
• insist on cash, a debit card or a pre-paid credit card being used, and possibly encounter resentment

Each of these has the potential to cause ructions in any family, and the Times suggests that parents should make their choice based on their past experiences of their child. And, perhaps, student credit cards should be reserved for those who have already proved themselves financially responsible.

Credit Card News: Regulator Wants Your Views

According to yesterday’s Washington Post: “the Federal Reserve wants to know what consumers think” about its latest proposals for future credit card regulation, which it published earlier this month. Regulations covered credit card rates, fees, and terms. The Fed wants your views? Yeah, right.

Navigating the Fed’s website is never easy, but finding a way to comment on the new proposals defeated this writer completely. True, it’s not too hard to find a press release that says: “Comments on the proposal must be submitted within 30 days after publication in the Federal Register, which is expected shortly.” And that press release has a link to a dense, 43-page Federal Register PDF extract on the proposed credit card rules. But, personally, finding a way to actually to comment proved impossible.

Credit Card Consumer Consultation in Action

So it was back to the Post to learn:

If you want to comment on the proposals, send an e-mail to regs.comments@federalreserve.gov. Include “Docket No. R-1384″ in the subject line. You can also comment by fax to 202-452-3819; remember to include the docket number. Comments must be received on or before April 14.

Very consumer-friendly. A cynic might almost wonder if the Fed really wants to hear from those who actually use credit cards, or whether it would rather just receive comments from the credit card companies’ lawyers.

Credit Card Companies Fed’s Priority?

You can find such cynics among the New York Times’s editorial staff. The paper carried a leader Monday that said: “The Fed has a long history of putting the credit card industry first and consumers far behind, and a draft of the rules released this month is disturbingly weak.”

And the Times isn’t alone in thinking that the Fed’s ties to credit card companies are too close. Earlier this month, Rep. Barney Frank (D-MA), who is chairman of the House Committee on Financial Services, issued a statement in which he said:

I do not support housing the Consumer Financial Protection Agency in the Federal Reserve. I continue to vigorously support the House-passed bill that establishes an independent agency with strong rule-writing authority and enforcement powers to implement consumer protections… My main objection to housing this critical function in the Federal Reserve has been the central bank’s historical failure to implement consumer protection as a central part of its mission and role.

Have Your Say on Credit Cards

If you want to have your say on credit card rates, terms, fees, and so on, the Consumers Union can help. Its creditcardreform.org site has a form that allows you easily to submit your views to the Fed.

Credit Card News: Regulator Wants Your Views

According to yesterday’s Washington Post: “the Federal Reserve wants to know what consumers think” about its latest proposals for future credit card regulation, which it published earlier this month. These cover credit card rates, fees, terms, etc. The Fed wants your views? Yeah, right.

Navigating the Fed’s web site is never easy, but finding a way to comment on the new proposals defeated this writer completely. True, it’s not too hard to find a press release that says: “Comments on the proposal must be submitted within 30 days after publication in the Federal Register, which is expected shortly.” And that press release has a link to a dense, 43-page Federal Register PDF extract on the proposed credit card rules. But, personally, finding a way actually to comment proved impossible.

Credit Card Consumer Consultation in Action

So it was back to the Post to learn:

If you want to comment on the proposals, send an e-mail to regs.comments@federalreserve.gov. Include “Docket No. R-1384″ in the subject line. You can also comment by fax to 202-452-3819; remember to include the docket number. Comments must be received on or before April 14.

Very consumer-friendly. A cynic might almost wonder if the Fed really wants to hear from those who actually use credit cards, or whether it would rather just receive comments from the credit card companies’ lawyers.

Credit Card Companies Fed’s Priority?

Such cynics can be found among the New York Times’s editorial staff. The paper carried a leader Monday that said: “The Fed has a long history of putting the credit card industry first and consumers far behind, and a draft of the rules released this month is disturbingly weak.”

And the Times isn’t alone in thinking that the Fed’s ties to credit card companies are too close. Earlier this month, Rep. Barney Frank (D-MA), who is chairman of the House Committee on Financial Services, issued a statement in which he said:

I do not support housing the Consumer Financial Protection Agency in the Federal Reserve. I continue to vigorously support the House-passed bill that establishes an independent agency with strong rule-writing authority and enforcement powers to implement consumer protections… My main objection to housing this critical function in the Federal Reserve has been the central bank’s historical failure to implement consumer protection as a central part of its mission and role.

Have Your Say on Credit Cards

If you want to have your say on credit card rates, terms, fees, and so on, the Consumers Union can help. Its creditcardreform.org site has a form that allows you easily to submit your views to the Fed.

Capital One announced yesterday the launch of the Venture Card, a travel rewards Visa credit card that offers double miles on all card purchases, with no restrictions on which types of purchases qualify for miles, and no restrictions on how and when miles are used — miles are good on any airline at any time, with no blackout dates. In this post Credit Card Act world, however, there is one feature consumers may not enjoy quite as much — an annual fee (waived for the first year, but $59 thereafter).

In addition to two miles per dollar charged, Venture Card customers can also get 10,000 bonus miles when they spend at least $1,000 in purchases with the card in the first three months of having it. Like all Capital One credit cards — and unlike almost all competitors’ cards — there are no extra transaction fees on purchases made outside of the United States.

The process for redeeming miles with the Venture Card may be a bit different than some consumers are used to, but in keeping with Capital One’s “no hassle” theme, it is straightforward. Cardholders pay for their travel purchases with the Venture Card, then contact Capital One via phone or over the Internet to redeem their miles against those purchases. Miles are essentialy worth a penny each in this formula — for example, a $300 travel purchase would require 30,000 miles if a cardholder wanted to completely pay with miles.

Interested consumers can apply for the Capital One Venture Card at http://www.capitaloneventure.com.

Credit Card Companies Wooing the Creditworthy

Last week, this column explored the theory that credit card companies are trying to lure the best customers from competitors by offering valuable new services and benefits at extra cost. Well, as everyone knows all too well, some of those extra costs are already in place. And CNN reported Friday that the wooing has already begun with a number of credit card rewards programs being enhanced.

For example:

• The Chase Freedom credit card now pays five percent (instead of three percent) cash back on certain types of purchases
• Citibank’s American Airlines-branded card has increased its reward from a mile for every dollar spend to 1.2 miles per dollar
• JPMorgan Chase’s co-branded Marriott and British Airways cards have had their rewards schemes upgraded

Credit Card Rewards–Why They’re Getting Better

As card issuers find their profitability squeezed by writing off bad loans, and new credit card regulation, they’re searching around for business models that deliver more to their bottom lines. Right now, attracting new, creditworthy customers is their favorite strategy.

And, as CNN points out, credit card rewards programs have three key advantages for the companies:

1. They build customer loyalty
2. They attract people who are unlikely to default
3. They expand transaction volumes, so increasing the “interchange fees” (the charges levied on merchants) benefits issuers by between one and two percent of the value of each purchase

Secured Credit Cards–an Innovation

Usually, the cheapest credit card rates are reserved for those with secured cards. That’s because the lender holds sufficient collateral to cover the balance, so the risk of default is close to zero. And now a company has come up with a novel idea that could give a whole meaning to the phrase “gold credit cards.”

Earlier this month, Gold Solutions Marketing, Inc. unveiled plans for secured credit cards that would be backed by gold bullion. The idea is that you would deposit your gold coins or bars in the company’s insured vaults, and then would be permitted to borrow up to 75 percent of their value. Any balances that are carried over would then accrue interest at a rate of eight to 13 percent APR, which is certainly competitive when compared with most unsecured credit cards.

Some Limits

One potential drawback is that the price of gold fluctuates. That shouldn’t affect credit card rates under the scheme, but it does mean that your credit limit could rise or fall as the price changes. As a general rule, the price of gold drops as the economy improves, so–if the current recovery is sustained–it’s likely that those holding these cards eventually find their spending power curtailed.

But Jeff Silver, who’s one of the company’s vice presidents (and who has one of those amazing, job-appropriate names), sees–unsurprisingly–only positives. He says:

The Gold Bullion Card is the ultimate win/win/win situation for the consumer, the bank and the economy. The consumer finds a new source of credit from assets he may already have, the bank issues credit cards to individuals without the bank incurring any risk of default, and into the economy pours a new source of credit and liquidity.

Credit Card Companies Wooing the Creditworthy

Last week, this column explored the theory that credit card companies are trying to lure the best customers from competitors by offering valuable new services and benefits at extra cost. Well, as everyone knows all too well, some of those extra costs are already in place. And CNN reported Friday that the wooing has already begun with a number of credit card rewards programs being enhanced.

For example:

• The Chase Freedom credit card now pays five percent (instead of three percent) cash back on certain types of purchases
• Citibank’s American Airlines-branded card has increased its reward from a mile for every dollar spend to 1.2 miles per dollar
• JPMorgan Chase’s co-branded Marriott and British Airways cards have had their rewards schemes upgraded

Credit Card Rewards–Why They’re Getting Better

As card issuers find their profitability squeezed by writing off bad loans, and new credit card regulation, they’re searching around for business models that deliver more to their bottom lines. Right now, attracting new, creditworthy customers is their favorite strategy.

And, as CNN points out, credit card rewards programs have three key advantages for the companies:

1. They build customer loyalty
2. They attract people who are unlikely to default
3. They expand transaction volumes, so increasing the “interchange fees” (the charges levied on merchants) benefits issuers by between one and two percent of the value of each purchase

Secured Credit Cards–an Innovation

Usually, the cheapest credit card rates are reserved for those with secured cards. That’s because the lender holds sufficient collateral to cover the balance, so the risk of default is close to zero. And now a company has come up with a novel idea that could give a whole meaning to the phrase “gold credit cards.”

Earlier this month, Gold Solutions Marketing, Inc. unveiled plans for secured credit cards that would be backed by gold bullion. The idea is that you would deposit your gold coins or bars in the company’s insured vaults, and then would be permitted to borrow up to 75 percent of their value. Any balances that are carried over would then accrue interest at a rate of eight to 13 percent APR, which is certainly competitive when compared with most unsecured credit cards.

Some Limits

One potential drawback is that the price of gold fluctuates. That shouldn’t affect credit card rates under the scheme, but it does mean that your credit limit could rise or fall as the price changes. As a general rule, the price of gold drops as the economy improves, so–if the current recovery is sustained–it’s likely that those holding these cards eventually find their spending power curtailed.

But Jeff Silver, who’s one of the company’s vice presidents (and who has one of those amazing, job-appropriate names), sees–unsurprisingly–only positives. He says:

The Gold Bullion Card is the ultimate win/win/win situation for the consumer, the bank and the economy. The consumer finds a new source of credit from assets he may already have, the bank issues credit cards to individuals without the bank incurring any risk of default, and into the economy pours a new source of credit and liquidity.

Credit Card Companies Wooing the Creditworthy

Last week, this column explored the theory that credit card companies are trying to lure the best customers from competitors by offering valuable new services and benefits at extra cost. Well, as everyone knows all too well, some of those extra costs are already in place. And CNN reported Friday that the wooing has already begun with a number of credit card rewards programs being enhanced.

For example:

• The Chase Freedom credit card now pays five percent (instead of three percent) cash back on certain types of purchases
• Citibank’s American Airlines-branded card has increased its reward from a mile for every dollar spend to 1.2 miles per dollar
• JPMorgan Chase’s co-branded Marriott and British Airways cards have had their rewards schemes upgraded

Credit Card Rewards–Why They’re Getting Better

As card issuers find their profitability squeezed by writing off bad loans, and new credit card regulation, they’re searching around for business models that deliver more to their bottom lines. Right now, attracting new, creditworthy customers is their favorite strategy.

And, as CNN points out, credit card rewards programs have three key advantages for the companies:

1. They build customer loyalty
2. They attract people who are unlikely to default
3. They expand transaction volumes, so increasing the “interchange fees” (the charges levied on merchants) benefits issuers by between one and two percent of the value of each purchase

Secured Credit Cards–an Innovation

Usually, the cheapest credit card rates are reserved for those with secured cards. That’s because the lender holds sufficient collateral to cover the balance, so the risk of default is close to zero. And now a company has come up with a novel idea that could give a whole meaning to the phrase “gold credit cards.”

Earlier this month, Gold Solutions Marketing, Inc. unveiled plans for secured credit cards that would be backed by gold bullion. The idea is that you would deposit your gold coins or bars in the company’s insured vaults, and then would be permitted to borrow up to 75 percent of their value. Any balances that are carried over would then accrue interest at a rate of eight to 13 percent APR, which is certainly competitive when compared with most unsecured credit cards.

Some Limits

One potential drawback is that the price of gold fluctuates. That shouldn’t affect credit card rates under the scheme, but it does mean that your credit limit could rise or fall as the price changes. As a general rule, the price of gold drops as the economy improves, so–if the current recovery is sustained–it’s likely that those holding these cards eventually find their spending power curtailed.

But Jeff Silver, who’s one of the company’s vice presidents (and who has one of those amazing, job-appropriate names), sees–unsurprisingly–only positives. He says:

The Gold Bullion Card is the ultimate win/win/win situation for the consumer, the bank and the economy. The consumer finds a new source of credit from assets he may already have, the bank issues credit cards to individuals without the bank incurring any risk of default, and into the economy pours a new source of credit and liquidity.