Posts Tagged ‘Credit Cards’

Warning: Those unused credit cards could cost you!

December 30th, 2009

Many of us have them: unused credit cards that we opened for whatever reason that we don’t use anymore and just have stuffed in a sock drawer or a desk. We may keep them because we think it will hurt our credit scores to cancel them, or for emergencies, or just because we are too lazy to call and cancel them. Now it looks like the credit card companies’ never ending quest for profits could make keeping these cards rather expensive.

According to this article on Bloomberg, Fifth Third Bank has instituted a $19 charge for NOT using your card. Additionally, Citi is starting to charge some customers with low activity levels on their accounts higher interest rates. On top of that many issuers such as Bank of America are starting to experiment with charging annual fees on credit card accounts where there may not have been one before.

For those of us that have built up a pile of unused accounts over the years, this may be a good reminder to cancel many of those accounts we no longer use. It helps reduce the possibility of being blindsided by fees and reduces you risk of fraudulent activity as well. On top of that, it eliminates all those mailings from the credit card company and leaves you with fewer accounts to have to track.

Will there be a credit score hit? Perhaps, although it may be smaller than you would expect, especially if you have several other accounts that are open and active. Just remember that the length of your credit history and the percentage of your credit lines that are utilized are the main factors here, so it is better to keep older and larger accounts.  Two things to consider doing are to request changing your card to a different program instead of closing the account entirely and consolidating existing credit lines with the same issuer.

Since we have no plans to apply for credit in the near future, we made the decision that downsizing to only a handful of accounts is our best course of action. The extra peace and security that comes from having fewer accounts is worth the hit of a few credit score points in my opinion.

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Posted in Banking, Credit Cards, Customer Service

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Chase: Just because your rate is fixed doesn’t mean we can’t add new fees!

February 9th, 2009

Here’s a gem for you, courtesy of USAToday.com: apparently Chase is assessing new fees and raising minimum payments on credit card customers who are floating balances under promotional fixed rates.

In the latest fee rolled out by a bank, JPMorgan Chase, the nation’s largest card issuer, has begun charging hundreds of thousands of borrowers a $10-a-month, or $120-a-year, fee. Industry watchers say the fee is unusual because of its size but also because Chase is adding it to borrowers’ monthly balances, where it accrues interest. The bank is also raising the same consumers’ minimum payments to 5% from 2%.

The change affects consumers with low promotional rates who have carried a large balance for more than two years and made little progress paying it off, says Chase spokeswoman Stephanie Jacobson.

So let me get this straight: customers who took advantage of a promotion offered by Chase and are in every way abiding by the terms and conditions set forth by Chase and making the required payments on time are going to now be charged an additional fee simply for carrying a balance? This is absolutely outrageous! Consumers shouldn’t suffer just because they took advantage of a promotion that didn’t go as Chase thought it would.

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Posted in Banking, Credit Cards, Scams

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Get a life! Financially, that is…

June 18th, 2008

There was an interesting series of tips over on CNNMoney entitled Get a Financial Life. It lays out a series of tips to get your financial house in order in 7 short weeks, with one task per week. Here are their tips, and my thoughts on them.

  1. Talk about your goals with your partner. If you are married or otherwise attached, your finances are a team sport. You can’t get very far if you and your spouse are running towards different financial goal lines. So talk about what you want and make sure you are on the same page.
  2. Build an emergency fund. Another good tip. The recommendation is three months of living expenses in good times, six months in bad. Just remember that your living expenses do not necessarily equal your salary. Hopefully you are frugal and six months of living expenses is a much smaller number than six months of your earnings, but if you have trouble saying no this number may actually be higher than your earnings.
  3. Get life insurance, in the right amount. According to the article, you should have life insurance equal to 5 to 10 times your annual salary. The more dependents you have, the higher the number should be. However, if you are single and have no dependents remember that the purpose is mainly to replace income, and if no one else is going to need that income after you die you don’t really need life insurance. Just make sure to have enough to cover your funeral expenses so that your family doesn’t get stuck with a bill!
  4. Use online billpay and automatic payments. I’ve written before on the virtues of automatic payments on credit cards, and many other bills can be paid by automatic draft from your checking account or credit card as well. Just make sure you are reviewing those bills for unauthorized charges, and if the payments come from your checking account be sure to write them down in the check register and make sure you have sufficient funds to cover the payment.
  5. Simplify your 401k with target-date funds. OK, this one I will disagree with slightly. I find that target-date funds typically have slightly higher management expenses than the funds that make them up. If you are willing to keep up with it, I would recommend just buying the funds individually. This also allows you to adjust the riskiness of your portfolio to suit your individual tastes.
  6. Automate your investments. I completely agree. The biggest investment challenge for a lot of people is just doing something. Setting up automatic investments allows you to set it and forget it. If done in terms of dollars, you also get the benefit of dollar-cost averaging.
  7. Get down to a single credit card. OK, I will disagree on this one. If you use automatic payments as noted in #4 above, I really don’t see a point to limiting yourself to a single card. This is especially true if you have reward cards that give different percentages for different types of purchases. At one point I carried one card for gas (5% reward), one card for restaurants (3% reward), and one more for everything else. Now I am mostly down to just my Citi AMEX Platinum that gives 5% on some purchases (gas, groceries, drugstores) and 3% on everything else, and my Citi Dividend card with a 1% reward for use at places that don’t take AMEX.

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Posted in Basics, Credit Cards, Insurance

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Don’t get burned on your credit card balance transfer!

June 9th, 2008

Here is a cautionary tale from our friend at Debt to Dreams. Our friend was apparently playing the credit card arbitrage game, which is where you take a no/low fee balance transfer at 0% on your credit card and put the money in an insured savings account to earn interest. It is a great game and one that I do myself, however there is the risk that you will slip up and end up having to pay the bank interest unexpectedly. I had a small slip with my AMEX Blue card when I didn’t realize that the promotional term was only six months when the advertisement showed “up to” 15 months. Thankfully my slip ended up only costing me about $30, but it was still a good lesson.

For Debt to Dreams, however, the damage was more substantial. Somehow he missed the expiration of the rate like I did, so when the next month’s bill arrived the statement showed that the promo rate had been replaced by the normal rate, which had been applied to the entire balance. Apparently this was a much bigger balance than I had because the damage was $557. Ouch!

I guess the lesson is to read everything carefully and keep track of the expiration dates of the promotions. Outlook and Yahoo Calendar reminders are great for this.

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Posted in Credit Cards

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Chase reallocated my credit lines unsolicited!

May 24th, 2008

I have a very odd letter from Chase yesterday about my credit card accounts with them. For whatever reason they decided to review my credit card accounts and reallocate credit limits between two of them. They decided to take $2,000 from a Flexible Rewards Visa that I hardly ever use and add it to my Chase Disney Visa, which is dormant other than the 0% balance transfer I am currently floating on the card.

The other account is still open and has about $13,000 in credit left on it, and considering my utilization on the Disney card was above 50% the move helps my credit score. However it still kind of bothers me that Chase took it upon themselves to reallocate my credit lines without prior notice or authorization. What would have happened if I was planning to make a large purchase on the card they took limit away from and went over the new lower limit?

Oh well, I guess no harm no foul. Just a word of warning for those of you with multiple Chase accounts that they may decide to monkey with your credit lines as well.

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Posted in Credit Cards

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My brother-in-law’s trash feeds Mexico!

February 27th, 2008

Several months ago I posted about my brother-in-law’s refusal to shred his personal papers, including credit card statements. At the time I warned that he was just asking for trouble, and it looks like that trouble has finally hit. On one of the cards he rarely uses he suddenly noticed several charges on his account from Mexico. The unauthorized charges totaled over $1000, with the oddest charge being a charge for over $30 at Burger King. Thankfully he caught the charges early (even before his statement closed), so he was able to have the account shut down before much damage was done. He also isn’t responsible for any of the charges. He just has to identify the unauthorized charges on his next statement and complete an affidavit and the items will be taken off of his account.

So what does this incident teach us? A few things, some perhaps not so obvious:

  1. Obviously, you should shred your account statements and anything else with your account numbers or personal information. The most likely way that the thief got the account number was out of the trash, and a shredder is a simple way to prevent the theft of this information.
  2. It is important to monitor your accounts, even if you don’t use it that often. An easy way to do this is to use a Yodlee account aggregator service such as Fidelity Full View, where you can enter in all of your accounts and monitor activity from a single page. This is a must if you have several accounts at different banks to keep an eye on.
  3. One of the biggest advantages to credit cards is limited liability for fraudulent charges. For credit cards, consumer liability is limited to $50 for fraudulent charges, with most issuers offering zero liability for fraudulent charges. While the issue is being straightened out, you are not out any money. Compare that to a debit card, where the funds are immediately deducted from your checking account. Many banks will only credit your account for fraudulent charges once they complete their investigation, which may take days or even weeks. While you are waiting you don’t have use of your money and may even bounce checks because your funds aren’t available. That’s why I feel debit cards are one of the most dangerous products out there. On our main checking account we only have ATM cards which require a PIN to use (no signature based transactions allowed).

Perhaps now my brother-in-law will start shredding. Doubtful, but we can always hope.

On an admin note, apologies to my readers for the lack of posts over the last week. My latest client work assignment has been for a financial reporting group of a publicly traded company, so we have been working crazy hours preparing for the filing of the annual report. Hopefully things will get back to normal before much longer.

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Posted in Credit Cards, Crime, Tips

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So does this mean the dog won’t get pre-approved credit card offers anymore?

February 9th, 2008

Well, I guess the credit insanity had to end sometime. One of the areas where logic seemed to go out the window long ago was with respect to credit cards. For a long time it seemed like there were at least five pre-approved offers in the mail every day. But perhaps the fun is now over.

An article from the Wall Street Journal last week talked about how credit card companies are tightening their standards up a little bit. The card companies seem to be reacting to the current situation differently, but here are the highlights:

  • American Express – AMEX is getting tougher on credit limit increase request and is reviewing credit lines when spending changes are noted.
  • Bank of America – Getting tougher in small business lending, as well as reviewing current credit card limits and open lines of credit.
  • Capital One – Tightening standards and increasing collection activity.
  • Citi – Tightening standards and raising credit score requirements; also evaluating open lines and considering other customer accounts with the bank.
  • Chase – Cutting back offers to customers they refer to as “gamers” who transfer balances to take advantage of low balance transfer rates.
  • WaMu – Cutting back direct mail offers to concentrate on current bank customers.

Seeing that many issuers are considering changing limits and terms on current customers, you can see the wisdom in keeping open large lines for different issuers. That way if one issuer starts with any shenanigans you have a safety net.

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Posted in Banking, Credit Cards

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The Interest Rate Cut and the Death of the App-O-Rama

January 24th, 2008

As most everyone is aware now, the Federal Reserve this week dropped the Federal Funds rate by 75 basis points (0.75%). This is great for borrowers, but not so great for savers. Several online banks have already dropped their high yield online savings accounts drastically in response to the cut. This is on top of cuts last year.

One advanced cheap bastard technique this hurts is what is referred to in many circles as the “App-O-Rama”. This is the practice of investing money from promotional balance transfer offers on credit card borrowed at a low interest rate in high-yield savings accounts at a higher rate. It works great when you can take a 0% APR offer and invest it in an insured account at 6% APY as was possible this time last year.

However, now that most accounts have dropped below the 5% APY threshold and many below 4% APY, the app-o-rama is becoming less and less worthwhile. Couple that with many credit card companies removing maximum caps on balance transfer fees and the technique becomes minimally profitable, if at all. It is an even less appealing proposition when you consider the hit your credit score would likely hit from conducting an app-o-rama.

So what is a saver to do in an environment where interest rates are headed south? It isn’t really profitable to play the app-o-rama game anymore. I’ll probably pay off my outstanding balance transfers as they become due and get out of the game. As for my excess cash that isn’t from balance transfers, I’ll probably start aggressively paying down the mortgage on the house. Hoarding cash earning 4% APY or less isn’t really worthwhile when you are paying 5.375% on a mortgage. Since I won’t be spending as much time managing the app-o-rama game, maybe I’ll have more time to tackle my financial to-do list.

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Posted in Banking, Credit Cards, Debt, News/Trends, Savings

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Is Discover Card relevant anymore?

December 4th, 2007

Back in the day, Discover Card was the king of the rewards credit cards, if for nothing else because it was nearly the only reward credit card. I remember how it was promoted with the tagline “The card that pays you back.”

Well, fast forward to today and Discover is far from the only player in the reward card game. Nearly every issuer has several reward cards available, and sadly for Discover most make the Discover Card programs look stingy at best. In a market where a full 1% back is becoming the standard, the tiered approach of the classic Discover card is just not competitive. You must spend $3000 in a year just to get to 1% back (the first $1500 gets you 0.25% and the next $1500 earns 0.50%). Additionally, they added additional provisions to make it more difficult to reach the full 1% tier. As stated on their website:

Warehouse purchases (those made at select warehouse clubs, discount stores and their affiliates) earn .25%. We do not include warehouse purchases or Get More program purchases (up to the dollar amount specified in each applicable program) in calculating your total annual purchases to determine your tier level. 

The only redeeming feature of the Discover Classic is their Get More program, where a merchant category is selected each quarter for 5% cash back. But considering the other programs out there like the Citi AMEX Platinum, is it really worth dealing with Discover for whatever odd category they decide to include in the bonus program? Especially considering that you have to go and register on their website for each promotion?

As for their other card programs, the only one that may be interesting is the Discover Open Road card that gives 5% back on gas and auto repairs. The Discover Miles card is nothing to write home about (with all of the airline and hotel programs out there, who really needs more miles). And the Discover Motiva card that pays you back a month’s interest for making six payments in a row on time – well, if you’re paying interest on your credit card you have bigger problems than finding the right credit card reward program.

It seems like the Discover Classic card only survives because it was the first one around and people are resistant to change. So for those of you that still have and use the old Discover Classic I ask the question: why do you still use the card? Am I missing something here? Leave me a comment to let us know your reasons.

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Posted in Credit Cards

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Chase Professional Card – You’ll apply if we mail you the application times four?

November 20th, 2007

Nothing really important with this post, but still funny. In the mail today I got a pre-approved application for the Chase Professional Card. In its infinite wisdom, Chase must have known that the offer wouldn’t initially appeal to me, so they sent me three more pre-approved applications for the card on the same day. I had a total of four applications for this card in the mail just today, not including the one addressed to my wife. Sadly, it isn’t even that good of a card.

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Posted in Credit Cards

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