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Two Down, $2,000 to Go

by Smithee on November 17, 2009

in Credit

When I was a new college graduate in 1997, I got my father to co-sign on a credit account so I could buy a computer. It was a shining white beautiful Gateway 2000, it probably cost around $2,000 (you kids and your $300 computer deals!), and it came with an interest rate of 26.9%.

Around the same time, I was approved for my first credit card, and then my second, and things went pretty badly after that.

Some of the details of that time in my life are fuzzy, but I know that I paid off the computer loan. I had to move back in with my parents in order to afford that, but it was paid off. And until today, that was the only installment or credit account I have ever fully paid off. I’ve gone for eleven-ish years with nothing but revolving credit and unpaid loans to my name.

But I’m proud to announce something totally mundane: we paid off our Rooms-to-Go credit account. That nice big bed in our master bedroom? We actually own that. Like I said, it’s mundane, and there’s probably no reason for you to be impressed by that, but it means the end of a nasty stretch of feeling entirely guilty.

Now I just feel mostly guilty. I’ve still got a balance on what I call my “legacy credit debt” – the debt that’s been in various states of huge for over a decade, and which gets consolidated and moved around but never fully wiped out. But there is good news there, too: that balance is below $2,000 for the first time since the 1990s. I haven’t charged anything to that card since I-don’t-know-when, and I can see the light in the clearing.

Unfortunately, there’s more bad news. My other credit card – the one that I didn’t intend to carry a balance on – has a big balance on it. It’s embarrassing… so much so that I’ve avoided even telling you guys about it. I bought a Mac Mini to use in the entertainment center, and we got tickets for a comedy convention next year, and a paranormal investigation, and we started a corporation. Needless to say, those aren’t the daily expenses I was expecting to put on that card.

Oh, but there’s more good news: my wife got a raise recently, which means she can contribute more to the joint expenses, which means I can make higher payments on my credit card debt.

I estimate that I’m about 8-10 (so, probably 14) months away from having no more credit card debt, assuming I can avoid any more vacation ideas or shiny electronics. I just have to keep reminding myself that all progress is good progress, and kicking myself accomplishes nothing.

Wish me luck.

(Normally, I’d say that luck isn’t even involved, here, but it’d be great if my employer got enough business in the next couple of months to restore our salaries to their original positions. The salary thing really hurts.)

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Reader Question: Can You Write “See ID” Rather Than Signing Your Credit Card?

by Flexo on November 11, 2009

in Credit

I can’t remember the last time I’ve signed the back of a credit card, and I use my credit cards (one for personal travel and big expenses, one for all other personal expenses, and one for business expenses) almost every day. It has never caused me any problems with cashiers; at the most, I might get a dirty look or I might have to show my license, but almost always the cards are accepted without much thought.

A lot of retailers have terminals where customers can swipe their own card, so many cashiers don’t even get the chance to check for a signature on the back. Even those who ask to see the card take no more than a quick look at the back. Most do nothing but punch in the last four digits into their point-of-sale computer and hand the card back.

It’s fairly common to write “See ID” or “Ask for ID” in the signature block on the back of credit cards but not every retailer reacts the same way when encountering this request. Here is a question I received from a Consumerism Commentary reader, Ryan:

I was recently told by a retailer that they would not accept my debit/credit card because I had not signed the back and wrote “SEE ID” instead. I was told the card was not valid and I was required to sign it in order to use it. I have done this same practice for over twelve years and have never been asked about it before now.

I was told they were cracking down… So the sale was denied and the charges reversed. First, is a signature truly required? If so, how can online and “swipe-less” transactions with my card be legal?

If you ask Visa or MasterCard, the policy is clear. For all in-person transactions, a signature on the card is necessary. If a signature is not on the card, retailers are instructed to require the customer to sign the card and provide identification.

Here is the related section of the Rules for Visa Merchants:

The final step in the card acceptance process is to ensure that the customer signs the sales receipt and to compare that signature with the signature on the back of the card… While checking card security features, you should also make sure that the card is signed. An unsigned card is considered invalid and should not be accepted. If a customer gives you an unsigned card, the following steps must be taken:

  • Check the cardholder’s ID. Ask the cardholder for some form of official government identification, such as a driver’s license or passport. Where permissible by law, the ID serial number and expiration date should be written on the sales receipt before you complete the transaction.
  • Ask the customer to sign the card. The card should be signed within your full view, and the signature checked against the customer’s signature on the ID. A refusal to sign means the card is still invalid and cannot be accepted.
  • Ask the customer for another signed Visa card.
  • Compare the signature on the card to the signature on the ID.

If the cardholder refuses to sign the card, and you accept it, you may end up with financial liability for the transaction should the cardholder later dispute the charge.

Some customers write “See ID” or “Ask for ID” in the signature panel, thinking that this is a deterrent against fraud or forgery; that is, if their signature is not on the card, a fraudster will not be able to forge it. In reality, criminals don’t take the time to practice signatures: they use cards as quickly as possible after a theft and prior to the accounts being blocked. They are actually counting on you not to look at the back of the card and compare signatures — they may even have access to counterfeit identification with a signature in their own handwriting.

“See ID” or “Ask for ID” is not a valid substitute for a signature. The customer must sign the card in your presence, as stated above.

MasterCard’s rules are similar, and most agreements between merchants and third-party payment processors reflect these rules.

You might think that would be the end of the story, but in reality these rules are almost never followed. The banks that offer credit cards on Visa’s network or MasterCard’s network, like Citi and Bank of America, may not even be fully aware of the signature requirement. I called Citi to speak to a customer service representative to try to gauge the bank’s preference. The person I spoke with seemed unfamiliar with MasterCard’s rule. She mentioned that it’s quite common for customers to write “See ID” on the back of the card and for those cards to be accepted. The representative understands most retailers will ask for identification and complete the transaction without requiring a signature.

According to the customer service representative the retailer has the authority to decline a transaction if the signature is missing even though most retailers don’t. Although Visa and MasterCard would like to require a signature, most retailers are willing to bend the rules to make the sale and remain customer-friendly.

Ryan also asked about online or “swipe-less” transactions. It certainly is legal to use credit cards for online or telephone-based purchases. In these cases, the “card-not-present” situations in which retailers can’t view the signature on the card, retailers are supposed to implement more security features such as the following:

  • Pre-authorize the transaction
  • Ask for the card’s expiration date
  • Ask for the card verification code (CVV2 or CVC2), the three digit code on the back of the card, or the four digit code on the front of American Express cards
  • Verify the card holder’s address (AVS)

It is up to a retailer how secure they want to make the transaction process. Making the process easier for customers, by not verifying address or not asking for a CVV2 code for example, also invites more fraud. Fraud results in chargebacks to the merchant, and merchants really do not enjoy dealing with chargebacks. (This is what happens when you call your credit card to dispute a charge you may or may not have made.)

You are at the mercy of the retailer or cashier when it comes to acceptance of credit cards. If a cashier won’t accept your card without a signature, you could try asking for the manager but don’t be surprised when a retailer won’t complete the sale without a signature. Not many are this strict, but those who do require the signature are sticking to Visa’s and MasterCard’s rules.

Readers: Do you sign the back of your credit and debit cards, leave them blank, or write “See ID?” Have you encountered any push-back from cashiers?

Photo credit: Ciaran McGuiggan
Rules for Visa Merchants, November 10, 2009

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House Approves Expediting Credit CARD Act

by Smithee on November 10, 2009

in Credit

We reported just a few days ago on the passage of a measure in the House of Representatives to expedite the Credit Card reforms passed earlier this year.

Unfortunately, I left out some of the story, as I’m still figuring out the intricacies of how laws are made, and there were some amendments made to the bill before it passed. In addition to pushing up the enactment date to December 1, 2009 and the other changes we reported, the House version would also:

  • ensure that changes to a credit card agreement that reduce a customer’s interest rate or other fees can be implemented immediately, instead of being subject to the 45-day waiting period required under the CARD Act of 2009 — in other words, the bad things require a delay, the good things do not
  • dictate that any card issuer that imposes a moratorium on increases in rates, fees and terms and conditions of a contract would be exempt from the accelerated date for the provision requiring an issuer to apply a customer’s payment in excess of the minimum amount due, to the highest rate balance — the Credit CARD Act of 2009 fixes the industry abuse of extending a balance by applying payments insincerely. If banks play along and start a moratorium, they can have until Feb. 22 to fix the balance-payment problem.
  • prevent the closure of a credit card account in response to the imposition of a new fee from negatively impacting a consumer’s credit report or credit score

As before, the Senate version includes no additional measures, only moves up the date to Dec. 1. There’s a general sense in the news media that the Senate version would have trouble passing (sound familiar?), but I’m not sure where the pessimism comes from, as the original Credit CARD Act passed with 90% in the Senate.

Here’s the govtrack page to track the Senate version.

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Expedited CARD Reform for Consumers Act of 2009

by Smithee on November 6, 2009

in Credit

After the Credit CARD Act of 2009 was signed into law, we saw how credit card issuers started making life tougher for their customers. In short, banks were levying fees on their customers indiscriminately, affecting both the good and the bad.

This has been going on for months. Lawmakers have publicly condemned it, and made requests to the federal reserve, but all to no avail. This week, however, an amendment to expedite the Credit CARD Act (giving it an effective date of December 1st) has passed the House of Representatives in a better-than-average bipartisan manner (only 53% of Republicans opposed it), and I’m hopeful for all of our sakes that a similar measure quickly passes in the Senate.

I read through the words in both versions, and found a few differences, which might make it take longer to work through Congress:

In the House

The House version (full text) makes an exception for depository institutions (banks) with fewer than two million credit cards in circulation. It also comes with various clarifications to make sure that the new law doesn’t apply to banks and creditors who haven’t punished their customers (many of whom continued to pay on time and remain in good standing) in advance of the new law.

It also includes new features starting at Section 6 which state that:

  • if you receive notice of a new fee, and you pay off your balance in full, or cancel your account, that won’t negatively impact your credit score
  • there will be a nine-month moratorium on rate increases with a start date of the enactment of the Credit CARD Act of 2009

If these amendments pass, the moratorium would start December 1, 2009, instead of nine months after the law was passed, on about February 22, 2010.

In the Senate

The Senate version (full text) includes no additional clarifications or amendments, only a date change to December 1.

Flexo and I don’t agree on everything (if everybody did, life sure would be boring), but we agree that Congress should pass each idea into law based on its own merits, and not bundle them together into a jumbled mess of unrelated ideas. In this case, if you want to expedite a law, then document the new date and move on. Now’s probably not the time to be adding new regulations.

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Bank of America Adding Annual Fees to Credit Cards

by Flexo on October 14, 2009

in Credit

With the current and upcoming changes in the credit card industry due to the Credit CARD Act and other regulations put in place by the Federal Reserve, banks and credit issuers are maneuvering as much as possible to be in a good position to continue making money off their customers. Public corporations have responsibility to their shareholders to protect their bottom line, and with the threat of reduced profits due to new regulations you can be sure these companies will try anything within the realm of possibility to survive.

Bank of America has announced some anticipated changes to their credit cards that shows what the future might look like: more credit cards will carry annual fees. These new fees, according to the bank, will range from $29 to $99. And unlike most fee-bearing credit cards, the customers receiving these charges may not have cards that offer premium services like a concierge or extensive rewards.

One of the criteria Bank of America will use to determine which customers are lucky enough to receive the fee is “profitability;” in other words, those of us who don’t send the bank extra in the forms of interest payments and late fees or those who use their credit card infrequently — the responsible users of credit — are likely to be assessed the fee. Bank of America could easily determine which customers are not profitable for the company and charge this annual fee to make them profitable.

For now, there are many fee-free credit card choices for responsible users. The climate might change soon, however. Even the most diligent credit card users, those who manage to use cash back rewards and other benefits while paying off their balance in full every month, might find that the new environment will point to a cash-only spending plan for the best deal.

BofA to charge annual fees on some credit cards, Candice Choi, The Seattle Times, October 13, 2009

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Credit Report Cards: Credit.com vs. Credit Karma

by Flexo on September 30, 2009

in Credit

For a few years, Credit Karma has been offering a product that lets consumers see what lenders and employers see when they look at the consumers’ credit reports. After securely and privately providing your personal information, Credit Karma retrieves your credit report from one of the credit reporting bureaus, either Experian, Equifax, or TransUnion.

Credit Karma then analyzes your details and assigns a grade, A through F. The various categories receiving grades relate to the items that determine your credit score. Lenders review these items when deciding whether to extend credit to you, how much credit to extend, and at what cost.

This is a free service, supported by advertising.

Yesterday, Credit.com announced they will also be offering a similar free service, providing a credit report card to help you evaluate and improve your credit report.

So which service is better? I took both services for test drives.

Credit report cards

Here are some of the most obvious differences. Credit.com assigns grades to the following categories: Payment history, debt usage, credit age, account mix, and inquiries. Credit Karma’s categories are similar: Open credit card utilization, percent of on-time payments, average age of open credit lines, total accounts, hard credit inquiries, total debt, and debt-to-income ratio. More categories, and therefore more information, is more helpful.

To look further into the health of my credit, Credit Karma offers charts in each category, placing my result within the spectrum of results from the Credit Karma Community, all users of the website. So I can see, for example, that the grade of “C” Credit Karma gave me for “Total Accounts,” which includes how those accounts are divided among revolving credit accounts and loans, puts me in a group of users who received an average score of 683, significantly lower than my score.

This tells me I’m doing well enough in the other categories to make up for this deficit but improving my mix of accounts will improve my score further.

I also received a grade of “C” from Credit.com for the “Credit Mix” category. Credit.com doesn’t offer a chart, but it does include details about my types of credit (23 revolving credit accounts, 0 mortgage loans, 1 auto loan, 6 student loans) and excellent suggestions for specific actions I can take to improve in this category.

Here are some screen shots. Click on the thumbnails to see the full-size images. [click to continue…]

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Free Identity Theft Monitoring for AAA Members

by Smithee on September 29, 2009

in Credit

If you’re an AAA member in California, Hawaii, New Mexico or Texas, you’re suddenly eligible for a free credit monitoring service, provided by Experian.

While I was looking through the fine print (a free service for you provided by ConsumerismCommentary.com), I found this, which gave me pause:

You are receiving a complimentary credit monitoring membership. Your membership is effective for the period disclosed to you when you received your activation code. Should you choose to discontinue your membership for any reason before expiration of the then applicable membership term for which you are entitled, you may cancel your membership by calling the toll-free number listed on this Web Site or the toll-free number listed in the welcome materials sent to you. Please be aware that if, at the end of your promotional membership, you decide to continue your membership for a monthly/annual fee, you will have an opportunity to re-enroll at a separate website with different Terms and Conditions.

But the e-mail I got from AAA stated:

This benefit is complimentary to AAA members—there are no hidden fees or charges. You won’t be asked to provide any payment information when you sign up.

There was an offer along the way to see my credit score for $5, but I’m happily using the free CreditKarma service for that.

When it was all done, there was a big button labeled “View Credit Report”, which isn’t the same as “identity theft monitoring”, but for all of our sakes, I clicked it. Thankfully, there was a menu option (all the way at the top, very small font) for “Credit Monitoring”. Here’s what you actually get:

  • Daily Monitoring of your Experian Credit Report
  • Email Alerts of key changes to your Experian Credit Report
  • Dedicated Representatives for Identity Theft Victims
  • Experian Credit Report

I love e-mail alerts, so I’ll be keeping this on for a while, and I’ll report back on its usefulness.

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One Person’s Successful Debtor’s Revolt

by Smithee on September 22, 2009

in Credit

Frequent readers know all about how a depressed economy and new laws are serving as convenient excuses for banks to be raising interest rates and otherwise penalizing clients, even those who pose no risk.

Ann Minch was presented with multiple notices of an interest rate hike. Even though she says she’s never missed a payment, she ended up with a 30% interest rate on her Bank of America credit card. She decided she’d had enough and started a protest in a simple YouTube video. YouTube videos are increasingly proving to be a successful way of getting the attention of a corporate behemoth that has wronged you. And it worked for Ann Minch.

Bank of America responded to her revolt, and because she was armed with knowledge and the right attitude, they finally agreed to set her interest rate back to its previous 12.99%. Many of our readers have found in similar situations that persisting with customer service, asking for as many supervisors as you have to, is often successful as well.

Ann explains in the video that she’s starting a new Web site to make the Debtor’s Revolt larger and more effective.

Interestingly, she also hints at a plan to avoid some tax increases, but isn’t very specific. I’d be curious to know what she’s referring to. Assuming she’s talking about federal taxes, I don’t know of any current proposals to raise taxes. In fact the current administration has lowered taxes for 98.6% of working households. The Bush tax cuts are meant to expire next year, but I’m not sure to what extent that will affect most people. Hopefully she’ll be more specific about that in the future.

In the meantime, congratulations, Ann!

Ann Minch Triumphs In Credit Card Fight, Arthur Delaney, Huffington Post, Sep. 21, 2009

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