Greetings, MYC readers. There’s a lot of buzz about credit cards this week and so I thought it’s time for another roundup. Here’s what’s in the news:
Still Getting Screwed
PressofAtlanticCity.com has a reader writing in to complain that, in spite of the new CARD Act, they are still getting jacked around by credit card companies, namely Chase and Capital One. The reader had their minimum payment raised from 2 percent of the balance to 5 percent, which doubled it from $300 to $785. And on a different card, the interest rate leapt from 9.99% to 17.99%. Yowza.
Essentially, we’re seeing the credit card companies getting in their last jabs before the ref breaks us up. Sucker punches, I’d call them. February 2010 is looming, and the window of opportunity for fiddling with terms is closing. Some legislators are moving to move up the effective date, but given the speed of bureacracy, relief may not come any sooner. PressofAtlanticCity raised an interesting point about the reader’s right to opt out:
But you have the right to opt out of paying the new rate by sending a letter. Then the company must give you a reasonable time to pay off existing balances at the old rate. However, you would not be able to make any new charges on the card, and once it was paid off, it would be closed. Make sure to stop any automatic payments on the card, as new charges will make the opt-out null and void. [My emphasis]
That’s something that card users may not have thought about. It’s sort of like those free AOL memberships where you can cancel, but as soon as you accidentally log on again, it’s reactivated again. Beware.
Here Come the Fees
Bank of America has spent a lot of time in the press buttering up customers by promising easy-to-understand credit card terms and no interest rate hikes and adjusted overdraft policies. But all that, it seems, were just so many spoonfuls of saccharine in an attempt to help the medicine of their next announcement go down: annual fees for cards.
Associated Press said that BofA was going to start charging annual fees between $29 and $99 on cards selected based on “risk and profitability.” Translation: If BofA can’t make a buck off you through finance fees, they’ll ding you with annual fees. A punishment for good behavior. Here’s another quote from the BofA :
“We are making this change in response to market conditions, new federal laws and regulations, and the increasing costs of providing unsecured credit,” states a letter sent to a Bank of America credit-card customer and obtained by The Associated Press.
Customers are told that they can reject the fee, but will subsequently have their account closed. The deadline to reject the change of terms is Dec. 16.
Closing a credit card account can come with repercussions to a person’s credit score, since it would lower the amount of available credit a person has access to.
No Luck for Retailers
The war over interchange fees seems to be skewing in favor of the credit card companies. Reuters has a story that points out that legislators are currently a bit busy with other pressing matters, such as healthcare and regualtory reform, and the fight that 7-Eleven brought over swipe fees may be pushed into the background. Per Reuters:
Merchants contend the fees, which range from about 1.6 percent to 2.5 percent, unfairly cut into their margins and drive up prices for consumers.
Financial services companies argue that the payments system is based on a pricing system that benefits businesses and their customers. Banks also said that in Australia, where interchange fees were limited a few years ago, consumers did not benefit and credit card fees rose.
Both groups have been lobbying intensively in recent months, but most observers believe the credit card companies have the upper hand.
“We believe that this legislation has no chance of passing this year,” Credit Suisse analyst Moshe Orenbuch said in a research note.
Debt free at $5 a day
Over at NoCreditNeeded, NCN talks about how making micropayments helped him understand the realities of money management and take down a fair chunk of his credit card debt. It’s a hybrid of the snowball method with a little bit of latte factor figured in. Check it out:
For thirty days, instead of focusing on the big-picture, I focused on the very, very small things. If I wanted a soda, I had to remember the $5. If I wanted a newspaper, I had to remember the $5. If I wanted to rent a movie, I had to remember the $5. This silly little experiment (which, in the end, wasn’t really all that sill), helped me learn the value of every dollar that comes in to my life.
If I had it to do all over again, here’s exactly what I would do – and it’s what I do when making micro-deposits to my savings account:
1. I would set a goal of saving $5 each day.
2. At the end of the week, I would send a micro-payment (or micro-deposit) of $35.
3. A couple of days after sending the micro-payment, I would check my credit card balance, just for that emotional boost that comes with seeing my debt reduced.
Have any of you tried something like this? Does it work?
Chase Stepping Up
The other day while flipping through Wired, I came across a lovely full page ad for Chase Sapphire, the new luxury card from JPMorgan Chase with “ultimate rewards.” It looks fun, according to the ad. CreditCardGuide.com breaks down all of the new and improved Chase cards in their blog posting:
They are known as the following:
- Slate with BluePrint
- Chase Sapphire with Ultimate Rewards
- Chase Freedom Credit Card
- Ink with Ultimate Rewards
- Ink Plus with Ultimate Rewards
- Ink Cash Business Card
- Ink Bold with Ultimate Rewards
Credit Card University
There’s a new resource for college students looking for a primer on credit card usage over at CreditCardUniversity.com. Our recommendation: start with the seven part series on “Why We Get in Debt.” Topics include:
Why We Get in Debt, Part 1: Behavioral Economics and 5 Types of Apathy
Behavioral economics looks at how we make poor decisions — even though they may not be rational.
Why We Get in Debt, Part 2: Lack of Self-control
Short-sightedness is one of the main reasons that we get into debt.
Why We Get in Debt, Part 3: Cumulative Cost Neglect
Cumulative cost neglect can take its toll on your personal finances: Small, Daily Purchases with the Credit Card Can Add Up.
Why We Get in Debt, Part 4: Procrastination
Putting Off the Credit Card Bill Can Result in Late Fees and Charges. It is important to make payments on your credit card bill — and to do it on time.
Why We Get in Debt, Part 5: Unrealistic Optimism
Unrealistic optimism about what we can pay back can lead to debt.
Why We Get in Debt, Part 6: Keeping Up with the Joneses
Miswanting and a desire for status can lead to expenses that we cannot really afford.
Why We Get in Debt, Part 7: Know Yourself and Your Limitations
Be honest with your limitations, and avoid things that tempt you into spending more with your credit cards.
Meanwhile, for the rest of us, you may want to brush up on the 8 most important credit card terms, courtesy of learncreditcards.com.
Stoozing Still Possible
Stoozers and credit card arbitrage practitioners have had a bit of trouble making money with their credit cards lately, but The Digerati Life has highlighted a few of the remaining 0% interest 12 months balance transfer cards. Anyone else know of any good deals?
That’s all for today. Be sure to share your links with us in the comments section.
Photo by Logan Antill.
Related posts:
- Annual fees and why they’re silly
- In Defense of Credit Card Fees
- 20 Common Credit Card Fees to Watch Out For!
October 16th, 2009 → @ credit card
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