New Rules of Post Credit Cards

Consumers will gain more rights when it comes to their credit cards, with CNBC's Carmen Wong Ulrich and John Ulzheimer, Credit.com

Credit card reform leaves small biz out

Washington's credit card crackdown applies only to personal cards, leaving some small businesses unprotected.

NEW YORK (CNNMoney.com) -- When the Senate passed its credit-card reform bill on Tuesday, Senator Christopher Dodd called it "a great day for consumers." But what will it mean for small business owners who've been struggling with inflated rates and unexpected fees on their credit cards?

That depends on how your small business is incorporated, and what kind of card you have.

The Credit Card Accountability Responsibility and Disclosure Act that Obama will sign Friday outlaws several card policies that have provoked public outrage in recent months, including retroactive rate increases on existing balances for cardholders in good standing; hiking rates for new charges without at least 45 days' notice; "double-cycle billing," which allows fees to be charged for balances that were already paid off; and "universal default," which applies rate hikes if a customer is late with payments on unrelated bills.

While some of these provisions were already put in place by the Federal Reserve last December, they weren't scheduled to kick in until July 2010. Instead, the 45-day notice will now go into effect in mid-August of this year, with the rest of the changes being implemented next February.

For small businesses, however, there's a catch. Because the new law amends the Truth in Lending Act, which only governs consumer loans, it doesn't apply to corporate cards.

What this means is if you use your personal card to make business purchases, you'll be covered by the new protections. Likewise, business cards based on your personal credit - as is often the case for sole proprietors - should be covered as well.

But for limited liability corporations and other companies that use traditional corporate cards, the same old rules will continue to apply. An amendment proposed by Senators Mary Landrieu, D-La., and Olympia Snowe, R-Maine, to extend protections to any businesses with 50 or fewer employees was defeated in the Senate last week; instead, the final bill directs the Federal Reserve to conduct a study of credit-card use by small businesses.

Read entire article :

Credit-Card Consumer Protection Law May Reduce Purchasing Power

By Alexis Leondis

May 22 (Bloomberg) -- Jack Krupansky declared bankruptcy three and a half years ago. Now he worries the credit-card legislation Congress passed this week will make his banks, including Barclays Plc, penalize him as a riskier borrower.

“This legislation could boomerang and hurt the same people it’s designed to help during the credit crunch,” said Krupansky, 55, a freelance software developer in New York.

The “bill of rights” that U.S. President Barack Obama signed today is intended to protect cardholders from excessive fees and last-minute contract changes. It also may prompt banks to slash available credit by as much as $90 billion to avoid risk, said Robert Hammer, chief executive officer of R.K. Hammer Investment Bankers, an adviser to card companies.

That reduction could choke off a consumer-led recovery and hurt retailers struggling amid the longest recession since the 1930s, said Andrew Caplin, an economics professor at New York University. Consumer spending accounts for 70 percent of the U.S. economy.

“The bill may stop various forms of abuse, but it will also stop some various forms of credit,” Caplin said. “If the economic recovery is going to rely on consumer spending, it will be a long wait.”

In 2007, purchase volume on all U.S. consumer and commercial credit cards equaled $2.11 trillion, up 8.4 percent from 2006, according to the Nilson Report, the Carpinteria, California-based newsletter.

Cardholders Spend More

“When people walk into stores with credit cards instead of cash, 90 percent of them spend more,” Britt Beemer, founder of America’s Research Group, said in an interview. “Apparel, which is in the dumpster already, is going to be hurt the most. Nonessential, big-ticket items like TVs and electronics could certainly be impacted a lot.”

Read entire article:

A New Day for Credit Cards

Card industry consultant Robert Hammer sees the new credit card rules reducing card issuer revenues by 10 percent next year. CNBC's Bertha Coombs has the details.

Will Credit Card Debt Crush American Households?

Will Credit Card Debt Crush American Households? The chart of American credit card debt is not pretty.
However, we disagree with negative tone of many market pundits on the increasing amount of American credit card debt. In our view, increasing credit debt level is not as worrisome as long as the total household debt as % of total net-worth of US households is still small and manageable. It appears to be the case as of end of 2008:

- US Household assets as a whole: $65.7 trillion, unadjusted for inflation.

- US Household liabilities: $14.2 trillion.

- Net worth of US/American households (assets minus liability) was $51.5 trillion.

(Source: The Federal Reserve)

This means the total household liabilities (not just the credit card debt) as % of total net-worth of US households is still 27.5%...very reasonable still.
Hence, we argue that US households in general on aggregate are still able to absorb and withstand higher debt levels. This is a surprising fact but fortunately true.
Source :

Escaping Credit Card Debt !!!

John Ulzheimer, of Credit.com, and Carmen Wong Ulrich help viewers get out of credit card debt.

Senate Approves Credit-Card Bill of Rights

By Jeff Plungis

May 19 (Bloomberg) -- A credit-card “bill of rights” that would curb fees and limit contract changes won approval from the U.S. Senate, as lawmakers pledged to restore “balance” between consumers and companies.

The Senate’s 90-5 vote sends the bill to the House of Representatives, which approved a similar measure last month. The House may give final approval as soon as tomorrow. President Barack Obama said he’d like to sign a bill into law by the May 25 Memorial Day holiday.

The Senate legislation would require lenders to apply payments to balances with the highest interest rates first. It would prohibit increasing a consumer’s rate on existing balances based on late payments to another lender, a practice known as “universal default.”

Senators said they had been flooded by complaints from constituents with clean payment histories whose rates were increased or borrowing limits were slashed.

“The statistics are just overwhelming about what’s happening to people,” said Banking Committee Chairman Christopher Dodd, a Connecticut Democrat. “It needed to change. This bill tries to bring a sense of balance back.”

General Electric Co. Chief Executive Officer Jeffrey Immelt told investors at a conference in Florida today that the legislation wound up as “equal to or better than what our expectation was.” GE is the biggest private-label credit card issuer in the U.S.

The American Bankers Association, representing companies such as Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., opposed the bill.

Banks Opposed

Banks will be prevented under the legislation from pricing for risk, Edward Yingling, president and chief executive officer of the American Bankers Association, said in a statement.

“What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky,” Yingling said. “It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate.”

Most credit-card stocks fell. Bank of America dropped 48 cents to $11.25 in New York Stock Exchange composite trading at 4:15 p.m., a 4 percent decline. JPMorgan was off $1.45, or 3.9 percent, to $35.81. MasterCard Inc. lost $6.67, or 3.9 percent, to $166.73, and Visa Inc. declined $1.61, or 2.4 percent, to $64.80.

Read the entire article:

American Express Will Slash 4,000 Jobs

By Hugh Son and Ari Levy
May 18 (Bloomberg) -- American Express Co., the largest U.S. credit-card company by purchases, will cut about 6 percent of its workforce as cardholders squeezed by rising unemployment fail to pay debts.

American Express will take a charge of $180 million to $250 million in the second quarter, mostly tied to severance and other costs from eliminating 4,000 positions, the New York-based company said today in a statement. Additional reductions will be made in marketing and travel costs and consulting services.

The cuts, in addition to 7,000 job eliminations announced in October, may save about $2 billion in expenses this year, the company said. American Express has had to set aside more reserves for failed loans as surging U.S. unemployment makes it harder for customers to pay debt. The jobless rate reached 8.9 percent in April, a 25-year high.

“Credit is a big issue and the spending volume on the cards is a concern as well,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco, who recommends selling American Express shares. “They’re taking the right steps in this environment.”

American Express rose $1.90, or 7.8 percent, to $26.13 at 4 p.m. on the New York Stock Exchange today, trimming its loss for the past year to 46 percent. The stock dropped 13 cents to $26 in extended trading after the announcement.
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A third of internet users too scared of fraud to hand over credit card details for online shopping

Almost a third of internet users are too frightened to hand over their credit details while shopping online, a report published today found.

The Office of Fair Trading said 30 per cent of internet users do not shop online because of a lack of trust and a fear of fraud.

It added that, although consumer confidence is gradually improving, online markets cannot reach their full potential because it is still too low.

Chief executive John Fingleton said: 'Online retailing is the future for many businesses and increasingly important to the economy.

'If consumers are not confident online, demand will grow at a slower rate. So we must tackle these concerns right now if the online market is to grow at its full potential.'

Minister for Consumer Affairs Gareth Thomas said: 'UK consumers buy almost twice as much over the internet compared to their European neighbours.

'It's encouraging that the OFT's survey shows increasing consumer confidence when buying online - but people still have concerns.
Read Entire Article

Senate Nears Completing Credit Card Bill, Blocks 15% Rate Cap

May 14 (Bloomberg) -- The U.S. Senate, working to complete legislation to curb credit-card fees and limit contract changes, refused to cap interest rates on balances at 15 percent.

The Senate may pass the so-called credit-card bill of rights measure as early as today, said Banking Committee Chairman Chris Dodd. Approval would send the measure to a committee to resolve differences with a House version.

“We’ve spent a lot of time over the last number of months trying to help stabilize the financial system,” said Dodd, a Connecticut Democrat. “A lot of attention has been paid to banks. We haven’t spent enough time trying to help consumers.”

Senators yesterday voted 60-33 to invoke budget rules that killed the rate cap proposed by Senator Bernie Sanders, a Vermont independent. Sanders said the action was needed to stop banks from routinely charging 25 percent to 30 percent on credit cards.

“When banks are charging 30 percent interest rates, they’re not making credit available, they’re engaged in loan- sharking,” Sanders said.

The Senate credit-card legislation would require lenders to apply payments to balances with the highest interest rates first. It would prohibit increasing a consumer’s rate on existing balances based on late payments to another lender, a practice known as “universal default.”

The bill would require credit-card companies to give 45 days’ notice before increasing an interest rate. It would prohibit retroactive rate increases on existing balances unless a consumer was 60 days late with a payment. Companies would have to restore the original, lower rate if a cardholder stayed current six months after a late payment.
Read entire atrticle

Obama Talks Credit Cards

May 14 2009

President Obama discusses credit cards and the need for more fairness and discipline in consumer spending.

Credit Card Crackdown

Insight on Americans' relationship with credit cards, with John Ulzheimer, Credit.com; Jerry Lynch, JFL Consulting; Doug Flynn, Flynn Zito Capital Mgmt.; and CNBC's Carmen Wong Ulrich.

MasterCard Will Let Customers Transfer Cash Using Mobile Phones

By Alexis Leondis

May 13 (Bloomberg) -- MasterCard Inc., the world’s second- largest electronic payments network, will begin letting U.S. customers with Bancorp Inc. accounts send money by mobile phone later this month.

Customers will be able to write a text message, use a mobile Web browser or download an application that will enable them to transfer money to another person’s account, the Purchase, New York-based company said today in a statement.

“Consumers are carrying a lot less cash around and this service enables them to send or receive money without the hassle of exchanging cash back and forth and writing checks,” said Art Kranzley, the company’s chief emerging technology officer.

MasterCard’s profit slipped 18 percent in the first quarter from a year earlier as credit-card spending fell, it said in a statement May 1. The company is unaffected by rising credit-card defaults because its network processes transactions and doesn’t make loans to cardholders.

The mobile phone feature was created for so-called social and family payments, such as reimbursing friends for concert tickets or sending money to a child in college, Kranzley said. The program, which limits transfers to $500, will initially be offered to customers using prepaid cards from Bancorp, an online commercial bank based in Wilmington, Delaware. Kranzley said it will be extended to other banks that sign up.

The sender must confirm the initial request by entering a personal identification number. This validation, along with the same security safeguards given to customers who hold credit cards issued by banks in the MasterCard network, will protect against fraud, Kranzley said.

Source Bloomberg.com

Restricting Credit Card Rate Hikes

Cardrating.com founder on the credit cards reform lawmakers are debating on capitol hill

Restricting Credit Card Rate Hikes
Uploaded by thejimrogers - News videos hot off the press.

Banks try social networking, jump on Twitter wagon

By Kathy Chu and Kim Thai, USA TODAY

Social networking is becoming an increasingly popular way for banks to reach consumers amid the economic downturn.

Wells Fargo (WFC) and Bank of America (BAC) have begun to "tweet" — post messages of 140 characters or less on Twitter.com — with customers about everything from bank fees to product features. Discover Financial (DFS), American Express (AXP) and Citigroup (C) have launched Facebook or MySpace pages. Some banks even put marketing videos on YouTube.

"Social media is a whole new world, and you cannot afford to not be a part of it," says Pamela Blase, a spokeswoman for UMB Financial of Kansas City, Mo., which tweets about everything from the bank's financial stability to the industry's prospects.

Banks say they're establishing presences on social-networking sites to tap into a growing demographic and to control the conversation about their brands. Yet the economic turmoil, some say, makes it even more important to reach out to customers any way they can.

"There's a lot of worry out there," says Ed Terpening, vice president of social media at Wells Fargo, one of the first banks with a group of employees dedicated to social networking. "That means that we have to stay close to our customers."

FIND MORE STORIES IN: San Francisco | Kansas City | YouTube | MySpace | Facebook | Bank of America | Citigroup | Wells Fargo | Twitter | American Express

The appeal of social networking, according to Steve Furman, Discover's director of e-commerce, is that it provides "pure, instant" communication with customers.

In general, banks and card issuers have been slower to embrace social networking than other industries have. But social networking has become popular enough that, for many institutions, it's not a question of if but when to establish a presence on these sites, says James McGovern of Corporate Insight, a financial-services research firm.

Yet as a growing number of banks become proficient in the social-networking world, the norms of customer service are being upended. Increasingly, today's online interactions between banks and consumers are peppered with shorthand, typos and even slang.

"It sounds like you need 2 talk 2 someone abt your specific situation," read a recent Twitter post from a Wells Fargo rep.

Adding to banks' challenges, social-networking sites are becoming another venue for consumers to complain — and complain is exactly what they're doing as credit card rates and fees rise even as the economy struggles and unemployment rises.

Jesse Hattabaugh, a software engineer from San Francisco, recently posted this message to banks on Twitter: "Stop making your living off my late fees! You fine me more than you loan me!"

Advanta Shuts Down Credit-Card Lending Amid Surging Charge-Offs

By Hugh Son

May 12 (Bloomberg) -- Advanta Corp., the issuer of credit cards for small businesses, will halt new lending for its 1 million customers next month as the recession causes a surge in loan defaults.

Lending ceases June 10. Advanta will use as much as $1.4 billion to pay investors of its securitized credit-card loans part of the debt’s face value, the Spring House, Pennsylvania- based company said yesterday in a statement. Advanta said it’s preserving capital after charge-offs, or uncollectible debt, reached 20 percent on some cards as of March 31.

“This is a Hail Mary pass: They’re hoping they can stay alive barely until the environment changes,” said David Robertson, president of the Nilson Report, the Carpinteria, California-based industry newsletter.

Advanta has reported three consecutive quarterly losses and has seen its shares plunge from about $30 in June 2007 to $1.13 at the close of New York trading yesterday. The U.S. jobless rate reached 8.5 percent in March, a 25-year high, squeezing sales for small business owners. The economic slowdown affected Advanta’s customers across the country, Chief Financial Officer Philip Browne has said.

“We’ll be shutting down accounts for future transaction activities, but many of the customers will maintain balances and pay us off over time,” Browne said yesterday in a telephone interview. “We’ll have to service and collect on that, and that will be the first order of business for the company.”

Curtailing Business

Shutting accounts won’t accelerate payments for existing balances, Advanta said. While the company is “free to do new business in the future,” it doesn’t expect to do so until the plan is under way, according to the statement.

More than 90 percent of Advanta’s small business customers will have “adequate” access to alternative credit after the company halts lending, Browne said.

Advanta was the 11th-biggest U.S. credit-card issuer at the end of 2008 with about $5 billion in outstanding balances, and the only major lender focused on small business borrowers, Robertson said.

The company’s announcement yesterday is “a big sign that the credit-card industry has problems that are going to be around for several years,” said the Nilson Report’s Robertson.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net;

Students Become Prey for Cards Charging 18% After Free Lunch

By Alexis Leondis (Source Bloomberg)

May 8 (Bloomberg) -- Irena Cabrilo got a free lunch during her freshman year at the University of North Texas in exchange for signing up for a credit card from Bank of America Corp. Eight months later, she was carrying a $1,500 balance and struggling to pay an 18 percent interest rate.

“They made it sound so easy,” said Cabrilo, now a senior majoring in marketing and advertising. “Just sign up, you’ll get approved and have access to money. They don’t talk about interest rates and what will happen to your credit history.”

Average credit-card debt among graduating college seniors increased to more than $4,100 last year from $2,900 in 2004, according to a study by SLM Corp. About 85 percent of students have at least one credit card, according to the study, conducted every four years by Reston, Virginia-based SLM, also known as Sallie Mae, the largest lender to U.S. students.

The Senate may vote on a bill as early as May 11 that would prevent credit-card companies from targeting college students such as Cabrilo by requiring parental consent for a borrower under age 21 unless there is proof of independent income or completion of a financial literacy course. A Senate panel approved the restrictions, which also limit credit-card interest rates and fees, in March.

“Credit cards should be a leg-up for college students, not a leg-trap that snares them in unbearable debt,” said Senator Charles Schumer, a New York Democrat. “This new legislation will help protect students from unfair lending practices.”

Students Targeted

Credit-card issuers market to students because they want to inspire brand loyalty from a young age and believe parents will step in if their children default, according to Bill Hardekopf, chief executive officer of LowCards.com, a Birmingham, Alabama research firm. The lenders also expect college graduates to have higher-paying jobs, he said.

Many students need the credit-card accounts because they don’t have sufficient financial aid or enough savings to cover college costs, the Sallie Mae study said. More are turning to credit cards as the gap between financial aid packages and tuition widens, said Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group in Washington.

Tuition and fees have risen 5.9 percent at four-year private institutions to $25,143 a year and 6.4 percent at public schools to $6,585 since last year, according to the New York- based College Board. Tuition, fees, room and board surpassed $50,000 a year for the first time in 2007 at George Washington University. Current annual rates at Ivy League schools, such as Harvard University in Boston, exceed $45,000.

Fewer Loans

Fewer private student loans, which often have variable interest rates, and “PLUS” loans are being originated because of stricter underwriting standards, according to Mark Kantrowitz, publisher of FinAid.org, a college funding information Web site based in Cranberry Township, Pennsylvania. Parents and graduate students may take PLUS loans, which require good credit and have fixed interest rates, to cover the balance of tuition.

Private education loan originations were $1.5 billion in the first quarter, down from $2.5 billion a year earlier, based on data provided by Sallie Mae.

Credit-card interest rates are often higher than private student loan rates, and funding college costs with credit cards should only be used after exhausting other loans and for necessary expenses, said Kantrowitz. “You should live like a student while you’re in school so you don’t have to live like a student after you graduate,” he said.

Recent graduates who are repaying their debts should make the minimum payment on every loan and apply any remaining money to the loan with the highest rate, Kantrowitz said.
click here to read the full article

Prepaid credit card - Advantages and disadvantages

loans and how and where to get them.
Also bad credit and what to do about it.
Bad credit personal loans, mortgage loans, refinance loans, debt consolidation loans, credit repair, credit bureaus and credit reports, and credit cards like VISA
Prepaid credit cards are offering people with low incomes or poor credit ratings a chance to take advantage of a credit card. But what advantages and disadvantages do prepaid credit cards have?

A relatively new form of credit card you so-called pre paid credit card. This differs from other types of credit card because you only have funds available to it on the corresponding clearing account. You need a credit card that is similar to a prepaid phone card first with credit “charge”, then this means the credit card that will be. Basically, the prepaid credit card offers some advantages but also disadvantages for the users and cardholders. The biggest advantage of prepaid credit card is certainly that now customers can use credit cards, which are otherwise due to adverse credit no card in this way would receive. As one means of prepaid credit cards only through any existing credit and no credit claims, can even the holder of a current account balances, this type of credit card use. Since especially abroad and in the Internet is often the only credit card payment option is to have these “new” card of course great advantages of the prepaid credit card.

A second benefit to the cardholder is that it is an overview of the decisions made therein. While using a traditional credit card even once in the sum makes more orders than we had intended, does this by pre-paid credit cards from the outset to avoid, in which only the amount of money in the account, you also have a maximum wants. Since an “overdraft” in the sense of the credit card is not possible, which also provides the customer a security in addition if the prepaid credit card is stolen should turn the advantage to mention that the maximum in the account or located on the card balance has to be.Besides the many advantages there are also a major drawback of the prepaid credit card. While it is certainly positive for some customers is that you use the card only on credit can not see that a few other customers as a big disadvantage to. One is at the disposal of assets, and may take the prepaid credit card is not in the sense of spontaneous, or even for emergency use as you would with a conventional credit card with a certain amount limit is used. For unforeseen orders, the prepaid card is less likely and thus is less flexible than other credit

Those concerned with purchasing online using their credit card, will be increasingly relieved on the so-called prepaid credit cards coming from different financial institutions. But what is behind such an offer?

Prepaid credit cards are actually the same idea basically, almost every owner of a phone should know: The credit card will be charged before use with a certain amount of money charged, then the payments will be processed accordingly. The principle is strongly reminiscent of the method with traditional rechargeable debit cards, however, the advantage of prepaid credit cards in the much wider acceptance. Almost in every place where ordinary credit cards are accepted, you have the possibility to use a prepaid credit card.

Another big advantage compared to ordinary credit cards is the lack Schufa query before issuing the card. Since under the prepaid principle usually no payments can be made to the board on the amount may go, is the lack of polling also perfectly understandable. For many customers, which, because of problems Schufa the issue of a normal credit card is denied, provided by the prepaid card is a suitable alternative to the use of cashless payment. Even as the first credit card in adolescence is the prepaid card as an alternative to cash is certainly recommended.

The comparison of different providers of prepaid cards is very rewarding, since depending on the bank also offered additional benefits. Credit interest rates, an unlimited Aufladebetrag or even negotiating a credit line (if still missing Schufa query) are possible depending on the institution. The annual fee for a prepaid credit card is usually 30 to 50 euros.

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