Credit Card Quick

Your Options for Rising Credit Card Interest Rates

News

It is no surprise that credit card companies are charging much higher interest rates in the years following the country’s recession and credit crisis. Although it’s true that, in some cases, the rise in interest rates are beyond your control, the truth of the matter is that you may be able minimize some of the effects of rising interest rates if you commit to good credit management habits.

Here’s how to protect yourself from rising interest rates:

• Do what you need to do to never miss a credit card payment. If you maintain a flawless credit history and never miss or skip a credit card payment, you will have much more leverage when it comes to rising interest rates. In other words, if you get notice from your credit card company that your interest rate will be raised, you can contact your credit card company and make a case with them to avoid the interest rate hike. If you have a sketchy credit history, your leverage with your credit card company is greatly diminished.
• Always attempt to pay off your credit card balance each month – If your credit card’s interest rate is raised by the credit card company, it won’t make much of a difference to you if you don’t carry a balance from one month to the next. Plus, if you call the credit card company to negotiate a lower interest rate, it helps to have the upper hand, and that can only happen if you don’t have a hefty balance.
• Because credit card companies must inform you of a credit card rate increase in advance, you can always begin looking for a new credit card before the rate increase takes place. If possible, find a credit card that features an attractive balance transfer offer, or cancel your current credit card and pay off your balance under your current interest rate. Keep in mind that credit card companies must allow you to pay off your outstanding balance under your current interest rate if you reject the interest rate hike and cancel the credit card.

Bank of America Customers: Take Note if you’re a Late Payer

News

Bank of America recently announced changes that will make it more difficult to rebound after a missed credit card payment.

If you are a Bank of America customer, you will likely get word that missing a payment could mean stiff repercussions for future purchases. In particular, the Bank of America Corporation announced that customers who miss a credit card payment may be charged a higher penalty interest rate on all future purchases. Most Bank of America customers have dodged this bullet for some time, even as other credit card issuers have been implementing the concept of a penalty interest for some time.

Bank of America Introduces the Penalty Interest Rate

The penalty interest rate, which may start as soon as June, could be a whopper, too, as the company announced it may charge its customers as much as 30 percent on future purchases. The company was quick to report, however, that the 30-percent penalty interest rate may not apply to every customer who misses a payment.

Determining Customers’ Credit Risk Factors

Bank of America says it will review a number of factors if a customer misses a payment before initiating the penalty interest rate, including the customer’s risk factors (such as the customer’s credit history, late payments and maxed-out balances), and all customers will receive a 45-day notice of the changes before the penalty interest rate goes into effect. Bank of America will only apply the penalty interest rate to future purchases, and it will not affect existing balances.

Bank of America, up until this point, had only charged late fees, but it is now following the path of other credit card companies and charging a penalty interest rate, likely to recoup some of the money lost as a result of the CARD Act regulations.

Bank of America is also in the process of testing a new checking account concept in some states. The new checking account concept is likely to have monthly fees. In addition, Bank of America has informed its customers that it would charge an annual $59 fee for their credit card. Customers can either accept the $59 or reject it and cancel their credit account.

Are Magnetic Swipe Credit Cards on their way Out?

News

It’s been a staple in the credit card industry for decades: magnetic stripe credit cards. But it looks like the magnetic swipe may be on its way out.

Invented all the way back in the 1960s, the magnetic strip on a credit card was a huge advancement in technology and was originally introduced for credit cards because of rampant credit card fraud.  Magnetic strips on credit cards took the burden off the store clerks who, up until that point, had to compare account numbers to printed list of accounts the store maintained.

The Magnetic Strip Problem

But fast forward to 2011 – nearly 50 years later – and it looks as if the magnetic strip may have had its run. Let’s face it: the magnetic strip is rather antiquated, as criminals have long figured out how to circumvent this piece of technology.

Europe, it seems, was a bit quicker on the uptake when it came to dealing with the magnetic strip problem, as the Eurozone banks converted their magnetic strip cards to a “chip and PIN” system back in 2005. The chip and PIN system provides an extra measure of security, as it feature microchip-embedded technology.

The Next Steps

Because European card issuers have used a more secure form of payment for the past six years, it only makes sense that they are getting a bit fed up with the antiquated system – and the credit card fraud that goes along with it – still being used by U.S. card issuers. In fact, many European card issuers have hinted that U.S. travelers may begin experiencing problems when using their magnetic strip credit cards in Europe.

Although the European chip and PIN system has been a success for them, it looks as if the U.S. may skip over this technology and develop its own technology to combat fraud. It is expected that the U.S. will adopt smarter card technology, such as the Near Field Communications chip.

Only time will tell how and when the U.S. will develop smarter card technology, but one thing’s certain: the magnetic strip may be on its last legs.

The Transparent Credit Card Industry: But is it?

News

The CARD Act (Credit Card Accountability Responsibility and Disclosure Act) was enacted by Congress to ease the strain of credit card costs for consumers. However, nearly a year later, many wonder whether the CARD Act was as beneficial as it was touted to be.

The Transparent Credit Card Industry

One of the largest goals of the CARD Act, according to Congress, was to increase credit card transparency for consumers. In other words, this new legislation requires credit card companies to inform consumers, at least 45 days in advance, of credit card interest rate hikes and provide them with opt-out features.

However, along with the positive often comes the negative, and the CARD Act has its share. For example, many economists believe that the increase in credit card interest rates is directly related to the CARD Act. In other words, creditors are searching for ways to recoup losses they incurred as a result of the new legislation, and they are doing so in the form of higher interest rates for nearly every consumer across the board.

Consumers Affected by Credit Availability

In addition, the Center for Responsible Lending study shows that the CARD Act “confused consumers further and did not reflect rates or availability.” Kenneth Clayton of American Bankers Association believes that the cost of credit and the availability of credit were “negatively impacted by the act; particularly working-class Americans.”

Many credit card companies, in response to the CARD Act, have also cut credit limits and have become choosier regarding to whom they will offer credit. In other words, the higher credit limits and easy availability to credit you’ve enjoyed for years may not be so easy to find anymore.

It is important to remember that, although there are negative aspects to the CARD Act, there are a number of features that protect consumers from shady credit card practices. Most credit card industry experts believe that consumers with good credit scores will benefit most from the CARD Act, while those with less-than-perfect credit may struggle to obtain credit cards with competitive rates.

Creditors now Paying Close Attention to their Customers’ Online Purchases

News

Credit card companies are watching you…online, that is.

Many of the country’s biggest credit card companies have begun using marketing techniques to appeal to certain customers online. In fact, they are using the shopping habits of customers to offer them customized, online offers.

Customized Offers Tailored to your Specific Habits

In other words, don’t be surprised that the next credit card offer that pops up while you’re surfing the web has been specifically targeted to you, based on your shopping habits. Credit card companies are now able to target individuals in a more precise manner; thereby allowing them to offer customers offers that best suit them.

Instead of the blanket credit card offers typically put out on the web, credit card companies are now doing a much better job targeting information, while still protecting their users’ privacy. It is now quite common, for example, for a creditor to offer a rewards credit card to you if you’re a frequent traveler. Based on your Internet surfing habits, they will be able to take a guess at your income and your interests, thereby allowing them to create a truly customized credit card offer.

Credit Card Companies Marketing Tactics Becoming Sophisticated

The credit card companies’ ability to track your spending and surfing habits has become much, much more sophisticated over the last 12 to 24 months, says Rob Shavell, co-founder of Abine Inc., a privacy software company.

Some companies are now able to compile large databases that store information on everything from your Internet browsing history, your “cookies” from other websites, and even “third party calls,” which is essentially information about you that is exchanged with outside websites.

One of the newest ways in which credit card companies are obtaining your personal spending information is through a technology called “device fingerprinting,” which provides companies with information about the computer you’re on, and the correlation between you and other people.

Some consumers enjoy having credit card offers tailored to them, while others may find this to be an invasion of privacy. If you want to avoid being targeted for marketing purposes, the best thing you can do is delete your computer’s Internet history and cookies regularly.

Bank of America to Hit Customers with Annual Fees

News

It is clear that credit card companies are still reeling from the ill effects of the CARD Act legislation. From raising interest rates to becoming much more selective regarding whom they will offer credit, the effects of the CARD Act continue to reverberate throughout the credit card industry.

Bank of America, though, appears to be taking things one step further, as they recently announced that they will begin charging annual fees to millions of its customers. Although it is still not clear how many people will be affected by these new annual fees, even consumers with a good history and a good credit score may not be in the clear regarding annual fees.

Fees to Start Soon

Bank of America is expected to begin sending letters to its current credit card customers as early as this spring. The letter will state that the company will begin charging many of its customers a $59 annual fee. The letter also states three reasons why credit card customers may be charge this annual fee, but it falls short on spelling out who exactly will be targeted.

The letter goes on to state that the company is making the changes due to “derogatory public record or collection filed” and that they will review their banking relationship with each customer.

Who is being Targeted?

It appears that the company is targeting customers with outstanding balances and why they are doing this is quite simple. If the company charges a customer with a large balance the $59 annual fee, they can either accept the fee or close the account. However, before they can close the account they must pay off the balance — and this is simply not possible for some customers. In short, the company can get away with charging the $59 fee to customers with higher balances because, unless they pay off their balance, they must keep the card open and pay off the fee.

Bank of America, although it doesn’t state this, of course, says that every account undergoes a periodical review, and that every customer will either have the choice to accept the fee or close the account. Bank of America also states that the “majority” of customers will receive the annual fee.

Creditors Set their Sights on Small Businesses Once Again

News

As a small business owner, you may have found the process of obtaining credit over the last few years quite difficult. However, as lenders begin to, once again, lend to consumers, small business owners may also be able to secure a business credit card without too much hassle.

The Past Haunts Small Businesses

In the past, many creditors were reluctant to offer credit to small businesses because many businesses were unable to pay on their balances because of the lackluster economy. As a result, the number of small businesses that rely on credit cards has decreased dramatically.

In fact, according to the National Small Business Administration, nearly 50 percent of all small businesses in the past relied on credit cards. However, over the past year, that number has fallen to just 30 percent, and credit cards are now ranked in third place when it comes to small businesses seeking financing.

Are Small Businesses Ready to Use Credit Cards Again?

Because of the events of the past, couple years and the decreasing number of small business credit card holders, creditors are once again wooing these individuals. They hope that small businesses, now that the economy is improving, will once again return to credit cards as a source of financing. But have small businesses given up on using credit cards?

It is no secret that, in addition to creditors pulling back the number of credit card offers to small businesses, many small businesses cut their ties with credit cards because they weren’t afforded the protection offered to consumers under the CARD Act.

Another factor that is making small businesses wary about applying for a business credit card is that fact that business credit card rates rose faster than any other type of credit card in 2010; meaning that small businesses were being socked for very high interest rates while consumers enjoyed much lower interest rates. In addition, businesses are also not exempt from penalty rates. In other words, one missed payment by a small business could spell catastrophe in terms of their credit card rates.

The jury is still out on whether small businesses will return to credit cards, so creditors must do everything in their power to woo their customers back.

Report Shows American Still Owe Big on Credit Cards

News

We’ve all heard about the trend taking place across America: Americans are using credit cards less and cash more often. However, even as Americans continue to pay off their debt and use cash more often, Equifax found, in a recent report, that many households in the United States are still carrying a burden of debt.

In fact, Equifax found that many Americans pay as much as 17 percent of their current income toward credit cards. The report also found that the major, metropolitan areas of the U.S. are the hardest hit, in terms of credit card debt, and residents of Florida, North Carolina, Ohio, Texas, Washington and California are having the most trouble with their credit card debt. Here is the amount of credit card debt the top metropolitan areas of the country are dealing with:

• California: $90,566,978,302
• Texas: $48,833,824,544
• Florida: $47,568,265,541
• Ohio: $28,985,502,668
• North Carolina: $22,386,064,118
• Washington: $18,288,819,367

If you are one of the millions of Americans struggling to pay off credit card debt, there are several things you can do today to begin cutting that debt down:

• Make a budget and figure out why you are spending on credit cards. Often times, overspending on credit cards is due to little more than not keeping a close eye on our monthly spending. Because of this, taking the time to sit down and make a reasonable budget – and stick to it! – is vital for conquering the credit card beast.
• If you are having difficulty making ends meet and you are worried that you will fall behind (or are already falling behind), it may be time to contact a non-profit credit counseling agency who can help negotiate better terms with your creditors and help you pay off debts without filing for bankruptcy.
• Make sacrifices to cut down on your debt. Although making large changes to your lifestyle may be difficult to do, the pride of paying off your debts and living debt-free will most certainly make up for your reservations about moving to a one-car family or getting rid of the cable television.

Congress Seeks to Limit Credit Card Interest Rates

News

If Congress has its way, there may be yet another change to the credit card industry.

In short, Congress has introduced a bill that will limit the amount of interest a creditor can charge you. Called the Interest Rate Reduction Act, this legislation will limit the interest rate on credit cards to just 15 percent, thereby making it, perhaps, the biggest change in the credit card industry to date.

Authored by U.S. Representative Maurice Hinchey, the Interest Rate Reduction Act is a way to help American better make ends meet in this challenging economy. Hinchey states that “credit card companies are finding new ways to squeeze the middle class despite significant reforms in the last Congress.”

In other words, it is clear that many members of Congress are dismayed that creditors have found a number of loopholes in the credit card legislation that was enacted last year. The only exception to the 15-percent rule, under this new legislation, is the ability for a creditor to raise interest rates if they would be “in dire financial straits otherwise.”

Although this new legislation has only been introduced, it is a distinct possibility that Congress can get it passed. In the meantime, however, it is important to pay close attention to your credit card’s interest rate so you can be sure you are getting the lowest, most competitive rate. Here’s what you need to do:

• Pay attention to all literature sent by your credit card company. Because the CARD Act requires credit card companies to inform consumers, in advance, of changes to their credit card accounts, you may find that your creditor is sending quite a bit of literature to you, either by itself or with your credit card statement. Although it may seem quite inconvenient to read this literature, it may detail changes in your credit card’s interest rate. In other words, take the time to read any and all information you receive from your creditor.
• Beware of introductory and balance transfer rates on your credit card accounts. Although introductory rates can be quite attractive, the creditor may raise your rates significantly once this special period has ended. In short, pay close attention to the default interest rate on a credit card if you are accepting an introductory rate.

The Credit Card Trends of 2011

News

What can you expect from the credit card industry in 2011?

Just a few of the trends predicted for the credit card industry for the upcoming year include: tighter credit card regulations, plenty of new credit card offers, and loads of rewards programs and balance transfer offers.

It’s all about the Prime Credit Card Customers

If your mailbox is stuffed with credit card offers as of late, you know you must have good credit. Those consumers with excellent credit scores are being tracked down by credit card companies. Although the credit card industry is still in its recovery stage, it has begun loosening the reins on credit card offers. However, don’t expect to receive credit card offers unless you have the credit score to back it up. In short, creditors and banks are vying for the business of prime credit card consumers, and they are pulling out all the stops in terms of rewards to get their business.

Rewards Programs Soar

Which brings us to rewards programs…If you have great credit, expect many of the credit cards you receive to come with attractive rewards programs. The bottom line is that credit card regulations and interest rates remain fairly high, so it is up to the credit card companies to lure consumers in with another catch; and that is rewards programs. Because there are so many credit card rewards programs floating around out there, take the time to find a rewards program that best fits your lifestyle. You’re sure to find one!

Balance Transfer Offers on the Rise

In addition to attractive rewards programs, most creditors want the best consumers to transfer their balances to their cards, so along come attractive balance transfer offers. Although you may still get a low, promotional interest rate on a balance transfer offer, expect the promotional period to be much shorter than you’re accustomed. In particular, you can expect promotional periods of about three to six months instead of the usual 12 months. It pays to note, however, that great balance transfer offers do still exist, so take the time and find one that best fits your needs and your budget. Again, if you have the good credit score to back it up, it is now quite easy to find competitive credit card offers!