The good people at Synovate Mail Monitor spend their working lives tracking and analysing the credit card offers that are mailed to consumers. It’s not a career that would suit everyone, and its hard to imagine that they get many gate-crashers at their Christmas parties, but they do valuable work.

For example, last month they revealed that, during the second quarter of 2010, U.S. households were in receipt of 640.3 million credit card offers, which was 83 percent up on the same time in 2009. During that 2010 quarter, Chase sent out four times as many solicitations as it did during the same period last year, and Citi tripled its mailings between the first and second quarters of this year.

Credit card companies that think you’re a business

Even if you’re retired or an employee, you may have found among the piles of junk mail you’ve received recently a couple of solicitations for business credit cards. That’s odd. Credit card companies are famous for their slick marketing, and it’s not generally like them to buy in the sort of poor quality mailing list that has you down as a business when you’re not.

Well, mystery solved. There’s a good chance that the issuers that sent those business credit card offers knew you weren’t a business. And they wanted you to sign up for those cards in spite of that.

Credit cards for businesses

Why would a card issuer want you, a consumer, to take a card that’s designed for businesses? Simple. Business credit cards were specifically excluded from last year’s Credit CARD Act. So all those extra protections you now have concerning credit card rates, fees, payment cycles and so on won’t apply to the business card that you’re being offered.

Small wonder that Synovate Mail Monitor says that the volume of business credit card mailings jumped 256 percent between the first quarters of 2009 and 2010.

U.S. Senator Charles Schumer (D-NY) wrote to the Federal Reserve last Wednesday, asking it to look into these solicitations, and to crack down on card issuers that may be tricking consumers into signing credit card applications for inappropriate corporate products. It was a worthy initiative, but, judging from the Fed’s responses to previous pleas to side with consumers against banks, he might just as well have waited until December, and sent a note to Santa.

Credit cards for businesses can be good

Of course, if you are a businessperson then a corporate credit card can be a valuable tool. Most credit card companies offer some form of business card, but perhaps American Express is most famous for them.

Two products that are worth exploring further are the TrueEarnings® Business Card from Costco and American Express and one which carries a great deal of prestige, The Business Platinum Card® from American Express OPEN.

Credit card companies not loved?

Who’d have thought it? Many consumers don’t particularly like their credit card companies. Newsweek reported Thursday that 78 percent of of people participating in J.D. Power and Associates’ annual customer satisfaction survey said they were considering switching.

The magazine said that now: “It seems like everyone loves to hate their credit card companies…” Some might wonder what took them so long.

Credit card offers–how to pick one

On the same day that the Newsweek story appeared, The San Francisco Chronicle carried a feature under the headline, “4 Tips for Picking the Best Credit Cards.” As the title suggests, it identified four key criteria for judging credit card offers:

1. Credit card rates
2. Annual fee
3. Credit card rewards programs
4. Convenience

The Chronicle’s analysis was excellent as far as it went, but may be a little basic for readers of index credit cards. So let’s beef it up a bit.

Credit card rates

Yes, as the Chronicle says, it’s important to carefully analyze the credit card rates on offer. You need to know whether it’s an introductory rate, and, if so, how long it will last and what the standard rate will be when it expires. You need to be aware that many companies advertise ranges of rates, and you shouldn’t suppose that you’ll be granted the lowest. And you need to be clear about whether the headline annual percentage rate (APR) applies only to purchases, and what rates will be applied to cash advances and balance transfers.

But you also need to be clear that–depending on your circumstances–you may be better off ignoring credit card rates. If you’re the sort of person who invariably pays off their balance in full each month, then it doesn’t matter if the APR is 100 percent because you would never have to pay it.

If credit card rates are important to you, you should check out the Iberiabank Visa® Classic card. At the time of writing, this has an APR that starts at 7.25 percent, which is unusually low. However, bear in mind that you only get this rate if your credit score is exceptional, and that it is a variable rate.

Annual fees

These can add up, particularly if you have a number of cards. But there are still plenty out there that have no annual fee. Blue Cash® from American Express, for example, doesn’t have one. But it still has a good rewards program.

Credit card rewards programs

Credit card rewards programs can be a minefield, and a comprehensive guide would need more space than is available here. However, here are some key guidelines:

• Make sure the issuer can’t unilaterally devalue your hard-earned points
• Avoid programs that allow points to expire unless you’re sure you can use them during their valid period
• Airline miles often only suit people with a particular lifestyle; don’t sign up for them unless you’re sure they’re good value for you
• Steer clear of programs that have high earning thresholds unless you’re sure you can meet them without incurring expense

Convenience

This isn’t much of an issue for most credit card companies, but the Chronicle suggests that you make sure yours has a good ATM network, electronic payment facilities, and round-the-clock customer service.

Other factors–including balance transfer credit cards

If you’re exploring balance transfer credit cards, then you really ought to consider the Citi® Platinum Select® MasterCard®. This card currently offers a zero percent APR introductory balance transfer rate for an exceptional 18 months. That breather from paying interest could allow you to make serious inroads into your credit card balances.

One final piece of advice–card issuers are notorious for “gotcha” clauses that are buried in the small print of credit card application forms. So take the time to understand fully what you’re signing up for. Mistakes at this point can prove expensive later.

Students and credit cards

Thank heavens for the Credit CARD Act of 2009. Not only did it stop credit card companies from employing all sorts of dubious marketing practices to lure students into signing up for cards they didn’t need, but it also says that those who are under 21 years old can only get a card if an adult co-signs the agreement–unless, that is, the youngster can prove that he or she has enough independent income to make repayments unaided. Parents across America heaved a collective sigh of relief when that law was passed.

But they sighed too soon. This is credit card regulation. And that means, of course, that no loophole goes unexploited. So it’s no surprise that some card issuers’ armies of lawyers have already circumvented the law.

Credit card regulation fails again

When the act was signed, consumer advocates begged the regulator, the Federal Reserve (who else?), to define what constituted an “independent ability to make required minimum payments.” It refused. And they asked it to force companies to verify whether or not students making credit card applications really had the resources they needed to support the card. It turned down that one too.

So at least one big bank says that it will issue credit cards to students under 21 years old if they have an annual income of…$2,000 or more. And it will count parental contributions, grants, and scholarships when it calculates that income. Oh, and it won’t ask for any proof.

Adam Levin, who used to be director of the New Jersey Division of Consumer Affairs, told The Washington Post, Friday, that, before the Credit CARD Act: “If you were a student and you could fog a mirror, you could get a credit card.” It looks like nothing has changed.

Student credit cards–some responsible ways forward

Assuming that you’d prefer your beloved offspring not to be lured into a debt trap, your first step is to avoid telling her or him about this loophole. What, you’ve never covered up an uncomfortable truth for a good reason before?

Then act as if the law is working just fine. If your child is financially responsible, you could offer to co-sign a credit card application for a specialist student product, such as the Citi® Dividend Platinum Select® Visa® Card for College Students or the Discover® Mix Tape Student Card.

However, you risk your own credit score taking a ding if the fruit of your loins defaults. So, if you think there’s a real chance of that happening, you could opt for a secured credit card, such as the Public Savings Bank Secured Card. These require a deposit to be paid up front (think of it as a security deposit on an apartment rental), but have the advantage of allowing youngsters to build up their own credit scores while keeping them well away from yours. Just make sure that the card you choose reports to all three of the big credit bureaus.

Of course, the safest route is to opt for a prepaid card. These don’t report activity to anyone, and shouldn’t allow a student to access any credit at all. But some of them have very high fees, so shop around. A good choice for many is The Mango™ MasterCard® Prepaid Card.

Credit card regulation failing?

Did you think that last year’s wave of credit card regulation would finally stop card issuers from gouging their customers? Well, you were half right. Most mainstream credit card companies have stopped their worst excesses. But at the industry’s fringes are players who stay within the law while still allegedly managing to exploit vulnerable customers.

That was the message of an editorial, headlined “The Customer Always Comes Last,” in Tuesday’s edition of The New York Times. It accused the credit card companies‘ regulator, the Federal Reserve Board, of coddling the industry, and went on: “Watchdog groups say that companies are already eagerly exploiting gray areas in the law, either by concocting new charges or relabeling old, disallowed charges.”

Credit card companies that walk a fine line

The Times’ editorial picked up on a story in Saturday’s St. Louis Post-Dispatch, which explored credit card deals offered by First Premier Bank of North Dakota. The report, written by Jim Gallagher, made depressing reading.

This blog exposed First Premier’s credit card deals well over a year ago, but it’s worth revisiting them. These subprime products are intended for customers who have poor credit reports, and the bank makes an excellent point when it says that it has to charge high credit card rates and fees in order to balance the risk posed by lending to such individuals. However, some think that its product does these people more harm than good.

Credit card rates and fees designed to exploit?

This morning, the bank’s website clearly lays out (providing you click the right link) what prospective customers are letting themselves in for. It says that its credit card rates for purchases stand at 59 percent APR. And it lists the fees it charges, which include a one-time processing fee of $45, and a $75 annual fee, which, for the first year, is payable on opening the account.

So, someone making a successful credit card application to First Premier who is given a $250 credit limit has an available balance of $130 when the card arrives. And, if they can’t pay that off in one go, they are charged interest at 59 percent on the $120 opening balance–even if they never use the card.

This seems to represent a recent improvement in the bank’s credit card terms. The Post-Dispatch story told of a customer with a $250 limit whose first statement arrived with $179 in fees, leaving her with an available balance of $71.

Alternatives

First Premier describes its product as: “Your second chance for a credit card…”. But is it your best second chance? Jim Gallagher suggests that those with bad credit reports would be better off with secured credit cards. These require you to deposit a sum of money with the bank upfront, rather as you do with a security deposit when you rent a home. You get it back when the account is closed or when the bank migrates you to an unsecured credit card.

The advantage of these cards over prepaid cards is that you get to rebuild your credit score. Just make sure that your card issuer reports to all three of the major credit bureaus. There are many unsecured credit cards out there, and some of them charge high fees and rates, so take care when selecting one.

The Applied Bank® Secured Visa® Credit Card and the New Millennium Bank Secured Gold Visa® or Mastercard® are well worth checking out. And the Public Savings Bank Secured Card seems a particularly fine product.

Credit card rewards–airline miles

Among those who write about credit cards, travel reward programs are not currently flavor of the month. There are too many stories of consumers whose reward points have been suddenly devalued, or who have experienced real difficulty redeeming points on the routes and at the times they want. Many financial advice columnists point people toward cash-back cards instead.

That’s not to say travel rewards programs are a bad idea for everyone. If your lifestyle is one for which miles make sense, then by all means find the credit card rewards program that suits you best. But don’t become so obsessed by the number you’ve acquired that you avoid making a level-headed assessment of the value that you’re actually receiving.

Bonus miles

Most airlines are now inviting you to top off your bank of miles by buying more. However, The Wall Street Journal reported Friday that many of the deals on offer make little financial sense. Consumers typically buy these at about three cents a mile, and then use them to buy tickets at a redemption value of roughly half that. Not great economics.

The Journal did find examples where top-off purchase programs could deliver serious savings, but cautioned that these were relatively rare. The message? As always with deals from credit card companies and airlines, be sure to read the fine print and calculate the costs and benefits before you commit yourself.

Credit card companies–the best of the best?

Speaking of credit card companies, it’s clear that some are better than others. But which are the good ones? Well, we may have moved closer to a more definitive answer when J.D. Power and Associates unveiled its 2010 U.S. Credit Card Satisfaction Survey on Friday.

More than 8,500 credit card users responded to the survey, and the top companies scored particularly highly on:

• Credit card rewards programs
• Customer experiences when interacting with companies’ online services and call centers
• Swift and effective problem resolution

Those credit card users scored American Express best for the fourth consecutive year, giving it a total mark of 769 out of a possible thousand. Discover Card came in a close second with 757.

American Express

American Express has a broad range of credit cards and charge cards for both consumers and businesses. Blue Sky from American Express®, for example, is one of those travel rewards cards that doesn’t tie you to a particular airline, and that therefore avoids many of the issues described above. You get a point for every dollar spent, and then redeem them at a rate of 7,500 points for each $100 of travel purchases.

Meanwhile, the classic American Express® Preferred Rewards Gold Card offers generous benefits including some interesting introductory bonuses. These include 10,000 points when you spend $500 within the first three months of membership, and the waiving of the first year’s annual fee.

Discover More

The Discover® More® Card – Black is one of the best balance transfer credit cards around. It offers an introductory zero percent APR on these for 12 months, which has to be a serious bargain.

Right now, trying to read the signals coming from the American economy is like trying to read the signals on your first ever date. You know what you want to happen, but what you’re seeing seems either incomprehensible or contradictory, and you’ve no real idea what it all means. Don’t worry. If you feel like a gauche teenager, imagine what it’s like for professional economists, many of whom only pretend to understand much more than you.

Credit card trends

According to the Federal Reserve’s Quarterly Report on Household Debt and Credit, published this month, the total household debt for all American consumers stood at $11.7 trillion in the second quarter of this year. That’s a scary figure, but it’s down $812 billion from its peak in the third quarter of 2008. And, of course, most of it (74 percent) is made up of mortgage loans, which most people regard as “good” debt.

Credit card debt comprises about six percent of the total, a proportion that has remained fairly consistent over the last few years. That, of course, means that it has shrunk pretty much in line with all debt. However, this isn’t just a reflection of a new prudence on the part of consumers. Much of the reduction is due to credit card companies wiping balances from their books when they pass “uncollectible” accounts to collection agencies. Foreclosures similarly accounted for some of the reduction in mortgage debt.

Those credit card companies were also largely responsible for the considerable drop in open credit accounts. Four million credit cards were withdrawn by issuers or cancelled by customers during the first quarter of 2010, and, by the end of that period, the number of credit card accounts had dropped by 23.2 percent compared with the second quarter of 2008. The last time so few cards were in circulation was a decade ago.

Credit cards and credit use

Overall, reduced debt and the fall in the number of credit cards are probably good things, certainly when it comes to financial solidity. However, they have their downsides. It is hard to see how the recovery can gain momentum until those who can do so begin to borrow and spend more again, thus creating the demand that gives employers the confidence to hire staff and give people raises.

What’s almost certainly bad for the economy is people who can’t afford debt borrowing more. The Fed report says that in the first quarter of 2008, consumers were using only 23 percent of their credit card limits. The same time this year they were using 28 percent. It’s sobering to think how many people who are newly unemployed or working part time are now using their remaining available credit to pay the rent and put food on their tables.

Credit scores and credit utilization

The proportion of your available credit that you actually use forms a significant part of your credit score, and if you’re edging closer to your limit you should probably see how that’s affecting your credit report. Man y services are available to help you monitor your report, not all of which deliver good value. However, three that are worth looking at more closely are (in alphabetical order):

• Equifax Credit Watch Gold With Score Power
• Smart Credit
• Transunion – 3 bureau Credit Monitoring

New Credit Card Rules

This Sunday, August 22, will see the implementation by the Federal Reserve of the latest set of rules to arise from the Credit CARD Act of 2009. Many credit card companies have preempted this deadline by introducing the changes in advance, but here are the new rights that you should be enjoying this time next week.

Credit Card Late Fees

At the moment, you may well be charged up to $39 if you’re late making a payment, regardless of the amount you should have sent as a minimum payment. From Sunday, late payment fees are capped at the amount of the minimum payment and cannot exceed $25 no matter how much was due (so if you should have paid $10, then that’s how much you can be charged as a late fee).

There are two exceptions to this:

• If you’ve already paid late on one or more occasions over the previous six months, the fee cap rises to $35, regardless of the minimum payment due.
• If your credit card company can prove that your lateness has cost it more than the cap (something that seems unlikely, but possible), it is entitled to charge you more.

Other Fees on Credit Cards

Two of Sunday’s other new rules also affect fees:

1. Lack of credit card use is no longer penalized because issuers aren’t able to charge inactivity fees. However, this may not prevent a company cancelling your card if you fail to use it often enough.
2. Issuers can no longer charge more than one fee for a single event or transaction that breaches your credit card terms and conditions.

Credit Card Rates

From Sunday, credit card rates can no longer be hiked without explanation. If your issuer does increase your rate, it must tell you why, and re-evaluate the increase after six months. Unless there is a good reason for it not to do so, it should then reduce the rate within 45 days.

Credit Card Regulation–Good or Bad?

The great debate about credit card regulation divides neatly along ideological lines. Some argue that the government is ill-equipped to interfere in private enterprises, and should leave the market to determine which practices are acceptable and which aren’t. Others say that the market for cards is inherently impure because few consumers can make fully informed choices when they select their cards. They contend that some issuers set out deliberately to confuse those making credit card applications, and then go on to pursue predatory lending policies.

Both sides can make compelling points, but one argument that appears not to be valid is that raised by industry lobbyists when legislators were originally considering the bill. Those lobbyists suggested that the new law might undermine companies’ business models, and force them to cut back on credit card rewards programs.

But the New York Times reported July 30 that banks’ profits from credit cards are again rising. And, a couple of weeks ago, this column quoted Andrew Davidson, a Mintel Comperemedia senior vice president, as saying that rewards have not been watered down.

Credit Card Rewards–Some Top Picks

If you’re on the look out for a particularly good credit card rewards program, these three are highly regarded by many:

• Chase Freedom Card
• Citi ForwardSM Card
• Chase Ink Bold

Credit Card Use Online

Later today, the chairman of comScore, Gian Fulgoni, is due to talk about his company’s most recent research, which reveals new credit card trends. It shows the very rapid rate at which e-commerce is growing in America, and–appropriately–Mr. Fulgoni will use a webinar (an online seminar) to explore its findings.

A large number of those shopping online use credit cards to pay for their transactions. Because, as the New York Times pointed out a couple of weeks ago, “…it’s generally less of a hassle to get fraudulent credit card charges halted…” than those that appear on debit card statements. Some ultra-cautious online shoppers prefer to use a prepaid card (such as The MangoTM MasterCard® Prepaid Card) to further insulate their lines of credit from fraudsters.

The comScore research suggests that retail e-commerce spending in the U.S. reached $32.9 billion in the second quarter of this year, up nine percent on the same period in 2009. The popularity of online buying grew most quickly in high-income households. Those in the $100,000+ a year bracket increased their online expenditure by 17 percent during that time, almost twice the national average.

Credit Card Trends by City

On Monday, Experian, a leading credit bureau, released its own research into credit card use, and this time the focus was on variations between America’s top-20 metropolitan areas. For example, those living in New York City have on average 3.77 open credit cards, while those in Phoenix, Arizona, have just 2.78. Such variations between the top and bottom ranking cities may sound small, but when you remember how many consumers have no cards at all, and how few have eight or more, those variations are quite revealing.

However, it would be a mistake to assume that those with the highest number of open cards also have the highest credit card debt. The study suggests that the average monthly credit card balance for New Yorkers living in the metropolitan area is $5,713, while for those in Phoenix it is $6,058.

Those in Atlanta have the highest average monthly balance ($6,753), and those in San Francisco the lowest ($5,323).

Corporate Credit Cards

Citi® won a a welcome accolade Tuesday when The Nilson Report named it the number one corporate bank card issuer. The ranking was based on transaction volumes rather than customer service, but, presumably, Citi would with some justification argue that the two are closely linked. In a press release, the bank spoke of:

…a host of online, customizable, reporting tools and integrated solutions…that takes program and report management to a higher level, providing a superior quality business intelligence engine –supporting the need for consolidated data and card-level administration and information.

If you’re in the market for a high-performance business credit card, you should look into the Citi AT&T Universal Business Rewards Card. Depending on your needs, you may also find The Business Platinum Card® from American Express OPEN an attractive proposition.

Credit Card Debt Down–Yet Again

Let’s start with the good news. The Federal Reserve published Friday its latest statistical release about consumer credit. The figures, which relate to June, show that “revolving credit” (nearly all of which is credit card debt) was down again that month, and now stands at $826.5 billion. Out of the last 21 months, according to the Los Angeles Times, this form of debt has fallen 19 times.

Given that the Fed reckons that outstanding revolving credit stood at $958.1 billion in 2008, that means that Americans have paid back about $131.6 billion to credit card companies in two years, right? Wrong. As this column has pointed out previously (and the Philadelphia Inquirer confirmed last month), a large proportion of the reduction is accounted for by “charge offs”, which is what the industry calls debt that it writes off because it’s uncollectible and passes to collection agencies.

In fact, the Inquirer says that, in the first quarter of 2010, about 40 percent of the apparent reductions in credit card balances was actually accounted for by charge offs. And some think that’s a conservative estimate. Still, if you make the assumption (and statisticians are likely to abuse you if you do) that 60 percent of the last two years’ reductions were genuine pay downs, that still means that Americans have paid off their credit cards to the tune of nearly $80 billion.

Credit Reports and Children

At least your young children don’t have to worry about their credit card debt and credit reports, do they? Again, the answer, regrettably, is a qualified Wrong. Because, last week, a number of newspapers covered a story about the growing incidence of people stealing children’s identities, and running up debts in their names.

This grizzly trend is apparently enabled by the current social security number (SSN) system. Apparently, criminal gangs now use a combination of public sources and online trawls to identify SSNs that currently have no credit record attached to them. They can then steal that identity in order to borrow money.

Of course, children’s SSNs generally go unused for at least 16 years, which makes them especially vulnerable to this crime, and the Christian Science Monitor says that seven percent or more of all identity theft cases that are reported affect these youngsters.

If you’re tempted to check your kids’ credit reports, the Monitor cautions that you might be making things even worse. In doing so, you could create a credit file in their names, which may make them even more vulnerable to identity thieves.

Credit Scores and College

What if your son or daughter is off to college, and has a credit card application turned down because of identity theft? Well, the first thing is to report it, and the web sites of both the Identity Theft Resource Center and the Federal Trade Commission provide advice about what to do.

However, it’s likely to take some time to resolve the matter, and during that period, you may have to:

• Issue an authorized card in his or her name on one of your own accounts, which may–depending on the child–involve a leap of faith too far, or
• Find one of the better secured credit cards, which requires a deposit, but could count toward building a credit score while the identity theft is being sorted out, or
• Source a good prepaid credit card, though you need to be careful about high fees with these

Among the best of the last two types of product are:

1. Secured credit cards: Public Savings Bank Secured Card
2. Prepaid cards: The Mango™ MasterCard® Prepaid Card

Credit Card Rewards Remain Robust

Remember when credit card companies were lobbying Congress to water down the bill that eventually became the Credit CARD Act of 2009? One of their arguments was that the legislation would undermine their business models so much that they’d be forced to cut back their rewards programs.

Well, the resulting credit card regulation has largely been in effect for some time now, and guess what? Credit card rewards are booming.

Credit Card Offers Take Off

Mintel, a specialist company that tracks direct marketing activity, said last Thursday that American consumers received 1.1 billion credit card offers in the mail during the second quarter of 2010. That compares with 419 million during the same period last year. And, of those mailed during the later period, 80 percent featured rewards programs.

Andrew Davidson, a Mintel Comperemedia senior vice president, commented:

It wasn’t long ago that we were speculating about the return of annual fees, the disappearance of teaser rates and the watering down of rewards programs, as card issuers attempted to maintain profits in the face of restrictive new regulations. As the dust settles on the CARD Act, we continue to see evidence that this isn’t happening.

Credit Card Rewards–Changing Trends

On Monday, the New York Times pointed out how some credit card companies are re-engineering their rewards programs. In particular, offers for credit cards that provide frequent flier miles are now coming up with some very attractive deals, including access to lounges, free bag check-in, and industrial quantities of introductory bonus miles. These can be great if you travel a lot.

However, the Times suggests that this new generosity may be a response to growing disillusionment among frequent fliers over the difficulties many encounter when redeeming miles on popular routes at busy times. This may be forcing credit card companies and their partner airlines to up their games.

Cash Back Credit Card Deals

The following day’s Times carried another article about credit cards, and this one quoted an industry expert who said that many may be better off with a cash back card than a frequent flier one. His reason? Airlines seem more ready to tinker with their programs. The expert went on to say, “With cash back there’s much less risk of the redemption level changing before you redeem your reward.”

If you’d prefer to take the safer route, here are three cash back credit card deals that are well worth exploring further. None of them has an annual fee.

Blue Cash® from American Express–This could appeal to big spenders because there are no limits on the rewards you can earn. It offers up to five percent cash back at supermarkets, gas stations, and drugstores. And, when you spend more that $6,500 on the card, you can boost your earnings so that you get 1.25 percent for all other purchases.

Chase Freedom Card–Spend $799 in purchases on your card within three months of receiving it, and you can receive a $100 cash back bonus. With normal use, you can get a huge five percent on many popular purchases and one percent on everything else.

Discover® More® Card – $50 Cashback Bonus®–This is a good card if you sometimes carry balances forward. It has a zero percent introductory APR for the first year, and then a competitive rate after that. Like the Chase Freedom card, you get a full five percent cash back on some purchases and one percent on everything else you buy with it.