Credit Card Quick

Can your Credit Card Company Really Dictate What you Can’t Buy?

News

Can a credit card company dictate what you purchase on your credit card? In the case of American Express, it seems they can.

American Express recently banned purchases of medical marijuana with its credit cards, and the resulting debate has brought the idea of credit card companies and the authority they should carry when consumers make purchases deemed questionable back into the spotlight.

Some of the purchases banned by some credit card companies include: gambling chips, donations to controversial non-profit organizations, medical marijuana and, in some cases, pornography.

Most credit card companies say that they are simply protecting themselves against legal liability, but consumer groups say that they are simply infringing on consumers’ rights and shouldn’t play the morality card.

John M. Simpson, of the consumer group Consumer Watchdog, says: “It seems to me that credit card companies are imposing their moral values on the world.”

It appears that, among the industry’s biggest companies, that American Express is the most conservative of them all, as it has banned medical marijuana in all 16 states that have legalized it. They have also banned online pornography.

Inconsistencies in Credit Card Rules

Some critics, however, note that there is a considerable amount of inconsistencies in these rules. For example, some cardholders don’t allow its credit card customers to charge gambling chips, but they can use the casino’s ATM to get cash advances at casinos.

A MasterCard spokesman has adopted a number of policies to “combat illegal or brand-damaging behavior.” American Express states that it “abides by federal law and prohibits transaction where the risk of dispute is unusually high.”

Adhering to Federal Law, or Making Moral Judgments?

In addition, American Express bans online pornography sales with its credit cards because they want to fight sales of child pornography. As such, they ban all pornography sales as an “additional safeguard.” Medical marijuana is also prohibited because the company says it is “adhering to federal law.” MasterCard and Visa are expected to follow suit.

American Express has banned online pornography purchases since 2000 because they considered it to be a “risk-based decision” because they had to deal with a number of disputed transactions prior to that date. They consider their decision to be based on risk alone; that it is “not a moral judgment.”

Study Ranks the Best and Worst Banks for Small Business Credit Cards

Choosing Credit Card

A recent study by Card Hub ranked the best and worst credit cards for small business. The study, which ranked the top 10 credit card companies according to their transparency and the extent to which they extended the new CARD Act protections to their business credit card customers, showed that not all credit card companies were fair and forthright to their business cardholders.

Because the CARD Act, which was enacted in 2009, does not apply to business credit cards, not all credit card companies extended the protections of the law to their business credit card customers. There were a few exceptions, though. Bank of America, in particular, was the only major credit card company to extend all of the protections of the CARD Act to its business customers.

Although many suspect that small business owners will soon be given the same protections under the CARD Act that individuals consumers are now afforded, the fact of the matter is that, at the current time, it can be quite tricky to be a small business owner with a business credit card.

Some of the results of the Card Hub study include:

• Wells Fargo, HSBC and U.S. Bank failed to provide any of the CARD protections to small business owners, and they also failed to provide transparency to small business owners about their policies.
• Citi, Chase and Discover ranked slightly higher than Wells Fargo, HSBC and U.S. Bank because they were upfront when it came to informing small business owners that the protections afforded to individuals consumers under the CARD Act did not apply to their small business credit cards.
• American Express and Capital One extended many (but not all) of the CARD Act protections to their small business credit card owners. It is important to research these credit cards before opening an account so you fully understand the card’s terms and conditions.
• Bank of America was the only credit card issuer to give its small business customers an important part of the CARD Act: They do not increase interest rates on its small business cards until the account is 60 days delinquent.

Does your Credit Card Help or Hinder your Credit Score?

Credit Score

We all assume that our credit cards, when used correctly, will help our credit score ranking. After all, establishing a history of charging and paying will prove our credit worthiness and bump up our credit score, right?

Well, that’s right most of the time. However, like most financial cases, this does not always hold true.

In particular, take note if you have a Visa Signature, World MasterCard or American Express credit card. These credit cards are generally reserved for those with high incomes and excellent credit and therefore come with the NPSL feature, which stands for No Preset Spending Limit.

You may think that if your credit card comes with the NPSL that you are free to charge as pleased, with no implications. However, your spending may very well be limited – unbeknownst to you.

What are NPSL Credit Cards?

NPSL credit cards generally come in two varieties: NPSL credit cards, which allow you to spend a certain, undisclosed amount, but require you to pay off your balance each month; and NPSL credit-hybrid cards that feature a revolving line of credit that allow you to exceed your limit, provided you pay any amount over your credit limit in full each month.

What many individuals fail to realize that many of these NPSL cards do come with a spending cap and, if your reach that amount (which may be unknown to you), your card will be declined. So, instead of enjoying the benefits of having no preset spending limit, you may be fooled into thinking your card will never be declined – only, of course, to have it declined, which can be incredibly inconvenient and embarrassing.

Detrimental to your Credit Score?

In addition, the way NPSL cards are reported to the three credit reporting agencies may be downright detrimental to your credit score. This is because one of the factors considered when determining your debt-to-income ratio is your credit utilization. If the credit limit is unknown by everyone except for the credit card company, including the credit reporting agencies, your credit utilization cannot be accurately calculated, thereby possibly lowering your credit score.

In short, it may be best to stick to a competitive, low-interest-rate credit card and avoid NPSL credit cards if you are concerned about your credit score.

Store Warranties: Should you or Shouldn’t You?

Introduction

Tis the season to head to the store and make those large purchases; namely, electronics purchases, so now is the time retailers begin asking you to purchase those costly, extended warranties. The last thing you want to do when purchasing an expensive electronics item is to purchase an expensive extended warranty. What should you do?

Luckily, if you use a credit card, you may not have to take out one of these extended warranties— and not feel bad for not doing so. Many experts agree that the chances of you actually using one of these warranties is pretty low. That’s because, statistically, if the electronics item breaks, it will either be during the first few weeks, which is covered under a return policy, or long after an extended warranty would be valid. In addition, experts find that the number of people who actually cash in on their extended warranty is in the single digits.

With that said, you may still feel a bit nervous about walking out of the store without some kind of guarantee. First of all, ask the store about their return policy. Many stores, such as Costco, offer a generous 90-day return on electronics (and a lifetime return policy on nearly everything else!).

Second, don’t leave home without a good credit card that features buyer protection. Many of today’s major credit cards offer extended warranties on things such as electronics through their consumer protection packages. It is important to remember that all credit cards do not offer this protection, so check with the credit card company before making any large purchases.

The major credit card companies have the following consumer protection plans:

• Visa Signature – If you are a Visa signature card holder, you will likely be entitled to a year extension beyond the manufacturer’s warranty.
• American Express – We love American Express cards for many reasons, and their generous consumer protection plan is just one of the reasons. If you purchase anything on an American Express card (all of the cards in their line come with the same protection) you will automatically receive a year extension beyond the manufacturer’s warranty.
• MasterCard – We weren’t overly thrilled with MasterCard’s consumer protection policy, as they will only offer an extension of one year if the manufacturer doesn’t offer a warranty.
• Discover – Discover cards do not offer these consumer protection plans regarding defective products, but they do partner with Square Trade to offer inexpensive warranty extensions.

American Express: Should You Really Never Leave Home Without It?

Introduction

American Express, or AMEX, as some prefer to call  it, is among the top companies when it comes to credit cards. They offer a variety of card options, some of these even with low APRs and no annual fee. They have excellent rewards programs, including the SkyMiles frequent flier rewards. There’s no doubt about it that an AMEX card is a great asset for your wallet.

Things to Consider

While an American Express card can bring you a lot of benefits, it is not as widely accepted as Visa, MasterCard or even Discover. Sure, they have merchants worldwide, however, if you plan to use a credit card for shopping and other things, you might want to carry AMEX along side another card or two, in order to be prepared for anything. This is not advice meant to tell you to stock up on credit cards so you can spend, spend, spend; rather, it is a precaution to take for the world we live in.

Not every merchant can accept AMEX. Not every merchant accepts the other cards either. It is dependent on the businesses’ ability to afford separate payment system to process the different cards. Since this can become costly, really denting the profit margin, many simply go with one or two credit card types. Still, it does not mean you should not have an American Express card ready to use.

Some Great Benefits

Aside from the possibility of rewards, AMEX cards offer you great benefits as a customer. It is an excellent option for frequent travelers, as you can get the SkyMiles, if that is your reward of choice, for flying. They offer a way to obtain cash advances, as well as travelers cheques, insurance plans, financial services, and much more. It’s a great option for business credit as well. As an American Express customer, you have access to so many wonderful things. With great rates, exceptional customer services and all this other stuff, it’s definitely a credit card worth having.

Other than the fact that not all merchants accept it, the only other downfalls of AMEX are pretty much the same as most other cards: if you overspend, you’re going to pay a lot, and of course, you have got to have pretty good credit in the first place to even get you hands on one.

That said, if you can get you hand on one, AMEX is right: never leave home without it.

Battle of the Cards: Why Merchants Accept Some Cards Over Others

Introduction

If you are a credit card carrying consumer, you know it can be very frustrating to head out to a store to make a purchase, only to find your plans waylaid by the store’s nonacceptance of certain credit cards or exclusive loyalty to one you do not carry. In an ideal world, every merchant would accept every credit card brand. In reality, this is not the case, nor is it reasonable to expect the average consumer to have a stock pile of  every credit card waiting in their wallet “just in case.”

While this can be a frustrating situation for the consumer, it is also important to put yourself in the merchants’ shoes and try to see things from their point of view. The truth is, most of them would probably like nothing more than to allow their customers to pay with whatever credit card they have on hand. Unfortunately, not all of them can.

Payment Processing

Visa and MasterCard only require one network to process payments. Discover requires a separate one, as does American Express. Merchants have a tough choice to make initially, because they have to choose the most cost effective method that they can afford. They need to choose the network that offers the best deal in both start-up and overall fees to suit their particular needs. Sometimes it is a matter of personal network preference, however, it’s usually more about what is best for the business overhead in the long run.

Merchants typically have to swallow the cost of initial account set-up and processing equipment. Then, they must pay maintenance fees and per transaction fees, which while typically minimal on a per transaction basis, really add up quickly. This can put a dent in the profit margin. On top of that, merchants often need their money sooner rather than later, so they need to choose a network that pays them at a rate that satisfies their preferences.

With these things in mind and the differences in rates per credit card company, a merchant really has no choice but to choose the network that is best for them, eve if it means alienating customers who carry cards they will not be able to accept. It may not be ideal, but that’s just the way it is.

They’re Thinking of You Too

One last thing to keep in mind when you become irritated that the store does not accept your card: appreciate it. While it may be inconvenient, the merchant is not thinking only of their bottom line. They have their customers in mind too. Accepting more cards with higher fees and expenses would drive up the cost of their products, affecting their sales and your pocketbook.

Understanding the Difference between a Credit Card and a Charge Card

Introduction

The terms “credit card” and “charge card” have often been used to describe the same thing but, in reality, they are two very different things.

A credit card is a standard card in which you can charge purchases and then pay them back over a period of time. A charge card, however, is card on which you can make purchases, but they must be paid off when your bill arrives.

Charge cards have been primarily issued by American Express, while other companies, such as MasterCard, Discover and Visa, have offered their customers credit cards.

The Benefits of a Charge Card

The premise behind an American Express card has always been liberal spending limits and no accrued interest rates, mainly because the card balance is paid in full each month. Most American Express credit cards have no set credit limit, but in order to qualify for an American Express credit card your credit history must be near flawless.

Annual Fee Amounts

There are also annual fees charged by American Express for its charge cards; they typically range between $25 to $500 a year, depending on the spending limit and benefits the card provides. The annual membership fee for owning an American Express charge card also comes with its share of perks, including a rewards program.

Should you fail to pay your balance on time, American Express charges either a flat fee or a percentage of the balance, depending on the card you are carrying. Most of the time, however, American Express affords its customers a liberal window in which to pay their balance; typically 40 to 50 days (compare that to 25 to 30 days for a standard credit card).

Flexible Payment Options

American Express also offers flexible payment options for its customers who use their cards to travel. American Express typically allows customers to carry a revolving balance of travel purchases, provided they exceed $200.

Credit Limits

American Express commonly keeps track of its customers buying habits and credit reports, and adjusts their credit limits to reflect this. Although American Express will not put a cap on your credit limit, they can refuse purchases if your balance becomes excessive. American Express, however, does not charge over-the-limit fees to its customers.

‘Superprime’ Consumers see Surge in Credit Card Offers

News

Although the economy and the credit sector is still far from being strong, there does seem to be small changes taking place that are giving many economists reason to be optimistic.

Creditors have begun extending credit to excellent credit card customers, also called “superprime” customers, as evident in the increase in credit card offers being delivered to the homes of these consumers.

In fact, credit card promotional mail volume rose 34 percent between September and October, which equals about 180 million pieces of new mail. This level is the highest it’s been since December 2008. It was also the largest month to month increase in credit card promotional mail volume since 2004.

Lower Credit Card Defaults Equal More Lending

The industry has begun to see a small drop in credit card defaults over the last two months, which may have banks breathing a little easier and offering to extend credit a bit more.

As credit card companies begin to spend more for their marketing efforts, many analysts see signs of credit deterioration beginning to subside.

It’s still important, however, to note that total credit card promotional mail volume is still down a whopping 74 percent from this time last year, which is the lowest level in 10 years.

Affluent Customers Only, Please

Only the most affluent customers will likely see an increase in credit card promotional mail, though, as credit card companies are expected to target only those customers with excellent credit histories and large incomes.

The two largest increases were seen from Chase and American Express over the last two months. Much of this activity from JPMorgan Chase & Co. is due to the release of its newest card, Sapphire.

American Express continues to aggressively compete with Chase to capture the wealthiest of customers, as seen by its increase in marketing spending – nearly $150 million more in the third quarter than the second quarter. American Express notes that it will continue to increase its marketing efforts as loan losses decline.

Credit card companies are also pulling out all the stops with their rewards programs in an effort to snag the affluent sector of the market.