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.

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

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 Score Bad? You’re Not Alone

If your credit report has taken a hit recently, you probably feel bad about it. That’s understandable. But you may find some small consolation in the knowledge that you’re far from alone. Last month, FICO Inc. published figures that show that 25.5 percent of all consumers have a credit score of 599 or below, a level that is likely to prevent them acquiring a mainstream credit card, mortgage, or personal loan. Yep, that’s one in four Americans, a total of almost 43.4 million people.

Of course, there’s more to life than a pristine credit report (health, family, happiness, love…the list is endless), but modern life is tough without the advantages that a good credit score brings. Have you ever tried booking a hotel room or renting a car without a credit card? Worse, some employers now routinely carry out credit checks for new hires and existing employees, so your job could be at stake.

So how do you go about rebuilding your score?

Secured Credit Card–A Useful Credit-Building Tool

Unsecured credit cards are probably the most common form of card. You’re given what amounts to a line of credit and the lender takes a chance on your defaulting. As their name implies, secured credit cards are very different. That’s because there’s no risk to the lender–your credit limit is the amount you deposit in your account–up-front.

Yes, that sounds a lot like a prepaid card, but it is a little different. When Gerri Detweiler, a personal finance advisor, appeared on Fox recently, she explained that the sum you pay up-front is closer to the security deposit you pay a landlord when you move into a rented home. You get it back when you close the account or when the issuer migrates you to a normal credit card.

What’s important about a secured credit card is that the issuer normally reports your account to credit bureaus, so–if you use your account responsibly–you are able to rebuild your credit score.

Choosing a Secured Credit Card

Even though they represent little or no risk to the issuer, many secured credit cards carry high fees. And a few of them appear to be little more than scams designed to fleece the already vulnerable. So take care when choosing one. Here are four golden rules to follow:

1. Make sure you understand all the card’s fees and costs before you commit yourself.
2. Check that the issuer is FDIC insured (it has your money, and you don’t want to take the hit if it goes bust).
3. Choose a reputable lender, and Google it to make sure other customers haven’t been gouged.
4. Ensure that your account will be reported to all three of the big credit bureaus.

Secured Credit Card Use

The best practice rules for secured credit card use are the same as those for ordinary cards–always pay on time and always try to pay off your balance in full each month.

And certainly make sure you don’t find yourself carrying forward a balance that represents a large proportion of your credit limit. The money you’re using may be yours, but the credit bureaus don’t differentiate between secured and unsecured credit limits, and your score can suffer if you use a high proportion of your available credit (it’s called your “credit utilization ratio”). Earlier this year, a Boston Globe money expert recommended avoiding carrying forward a balance that’s greater than 30 percent of your credit limit.

If you’re thinking of applying for a secured card, you could start by exploring these:

• Public Savings Bank Secured Card
• New Millennium Bank Secured Gold Visa® or Mastercard®
• Applied Bank® Secured Visa® Credit Card

Credit Card Debt Doesn’t Only Happen to Bad People

There’s a lot of moralizing that goes on about credit card debt, and people who have been smart enough to avoid it often look down their noses at those who’ve got themselves into deep trouble. So it was refreshing to read Trent Hamm’s “confessional” piece in the Christian Science Monitor last Friday.

Trent, who’s clearly neither bad nor unintelligent, described how he left college with “manageable” credit card debt, but found himself a few years later owing $20,000 on his cards. The monthly repayments on that were costing him more than his rent, and he had reached a point where he simply couldn’t satisfy all his creditors. He’s turned things around now and acknowledges his mistakes, but his explanation for his experience illustrates how human–rather than immoral or stupid–his actions were:

Why did I buy? There was a mix of things going on. Poor impulse control. Career-related anxieties. Lots of stress. All of these things were solvable on their own and buying things I couldn’t afford was merely a short-term salve for them. It was easy to forget that pain if I could go home and read a new book or play a new game for a while.

Credit Card Use Overseas

Yesterday’s Seattle Times explored the difficulties that Americans often face when trying to use their credit cards abroad. Banks in many countries (across western Europe, but also elsewhere) stopped relying on magnetic strips for swiping credit cards many years ago. Instead, their cards contain a microchip, and customers never sign for transactions, instead typing their PIN into a keypad.

This undoubtedly reduces queues at check-outs because it’s a faster process than swiping and signing. It also has some security benefits, partly because it’s supposed to be inherently safer (though not perfectly so), and partly because you never need to lose sight of your card. In a restaurant, for example, your waiter brings a portable terminal to your table and conducts the transaction there.

This is all very well, but what happens to Americans, who don’t have chips in their cards? Well, in theory, outlets should print off a slip and allow you to sign. But some smaller ones don’t. And automatic machines that sell tickets, gas, highway tolls, and so forth simply won’t work. So if you’re travelling overseas (and Canada and Mexico are both introducing “Chip and PIN” at the moment), your credit card use could be affected and you probably should carry more cash than you usually would.

Student Credit Cards

Last week (July 19), the Index Credit Cards news blog mentioned a number of student credit cards that could suit those who will soon be off to college. Today’s Detroit News raised an additional point on the subject that’s worth repeating.

If you’re not convinced that your son or daughter is yet ready for his or her own credit card, then you could always order an additional card for him/her on one of your accounts. Of course, the trouble with this is that your offspring could go off on a spending spree with your credit limit.

However, people with American Express charge cards can set (and later change) individual spending limits on each of their additional cards. Now, try that on your husband/wife/partner, and you may well find that the consequent cost of couples counselling outweighs any savings on your card bills. But use it on your son’s or daughter’s additional card, and you can prevent out-of-control spending, while still being able to up the limit in an emergency.

If you’d like to to have the ability to help manage your child’s student spending, then check out the American Express® Preferred Rewards Gold Card, or other American Express cards that offer this functionality.

You could find the best credit card news you’ve seen in ages.

Credit Card Trends: “Lies, Damned Lies, and Statistics”

Writers often have odd lives, which may explain why last Thursday afternoon this one was listening online to a business program being broadcast by the London Broadcasting Company (LBC). That’s London, England. You see? Odd.

An analyst was being interviewed down-the-line from New York, and he was discussing that day’s American financial news. He was particularly enthusiastic about the latest figures from the Federal Reserve about consumer credit in general and credit card debt in particular.

The Fed, he correctly said, had reported that Americans had reduced their credit card balances by $7.4 billion in May, which was an annualized rate of 10.5 percent. He then went on to comment that this was proof of a new prudence and resilience among consumers. You are lucky (although you may not think so) to be reading this column, because his remarks very nearly resulted in the computer on which it is being written exiting a first floor window at speed.

Credit Card Debt–The Reality

The analyst could also have told LBC’s listeners that the Fed’s G.19 Consumer Credit Report shows that credit card debt fell by $19.5 billion in the first quarter of this year. However, he is unlikely to have celebrated the fact that only $800 million of that was a result of Americans paying down their balances. According to the Federal Deposit Insurance Corporation (FDIC), the other $18.7 billion was written off (”charged off” in industry jargon) by credit card companies because they’d given up hope of collecting the debts.

Cheerful headlines reporting some other credit card trends need to be taken with similarly large pinches of salt. Over the last couple of weeks, S&P, Fitch Ratings, and the American Bankers Association have all published data that show declines in card delinquencies (overdue accounts), and these have largely been covered in the media uncritically.

However, some analysts believe that these figures are partly a result of all those charge offs. Because they’ve already eliminated so many of the long-term unemployed and uncreditworthy from their customer bases, credit card companies are left with a greater proportion of cardholders who have had healthy credit reports all along. Other experts think that struggling consumers are prioritizing making minimum payments over everything else (including their mortgages) because they see maintaining the line of credit that their credit cards provide as an overwhelming need. They may not be able to keep that up for ever.

Some Good News

All of this doesn’t mean that there are no signs of Americans tightening their belts and being more financially responsible. The Discover® U.S. Spending Monitor, published July 7, showed that consumer spending intentions dropped two points in June. Unfortunately, much of that was due to a fall in economic confidence.

Of course, after all that gloom, it’s important to recognize that life remains more than comfortable for the huge majority of Americans. Indeed, with so many refinancing at record-low mortgage rates, a large section of the population has never had it so good. And if you still have a pristine credit report, you should regularly review the credit cards in your wallet to make sure you’re still getting the best possible deals.

Discover Great Credit Card Deals?

For no better reason than that the company’s name has already come up, let’s look at a couple of offerings from Discover.

The Discover® More® Card – Black has no annual fee, and is currently offering a zero percent introductory annual percentage rate (APR) for the first nine months. After that, the rate will be between 11.99 percent and 20.99 percent, depending on your credit report. This card’s strength is in its rewards program. You get one percent cash back on everything, five percent on purchases made in particular categories that change through the year, and up to a huge 20 percent on certain purchases made through the Discover online shopping website.

While you’re exploring the range, check out the Discover® American Flag Card. Yes, it offers a good deal to the right sort of cardholder, but it would also look just so good in any pocketbook!

The Good Credit Card News

It’s Independence Day so let’s celebrate the fact that today Americans are less dependent on credit card debt than they have been for a very long time. A quick trip to the Federal Reserve’s website reveals the latest figures. In 2008, revolving credit balances (which are mostly made up of credit card debt) averaged $958.1 billion. In April 2010, that figure was down to $838 billion.

Wow. That’s a reduction of more that $120 billion. No wonder virtually all the big credit card companies are reporting falling levels of both delinquencies (overdue accounts) and charge offs (debt written off because it’s uncollectible).

If you’re feeling in a fragile frame of mind, and simply aren’t up to dealing with bad news, then stop reading now. Because reality is about to intrude.

The Bad Credit Card News

The bad credit card news is that all that good credit card news was plain wrong. Yes, balances are down by $120 billion, but most of that is likely to be because card issuers have written off huge amounts of debt. And that money has fallen off the Fed’s revolving credit figures and into the laps of collection agencies.

Worse, as the Wall Street Journal pointed out Saturday, the reason credit card companies are reporting better delinquency and charge-off rates is because: “Some people have been unemployed so long they have simply been washed out of the credit system and no longer have any effect on the numbers.”

Credit Card Users Face Harsh Penalties

Things can be pretty tough too for those who remain credit card users. MarketWatch revealed last week the results of a survey that suggests too many card issuers retain what it calls a “gotcha” attitude to penalty interest rates.

As if credit card rates aren’t high enough already, many companies impose substantial hikes on those who are even a little late in making a payment. And the survey shows that some issuers use language to explain their penalty programs that is at best unclear, and at worse could be seen as deliberately obfuscating.

Chasing Good Credit Card Deals

When it comes to explaining penalty credit card rates, none of the major issuers scored perfectly in the survey, but one that did better than most was Chase. So, if you prefer to deal with a company that strives for clarity in its dealings you could do worse than explore some of its products.

For example, the Chase Freedom Card offers one percent earnings on all purchases. And you can earn five percent when you buy within certain categories (these change regularly), and an amazing 20 percent on online purchases made through specified merchants.

Meanwhile, if you’re seeking a balance transfer credit card, you should check out Slate from Chase. This card offers a zero percent introductory APR on balance transfers, and some nifty tools that could help you meet your credit card debt reduction goals.

And, finally, the Chase Sapphire Preferred Card could be for you if you particularly value travel rewards. And, right now, you could earn 25,000 bonus points if you spend $3,000 on the card during the first three months that you have it.

Click the links for details, terms, and conditions.

Credit Score Tightening

Yesterday, TransUnion, one of the big-three credit bureaus, unveiled an enhanced form of credit score that could make it more difficult for some Americans to obtain credit cards. According to TransUnion, credit bureaus traditionally calculate credit scores using four main forms of historical data:

1. Past delinquencies
2. History of responsible use
3. Debt level
4. Utilization (the proportion of your credit limits that you actually use)

However, the company is now able to offer–in partnership with ID Analytics–a fifth dimension based on people’s “stability.” And it claims that this additional perspective can, in some circumstances, reduce bad credit decisions by up to 46%.

Credit Card Debt Problems Down Again

Also yesterday, Moody’s Investor Services published its monthly survey of credit card charge-offs, which is industry jargon for the balances that credit card companies write off because they think the debts have become noncollectable. That doesn’t, of course, mean that nobody will try to retrieve the money; anyone whose balance is charged off should expect to hear fairly soon from a collection agency.

The first bit of good news is that Moody’s says that charge-offs on credit cards in May fell for the second month in a row. Jeff Hibbs, an analyst with Moody’s, says that the company believes that “…credit card charge-offs have passed their peak levels of this credit cycle.”

Credit Card News–Things Are Getting Even Better

The second piece of cheerful credit card news to arise from the Moody’s report concerns delinquencies, which are overdue payments on balances that are yet to be written off. In May, these fell to their lowest level since November 2008. Early stage delinquencies (accounts overdue by 30-59 days) were even healthier, and the company says: “The rate is approaching its historically low ranges of 2006-7.”

All of this suggests that fewer Americans are getting into trouble over credit card debt. And that has to be a welcome thought for card holders, credit card companies, and anyone who cares about the health of the U.S. economy as a whole.

Prepaid Credit Card Swipe Fees to Be Unregulated?

Regular readers may recall that legislators on Capitol Hill are currently deciding whether to regulate “swipe” (or “interchange”) fees, which is the cut taken by credit card companies and payment networks every time a merchant swipes a card. A House-Senate conference is currently hammering out the details, but it appears that lobbyists have won a concession over plans to limit swipe fees on prepaid credit cards–as they’re oxymoronically called.

Earlier today, the Washington Post reported that the conference had decided not to regulate these fees, mainly because to do so could harm poor users who often receive state benefits through fee revenue. If swipe fee revenues are reduced, issuers might make up the difference with higher fees for users.

Credit Card Use Without the Credit

As discussed in previous columns, prepaid credit card use can prove expensive because they often have high fees. However, if chosen with care, prepaid cards can provide a convenient payment method for those for whom traditional credit cards are not appropriate.

One such group is teenagers, and Discover offers a useful product that’s tailored for the young, the Current by Discover Teen Prepaid Debit Card. Other groups include those who cannot–or do not wish to–access mainstream cards. People in that position could check out the ACE Visa Prepaid Debit Card or The Mango™ MasterCard® Prepaid Card.

Credit Card Debt: the Helpers Who Harm

When you’re up to your eyes in credit card debt, any port looks welcome in the storm. But Friday’s New York Times told harrowing stories of those who, in desperation, had turned to businesses who promised to help them only to find themselves way worse off.

The airwaves, print media, and Internet are full of ads from companies offering to free you from credit card debt. And, the Times says, last year 425,000 Americans asked these firms for help with a total of about $11.7 billion in card balances. But there’s a good reason why, in the last six years, 21 states have brought 128 enforcement actions against debt settlement companies–all too often these are predatory scams.

And countless consumers have found themselves both poorer and in deeper trouble–sometimes bankruptcy–as a result of being too trusting when it comes to those who promise help eradicating the balances on their credit cards.

Credit Cards After Collapse of Credit Scores

Those who are already beyond the “help” of debt settlement companies often find that their damaged credit score means they can no longer enjoy the benefits of traditional credit card use. But they still need a convenient payment instrument, so they turn to prepaid credit cards.

Previous editions of this column have recommended a number of pre-paid cards (which can often be used to repair credit scores), including the ACE Visa Prepaid Debit Card, the ACE Pink Visa Prepaid Debit Card, and The Mango™ MasterCard® Prepaid Card.

Prepaid Cards to Be Exempt from Swipe Fees?

But, last week, the Center for Financial Services Innovation (CSFI) wrote to Rep. Barney Frank (D-MA) and Senator Christopher J. Dodd (D-CT), who are the chairmen of the house and senate committees that supervise financial services. The CFSI argued that current proposals to limit so-called “swipe” or “interchange” fees (the amount of a transaction taken from merchants by credit card companies and networks every time a card is swiped) could “substantially” harm the consumers who use these products. The letter continued:

We believe an explicit fee limit on interchange will effectively prevent millions of low- and moderate-income households from accessing a financial product that has emerged to enable poor, underbanked families to access the financial mainstream.

Credit Card Rewards Programs–Cash-Back Cards

If you’re in happier financial circumstances, you may be more interested in another New York Times piece, published just hours after last Monday’s edition of this column. The Times looked at the best cash-back credit card rewards programs, and confirmed the attractiveness of one of the picks featured here earlier in the day. It said:

You may also want to look at Blue Cash® from American Express, which after the first $6,500 of purchases, pays 5 percent for certain “everyday purchases” and 1.25 percent for all other purchases.

That’s a great deal, so it’s getting plenty of recommendations.