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Walgreens to roll out its own credit cards and a prepaid debit card in 2021

The drugstore chain has its sights set on boosting customer loyalty and adding more revenue streams

It’s commonplace for retailers to have their own vanity cards, but Walgreens’ latest foray goes a little further. In an effort to boost both loyalty and revenue, the drugstore chain says it will partner with Synchrony and Mastercard to launch credit cards and a prepaid debit card, and it is exploring other financial services.

The company’s short-term plan for the credit cards is to connect them with its new customer loyalty program, myWalgreens, allowing cardholders to receive cash rewards and other offers. 

A wide range of benefits

Walgreens is keeping its cards close to its chest, only going as far as saying that the co-branded credit card will offer an undefined “wider range of benefits” when used at other retailers and service providers. The offering will reportedly be the first in another “range of new financial products and services” that the company has up its sleeve. While it didn’t give specifics, it said in a release that it plans to explore a number of add-ons that Mastercard offers such as point-of-sale financing and installments.

That last part -- point-of-sale financing and installment plans -- comes directly from the financial crunch that the pandemic put the consumer world in. According to a report by Salesforce and coverage by CNBC, the use of “buy now, pay later” for online orders grew 109 percent during the 2020 holiday shopping season.

The company is also taking a health-first cue from the pandemic, allowing customers to have access to contactless shopping experiences.

“Walgreens is committed to providing our customers and patients with unparalleled loyalty and rewards experiences for managing their health and well-being, and we are excited to partner with Synchrony and Mastercard, who share our commitment to support healthy communities,” said John Standley, Walgreens president. 

“As we continue to focus on creating new revenue streams, we look forward to exploring and introducing even more health and well-being payment initiatives in the near future.”

The new Walgreens credit cards are slated to be available in the second half of 2021, and eligible customers will be able to use the Walgreens credit card for purchases at more than 9,000 Walgreens stores, via the Walgreens mobile app, and at Walgreens.com.

It’s commonplace for retailers to have their own vanity cards, but Walgreens’ latest foray goes a little further. In an effort to boost both loyalty and re...
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Your travel rewards card may now reward more than just travel

Several card issuers have made adjustments as the pandemic has limited travel

Consumers who have a travel rewards card may find that it hasn’t been all that useful during the pandemic since travel has been limited. But a number of card issuers have found other ways to offer their customers perks, even when they don’t leave home.

MyFICO recently reported on how some card issuers are rewarding their home-bound cardholders. They’re expanding their higher-earning rewards categories to appeal to the shift away from travel spending. 

For example, the Chase Sapphire Preferred Card is now offering more points for grocery purchases. Cardholders can earn two points per dollar on up to $1,000 in grocery store purchases from November 1, 2020 to April 30, 2021. 

At the same time, cardholders can also accumulate two points per dollar spent on dining, which includes eligible delivery services and takeout.

The Chase Sapphire Reserve Card is also offering more rewards on groceries and gasoline purchases. From June 30, 2020 through June 30, 2021, cardholders are getting an automatic statement credit on gas and grocery store purchases of up to $300.

Grocery store purchases made between November 1, 2020 to April 30, 2021 will earn three points per dollar.

Restaurants, supermarkets, and gas stations

Citi Premier, another popular travel card, has beefed up its points offered on restaurants, supermarkets, and gas purchases. Cardholders get three points per dollar when they use the card at restaurants, supermarkets, and gas stations -- and it still rewards travel. Travelers get three points per dollar on travel expenses.

Ordering out has become a household routine during the pandemic, and Capital One travel cards reward customers when they use UberEats. From now through January 31, 2021, the Capital One Venture and VentureOne are offering five points per dollar on UberEats food delivery purchases.

If you’ve already racked up a lot of miles and points on your travel card, remember that they don’t always have to be redeemed for travel. If you check into your card’s rewards options, you may find that you can cash in your miles for statement credits, gift cards, and even merchandise.

If you carry a travel rewards card in your wallet, it’s important to make it rewarding in some way. Many of these cards carry a hefty annual fee. If you aren’t getting rewards to at least cover the fee, there are many more efficient options.

While closing an account can negatively affect your credit score, you may be able to stay with your same provider but switch from a card with an annual fee to one without one.

Consumers who have a travel rewards card may find that it hasn’t been all that useful during the pandemic since travel has been limited. But a number of ca...
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Capital One reportedly barring customers from ‘buy now, pay later’ options

It’s the first credit card issuer to take that step

Capital One reportedly will no longer allow its customers to use its credit cards to pay off debt accrued through “buy now, pay later” (BNPL) transactions, which have grown in popularity during the pandemic.

A growing number of apps offer BNPL services in which a consumer purchases an item and charges it through the app. The consumer makes four payments, usually every two weeks, to clear the debt.

Consumers don’t pay interest. The app company charges the merchant a small commission. But the transactions are considered risky because the consumer is not required to submit to a credit check.

Reuters reports that Capital One has confirmed that it will not allow its customers using its credit cards to clear BNPL debt because of “unacceptable risk.” It’s the first credit card company to take that step.

‘Risky business’

Reuters quotes a Capital One spokeswoman as saying the company is ending the practice of consumers putting “point-of-sale” loans on its credit cards. 

“These kinds of transactions can be risky for customers and the banks that serve them,” the spokeswoman told the news agency.

Credit card companies also view BNPL as a growing source of competition. Consumers who switch from paying with a credit card don’t pay interest, which averages about 17 percent on balances. 

How it works

One BNPL app company, Klarna, explains how it works in the terms and conditions on its website:

  • Use your own valid debit or credit card, or other accepted payment method, to pay (no prepaid cards).

  • The initial payment is charged when the merchant completes your order (this is usually the shipping date for online orders).

  • The next 3 payments are automatically charged every 2 weeks after your first payment.

  • There are no interest charges with Pay later in 4 installments, and no fees when you follow your automatic payment schedule.

BNPL services are largely unregulated, even though they involve what are in effect interest-free loans. A search for “buy now pay later” on the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) websites returned no results.

Some personal finance experts have warned that BNPL could pose trouble for impulsive consumers. They say consumers could look past the high cost of an item if they only see the payment they will be required to make every two weeks.

Capital One reportedly will no longer allow its customers to use its credit cards to pay off debt accrued through “buy now, pay later” (BNPL) transactions,...
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Survey finds consumers’ data breach concerns are growing

With credit card usage rising, a card’s fraud protection is increasingly important

With so many consumer purchases shifting to online channels this year, it should come as no surprise that credit card usage is much higher than in past years. For that reason, using the right card for your particular needs and protecting the card from data thieves are two important considerations.

A new survey from Generali Global Assistance (GGA) found that 86 percent of consumers plan to do most of their holiday shopping online this year and 62 percent of shoppers plan on using just one card to make purchases.

Not only does using a single card make it easier to keep track of spending, security experts say it’s also safer.

"The pandemic has created the perfect environment for scammers, who are exploiting uncertainty and our more digitally focused reality, said Paige Schaffer, CEO, Global Identity and Cyber Protection Services at GGA. “Thirty-six percent of shoppers we surveyed this year indicated that their credit card provider experiencing a data breach was a top concern this holiday season.”

Best cards for security

If you’re using a single card, having one with robust fraud protection, as well as other consumer-friendly features, will work to your advantage. The personal finance site MoneyUnder30.com recently ranked credit cards for their security features.

It rated Wells Fargo Cash Wise Visa Card as best for fraud protection. It singled out the Discover It Cash Back card as best for security and cashback.

While security is very important, consumers also consider perks and benefits when choosing a credit card. But consumers should consider their needs. Do they need to transfer a balance or do they need cashback? In the era of COVID-19, travel rewards may be less important than they used to be.

Rating the cards

In its recent analysis of the best credit cards for 2021, CardRatings.com offered choices in 11 different categories. Some of the picks for next year include:

  • Best Flat-Rate Cash-Back Rewards – Citi Double Cash Card

  • Best for Families – Blue Cash Preferred Card from American Express

  • Best General Travel Rewards – Chase Sapphire Preferred

  • Best Balance Transfer Offer – Citi Diamond Preferred

  • Best Student Credit Card – Discover it Student Cash Back

  • Best for Small Business – Ink Business Preferred

The editors say they consulted consumers as well as experts, scoring cards on customer service, rewards, usability, and other factors.

ConsumerAffairs has also dug deep into various credit card offers, looking for the best fit for a wide range of needs. You’ll find our results here.

With so many consumer purchases shifting to online channels this year, it should come as no surprise that credit card usage is much higher than in past yea...
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SoFi issues a new Mastercard credit card

The company says the new product can help you pay down debt

Many households are facing staggering credit card debt, but fintech firm SoFi says its newly issued credit card could help with that.

The company says its first credit card promotes healthy financial habits and delivers on its mission to “help people get their money right.” The card, on Mastercard’s network, has no annual fee and provides up to 2 percent unlimited cashback when redeemed into SoFi Money or SoFi Invest accounts.

The two percent rate also applies when the rewards are used to pay down SoFi Student Loans or SoFi Personal Loans. The card launched last week with a small number of SoFi members. Consumers interested in the card can get on a waitlist for when the card membership is fully open.

‘Holistic, healthy money habits’

Company executives say the card is aimed at helping consumers chip away at the $14.3 trillion in consumer debt with rewards that are most valuable when used to pay off debt. Other options include investing the rewards or saving for a rainy day.

"Based on feedback from our members, we designed a credit card that helps our members pay down debt or invest in the future with every purchase while building holistic, healthy money habits," said SoFi CEO Anthony Noto. "Through simply using the SoFi Credit Card and following the same daily spending patterns that our members do today, we are making 'getting your money right' the most intuitive and convenient choice."

Cardholders who carry a balance on the card will also be rewarded if they use the card responsibly, the company says. The interest rate on balances will go down by 1 percent after 12 straight on-time credit card payments and will remain at that level as long as on-time payments continue. 

According to the Federal Reserve, U.S. consumers were carrying $1.08 trillion in credit card debt in the third quarter of 2019. That made up a little over 26 percent of consumers’ total debt at the time.

The growth of fintech

SoFi is one of the growing number of fintech firms that are providing financial services directly to consumers by using technology to provide many of the services traditionally associated with banks. The companies tend to be favored by younger consumers.

SoFi was founded in 2011 by four students at the Stanford Graduate School of business. One of the principal aims was to provide a more affordable student loan product.

"SoFi continues to create thoughtful and innovative products to empower its members to pay down debt and improve their financial lives," said Linda Kirkpatrick, president, U.S. Issuers at Mastercard. "We are proud to build upon our relationship with SoFi and work closely to arm their members with benefits and features that are directly relevant and meaningful to their lives."

Many households are facing staggering credit card debt, but fintech firm SoFi says its newly issued credit card could help with that.The company says i...
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Consumers think Halloween’s biggest fright is the scare the pandemic is putting on their finances

Almost half of consumers think credit card debt is scarier than COVID-19, a survey finds

With the pandemic’s first Halloween less than a week away, a new WalletHub study finds that consumers are still spending billions on the holiday, but overall, they’re feeling life is a little spookier than they’d prefer.

The survey -- WalletHub’s Halloween Spending & Financial Fears Survey -- lays out these consumer frights:

  • A whopping 130 million Americans think the coronavirus is the scariest thing about Halloween this year.

  • Nearly 40 percent of Americans are more afraid of credit card debt than the coronavirus.

“Almost 40 percent of Americans are more scared of credit card debt than the coronavirus in part because of political allegiances, but also due to the fact that credit card debt might seem more tangible to an indebted individual who has yet to know someone with COVID-19,” said Jill Gonzalez, a WalletHub analyst. 

“Current events aside, money was the number one stressor for Americans for many years before the coronavirus pandemic, so it shouldn’t be a surprise that credit card debt and money problems in general still scare a lot of us, maybe even more so than before.”

Money concerns are widespread this year

The survey found that the pandemic has led to an increase in the number of consumers experiencing money-related worries.

  • Concerns about money problems are hitting 22 million more people this year than last year;

  • Close to 90 percent of Americans think that politicians prey on peoples' financial fears;

  • Roughly 13 million more Americans are scared about their kids' financial futures in 2020 than in 2019;

  • Almost 33 percent of people think their finances are a personal horror show.

Gonzalez said that consumers think the “horror show” label applies for a variety of reasons, including the pandemic’s impact on the U.S. economy, as well as debt levels which continue to be high despite showing recent improvement.

“It’s tough to say your finances are looking good when you’re out of work or waiting for business to pick back up. You can’t ignore the possibility that some people are just being dramatic when saying their finances are a horror show, either,” she said.

With the pandemic’s first Halloween less than a week away, a new WalletHub study finds that consumers are still spending billions on the holiday, but overa...
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Consumers showing new interest in store credit cards

A survey finds a huge increase in interest over the past two years

An unusually large number of consumers have expressed interest in signing up for a store credit card this holiday shopping season. 

The survey, conducted for CompareCards, found that 44 percent of Americans say they're at least somewhat likely to apply for a store card during the holiday shopping season. That's up from 32 percent in 2019 and 24 percent in 2018.

A store credit card is a Visa or Mastercard that is co-branded with a national retailer. Consumers are often offered a special discount on a purchase if they apply for the card.

The survey authors say the findings are somewhat odd since more than half of people in the survey said they've had a store credit card in the past and have regretted getting one.

What’s changed?

What’s different now? The authors point out that the interest rate on these store-branded credit cards has come down from recent highs, but they’re still higher than the rate on regular credit cards.

Another possible reason for the shift in sentiment could be that more consumers need a credit card. At the beginning of the coronavirus (COVID-19) pandemic, credit card issuers unilaterally closed many credit card accounts or lowered credit limits.

A previous CompareCards survey found that about 70 million people – more than one-third of credit cardholders –  involuntarily had a credit limit reduced or a credit card account closed in a 60-day period from mid-May to mid-July.

Lenders moved swiftly to reduce their risk, fearing widespread unemployment would lead to a wave of defaults. It was impossible for them to determine which of their customers had lost their income -- and were thus more likely to default -- and which were still gainfully employed.

Easy to get

Since store-branded credit cards are easier to get -- clerks often try to sign you up in the checkout line -- more consumers may be giving them another look. But their interest rates tend to be on the high side and the rewards are usually less-generous than traditional rewards cards.

Store cards may also look more attractive to consumers than in the past. In addition to slightly lower interest rates, the rewards are getting better.

More retailers are trying to drive spending by creating tiered-rewards programs that let consumers earn rewards faster the more they spend. That’s fine, but remember those higher interest rates. Carrying a balance can wipe out those rewards very quickly.

The survey found that nearly half the people who currently have a store-branded credit card are carrying a high-interest balance. Fifty-nine percent of consumers with a store credit card say it’s the card they use the most.

An unusually large number of consumers have expressed interest in signing up for a store credit card this holiday shopping season. The survey, conducte...
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Venmo launches a new Visa credit card

The card will work with the Venmo app

Venmo has introduced its first credit card, issued by Synchrony and powered by Visa. Members can manage their card in the Venmo app and earn cashback on each purchase.

Just like the app, the card allows users to transfer money or split purchases with friends. A nice feature of the card is that the top reward category changes based on the customer’s biggest spending category.

Instead of having to choose a category or have one assigned by the credit card issuer each quarter, the new Venmo card will pay 3 percent cash back on the customer’s largest purchase category during a billing cycle. One month it might be airlines, another month it might be groceries.

The card pays 2 percent cash back on items in the second-largest category and up to 1 percent on all other purchases. There is no annual fee.

Spending categories include groceries, bills and utilities, health and beauty, gasoline, entertainment, dining and nightlights, transportation, and travel.

Cash goes into the Venmo account

When a customer earns cash, it’s automatically placed in their Venmo account, allowing them to easily use the money. They can use it to make statement payments, make purchases, or send it to family or friends using the app.

The card has many of the same features of the app. Users can manage their card and spending using the mobile app and track spending activity in real time, organized by spending categories, and split and share purchases.

They can also monitor how much cashback they’ve received, make payments, and otherwise manage the credit card – all in the app. Customers can also choose to receive real-time alerts to help them see when and where purchases are made, and when cashback is applied to their account.

Minimal contact during purchases

Venmo says its credit card is also easier to use. It has an RFID-enabled chip so customers can tap to pay at the point-of-sale, allowing for minimal contact, instead of inserting the chip or swiping their card at the point-of-sale.

Venmo’s card also takes advantage of parent company PayPal’s QR code-scanning for credit-card purchases at some brick and mortar and online retailers. To start, the Venmo card’s QR code will only work for card activation and for other Venmo users to send card customers a payment.

Venmo is doing a soft rollout, making the new card available only to a small percentage of current Venmo users this year. The card will be fully available in the first quarter of next year.

Venmo has introduced its first credit card, issued by Synchrony and powered by Visa. Members can manage their card in the Venmo app and earn cashback on ea...
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More consumers are losing access to credit during the pandemic

Credit card companies have closed accounts and lowered credit limits for 70 million people

As soon as the pandemic threw millions of Americans out of work, credit card lenders began canceling cardholder accounts and reducing credit lines. New data suggests that this trend has only accelerated.

A survey by credit card site CompareCards reveals that about 70 million people – more than one-third of credit cardholders –  involuntarily had a credit limit reduced or a credit card account closed in a 60-day period from mid-May to mid-July.

Lenders moved swiftly to reduce their risk. It was impossible for them to determine which of their customers had lost their income -- and were thus more likely to default -- and which were gainfully employed.

But the survey shows lenders haven’t tightened credit for everyone. Millennial customers were the cardholders most likely to have a credit limit reduced or account closed involuntarily. 

High-income cardholders not immune

Customers with the highest incomes -- who are often among the biggest spenders and have the highest credit limits -- were the most likely to say their credit availability had only been reduced in the wake of the pandemic.

When credit limits were reduced, the survey shows it wasn’t by a lot. The most common credit limit reduction was between $501 and $1,000. But 22 percent of customers in the survey said they saw their credit availability shrink by $5,000 or more.

About 89 percent of those whose credit availability declined were notified by their lender of the change, but not all were given a reason. Of those who were told why there was a change in their account, about half said it was because of a decrease in their credit score or late payment.

Credit score impact

Losing access to credit will almost always send a credit score even lower. A score will go down if a credit card company reduces the cardholder’s credit limit. It could go down even more if there is a balance on the card. The credit limit reduction means the cardholder is using a higher percentage of available credit, usually a drag on credit scores.

“We're several months into the pandemic and one of the few things we know for certain is that no one knows exactly when this is going to end. Because of that, it's likely that we will see banks continue to be cautious when lending,” the authors write. 

There are some things consumers can do to make sure they aren’t the next to lose access to credit. Consider using any dormant cards more. Put a small, recurring subscription – such as Spotify or Netflix – on that little-used card to ensure that it is used each month. Then, set up automatic payments so you never pay late. 

As soon as the pandemic threw millions of Americans out of work, credit card lenders began canceling cardholder accounts and reducing credit lines. New dat...
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Consumers use rewards credit cards to help get by during the pandemic

The type of card you have has never been more important

If you have a travel rewards credit card in your wallet, you may be asking yourself just how useful that will be in the midst of a pandemic

Air travel has plunged since the coronavirus (COVID-19) swept the world, and cruises have been canceled. Many countries are temporarily closing their borders to travelers from other countries, another inducement to stay home. In the U.S., some states where coronavirus cases are low are discouraging travelers from states where cases have spiked.

For travel rewards cardholders, that may mean a lot less travel in the months ahead. Not only are they missing out on racking up rewards points, but they are also likely paying a hefty annual fee for the privilege of having the card.

The Wall Street Journal reports that major banks are taking steps to discourage customers from canceling these highly profitable cards, noting that JPMorgan Chase is delaying a $100 increase to its $450 annual fee on its flagship Sapphire Reserve Card.

Chase has joined Citibank and other major card issuers in adding other non-travel rewards to their cards to keep them in consumers’ wallets. However, consumers should carefully measure the value of those potential rewards against the annual fee.

Cash may be king

Having a rewards card that provides points or cashback on routine purchases like gasoline and groceries may make more sense in these times, and these types of cards rarely carry an annual fee.

In a new report, PayPal offers research showing that a significant number of consumers are using their credit card rewards to stretch their budgets. Nearly a third of consumers have used rewards to purchase the things they need most, such as groceries. 

"More and more people across the country are turning to their credit card rewards as a helpful and easy way to make their dollars go farther, and in the current environment, two-thirds of Americans now view these rewards balances as a way to buy the things they need such as groceries and other essentials," said Jill Cress, vice president of consumer marketing at PayPal.

Unaware of their rewards

At the same time, the research found that 39 percent of people with rewards credit cards were completely unaware of their rewards balance. Cress says it’s not only important to incorporate those rewards into the household budgets, but consumers should also think carefully about the credit cards they have and the kinds of spending they reward.

"With travel and luxury items still less of a priority for many right now, our research shows that people are instead tapping into their rewards balances to support small businesses in their community and to give back to causes," Cress said.

Replacing a travel rewards card that carries an annual fee with a no-fee card providing cashback on everyday purchases may be a prudent step in this new environment, and there are many of these cards to choose from.

ConsumerAffairs has researched the best cashback credit cards here.

If you have a travel rewards credit card in your wallet, you may be asking yourself just how useful that will be in the midst of a pandemicAir travel h...
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Survey finds new credit card accounts have plunged 73 percent

As unemployment spikes, consumers are losing access to credit

Credit card companies slammed on the brakes in March as millions of consumers lost their jobs. The number of new credit card accounts plunged 73 percent between March 15th and April 15th, according to a survey by CompareCards.

While it’s not surprising that lenders would try to reduce their risk in the face of rising unemployment, the speed in which they acted is unprecedented. Then again, the economic disaster from the coronavirus (COVID-19) shutdown happened virtually overnight. 

Prior to the pandemic, credit card companies aggressively sought to open new accounts because of a robust economy. In the new environment, consumers may find it will be much harder to get all types of credit.

Economic uncertainty

Compared to the March-to-April periods from 2017 to 2019, the number of new cards slowed to a trickle this year. When lenders did issue cards, the credit limits were on average $700 lower.

“When the economy is uncertain, as we are currently witnessing, plans change and lenders get nervous,” CompareCards wrote in a blog post. “When lenders become wary, they resort to reducing credit limits on existing accounts, or even close those accounts altogether, because all that available credit just looks like unnecessary risk to the bank.”

Even if you already have a credit card, it doesn’t mean you’re going to keep it. As unemployment surged in late March, credit card companies moved quickly to close some customers’ accounts. 

At the end of April, about 25 percent of consumers reported that their credit card company had closed an account or lowered their credit limit.

‘High risk of failure to pay’

ConsumerAffairs has received scores of complaints from consumers like Robert, of Houston, who told us he had several credit cards with Synchrony, which he said had continued to increase his credit limits over the years.

“Then, in one single day, Synchrony closed every single account without notice,” Robert wrote in his ConsumerAffairs post. ”Received a letter stating ‘Activity on accounts indicative of high risk of failure to pay.’ How is that possible when there was less than $3k total on just 2 of the several accounts I had with them?”

Robert also said his credit score dropped by more than 100 points because of the loss of credit, which he says significantly increased his debt ratio.

Credit card companies are often quick to react to perceived risk because credit card debt is not secured by any kind of collateral. If an account holder doesn’t pay, there is no means to secure payment without going to court.

But in the wake of the coronavirus, some lenders are even worried about secured debt. Earlier this month, Wells Fargo announced it was temporarily suspending new home equity lines of credit (HELOC), joining other major banks moving to reduce their credit exposure.

Consumers whose credit card accounts have been closed by their lender may be able to restore access by applying for a secured credit card. ConsumerAffairs has researched the best secured credit card companies here.

Credit card companies slammed on the brakes in March as millions of consumers lost their jobs. The number of new credit card accounts plunged 73 percent be...
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Credit card use is up 7 percent in the last five years

But cash is unlikely to disappear from the economy

The number of U.S. consumers using credit cards has increased 7 percent over the last five years, according to a new report from Packaged Facts.

The report’s authors say credit card use usually goes up during good economic times. Steady economic growth and an increasingly healthy job market in recent years have helped to provide a widening pool of credit-worthy credit card customers, and good times have encouraged them to spend.

Another factor driving increased credit card us is e-commerce, which is taking an increasingly bigger market share of retail and which is made much easier with payment cards.

The report found that consumers increasingly favor general-purpose credit cards over so-called private-label credit cards. This suggests that, after several years of growth, private label cards may now be less popular with consumers.

A private label credit card is a store-branded card that is meant to be used at a specific store. These cards are managed by a bank or commercial finance company for retailers like department and specialty stores and for some airlines.

The trend of going cashless

The growth in credit card use may also suggest the continuation of the trend of consumers paying for virtually everything using plastic. A 2018 Pew Research Center study found that 29 percent of U.S. adults said they make no purchases using physical currency during a typical week, up from 24 percent in 2015.

“Most notably, adults with an annual household income of $75,000 or more are more than twice as likely as those earning less than $30,000 a year to say they do not make any purchases using cash in a typical week (41% vs. 18%),” Pew said in a release.

“Conversely, lower-income Americans are about four times as likely as higher-income Americans to say they make all or almost all of their purchases using cash (29% vs. 7%),” the Center said.

More consumers can qualify

The higher income group is also more likely to have a bank account and to be able to qualify for a credit card. Packaged Facts’ report showing credit card use is rising could also mean that consumers who previously couldn’t qualify now can.

But a 2019 report from Origin, Hill Holliday’s independent research arm, suggests most consumers aren’t ready to give up cash completely. The survey found that 76 percent of consumers still carry some cash, even if they mostly use other methods to pay for things. Fifty-five percent said they “hated” the idea of completely abandoning cash.

Most merchants -- particularly small businesses -- also prefer that their customers pay with cash because payment cards always carry some type of fee.

The number of U.S. consumers using credit cards has increased 7 percent over the last five years, according to a new report from Packaged Facts.The rep...
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Consumers are finding more financial success with secured credit cards

A KeyBank report shows 30 percent of customers became eligible this month for an unsecured card

KeyBank reports that nearly one-third of the consumers who signed up for its secured credit card were eligible for an unsecured card after just one year.

A secured credit card is often used by consumers with poor or no credit. They make a deposit with the lender which secures their credit line. For example, if they deposit $500, they have a $500 credit limit on the card.

KeyBank promotes it as an effective tool to not only build up a credit score but also establish good money-management habits. The lender reports that 30 percent of its secured credit card customers became eligible this month for an unsecured card. Of that number, KeyBank says 65 percent are millennials.

“Millennials, many of whom came of age during the 2008 recession, are saddled with debt and looking for ways out of it," said Mitch Kime, head of Consumer Payments in KeyBank's Enterprise Payments group. "Our Secured Credit Card helps them overcome the barriers they face to establishing a strong credit history that makes financial achievements, like renting their own apartment, a reality."

Consumer support

KeyBank says it offers support to its secured credit card customers by reviewing accounts twice a year. Customers are then offered advice on how they can better manage their credit and improve spending habits. According to the lender, young adults and recent college graduates between the ages of 21 and 25 make up the largest segment of Secured Credit Card customers. 

Selecting a secured credit card is a lot like deciding on any other type of card. It’s best to find one with no annual fee. Some secured cards even offer rewards, such as cashback on purchases. 

While the credit limits tend to be low -- after all, they’re determined by how much money you deposit as security -- that tends to be beneficial since it prevents consumers from running up large balances. In most instances, consumers using a secured card need to pay the balance in full each month to have any available credit the following month. That’s a good habit to establish.

ConsumerAffairs has researched secured credit cards and come up with this list of the best ones. 

KeyBank reports that nearly one-third of the consumers who signed up for its secured credit card were eligible for an unsecured card after just one year....
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Choosing your first credit card should be done with care

Experts suggest the best cards for students and those new to credit

Picking a credit card is done too often in an off-hand manner without a whole lot of thought. Maybe a merchant offers you a discount at checkout if you apply for their credit card.

But if you are seeking your first credit card, it pays to think first about your needs. If you rarely travel, then choosing an airline rewards card with an annual fee is definitely not a good fit.

If you have little credit history, there will be many cards that simply decline your application. In that case, how do you find a lender who will not only take you on as a customer but who also offers a product that fits your needs? For answers, we turned to some credit card experts.

CreditCards.com likes the Discover It Student Cash Back card. As the name implies, it is for students who, in many cases, have never had a credit card in their name. It offers 5 percent cash back on rotating categories that change quarterly. All other categories earn 1 percent cash back on every purchase.

Unusual rewards for a student card

The card has no annual fee and wins points for its cashback rewards, which CreditCards.com says is unusual for a student card.

WalletHub has several suggestions for consumers new to credit, including the Capital One QuicksilverOne Cash Rewards card. The card makes the list because it pays 1.5 percent cash back on all purchases.

The only downside, however, is the $39 annual fee. For some, that might not make sense. But the experts at WalletHub point out that the cash rewards will pay for the annual fee if you think you’ll spend $2,600 a year on the card. The interest rate is also on the high side for consumers with spotty credit, so it’s advisable to pay the balance in full each month if you get the card.

"While there has been a lot written about credit cards that offer the best perks and bonuses, there's not as much information available for people who just want a good starter card," said Eleri Miller, Marketing Coordinator for RAVE Reviews. 

RAVE has published a list of what it sees are good starter credit cards that include the two mentioned above. It also suggests Citi Rewards Student Card pays double points at supermarkets and gas stations on the first $6,000 spent per year. It provides one point on all other purchases after that.

There is no annual fee, and it offers a 0 percent introductory interest rate for the first seven months after opening an account. But beware -- if the balance isn’t paid off at the end of seven months, the interest rate will go from 16.49 percent to 26.49 percent, depending on your creditworthiness.

For consumers with ample credit experience, check out ConsumerAffairs’ best credit card section, where you can find recommendations for cards that best suit specific needs.

Picking a credit card is done too often in an off-hand manner without a whole lot of thought. Maybe a merchant offers you a discount at checkout if you app...
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The Apple Card is now open to all iPhone owners

After trial roll out Apple is signing up as many of its customers as it can

The Apple Card, the company’s entry into the credit card market, is now open for all iPhone users. Over the last 10 days, it has only been available to select customers.

Apple says its customers can quickly apply for the new credit card through the Wallet app on iPhone and start using it right away. Apple announced the card earlier this year, partnering with Goldman Sachs, saying it wanted to help consumers better manage their money.

“We’re thrilled with the overwhelming interest in Apple Card and its positive reception,” said Jennifer Bailey, Apple’s vice president of Apple Pay. “Customers have told us they love Apple Card’s simplicity and how it gives them a better view of their spending.”

The Apple Card is like many regular credit cards. It doesn’t have an annual fee and it offers 3 percent cash back on Apple purchases and 1 percent on all other purchases. 

The card has gotten a rather lukewarm reception from personal finance experts who note that most cards now don’t charge an annual fee and offer rewards as generous or more than what the Apple Card pays.

Other cards may have better benefits

“The only people who should consider applying for the Apple Card are those who pay their bills in full every month and spend a lot via Apple Pay,” WalletHub CEO Odysseas Papadimitriou told us earlier this month. “Everyone else is better off with one of the best rewards credit cards or one of the best 0% APR credit cards.”

The Apple Card, after all, is still a credit card that charges credit card interest. When the company announced the product in the spring, it said its rates would be lower than most credit cards. They are, but not that much lower -- topping out at around 24 percent APR. The average credit card rate is around 15 percent.

Papadimitrious points out that the Apple Card doesn’t offer 0 percent introductory rates, and its lowest interest rate -- the one offered to customers with the best credit -- is 12.99 percent.

Added utility

That said, loyal Apple customers may find added utility with the card. It’s extending 3 percent Daily Cash to more merchants and apps. And from now on customers will receive 3 percent Daily Cash when they use Apple Card with Apple Pay for Uber and Uber Eats.

There could be an additional advantage. If you own an iPhone and have been turned down by other credit card companies, the Apple Card might be your best bet. CNBC reported last week that consumers with subprime credit scores are being approved for the Apple Card. 

Apple reportedly sought a banking partner willing to approve as many of its U.S.-based iPhone users as possible, within the bounds of responsible lending. One iPhone user approved for the Apple Card told the network he was “shocked” that he was approved because his credit score is 620.

The Apple Card, the company’s entry into the credit card market, is now open for all iPhone users. Over the last 10 days, it has only been available to sel...
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Select Apple customers are now signing up for the Apple Card

Initially, many experts aren’t that impressed

The Apple Card, Apple’s branded credit card announced earlier this year, began to roll out this week. 

Some iPhone owners were able to apply for the card this week, and it will be open to everyone else by the end of the month. This week, consumers and financial services experts got their first look at the card’s details.

“The only people who should consider applying for the Apple Card are those who pay their bills in full every month and spend a lot via Apple Pay,” said WalletHub CEO Odysseas Papadimitriou. “Everyone else is better off with one of the best rewards credit cards or one of the best 0% APR credit cards.”

That’s because the Apple Card is still a credit card. When the company announced the product in the spring, it said its rates would be lower than most credit cards. They are, but not that much lower -- topping out at around 24 percent APR. The average credit card rate is around 15 percent.

Papadimitrious points out that the Apple Card doesn’t offer 0 percent introductory rates, and its lowest interest rate -- the one offered to customers with the best credit -- is 12.99 percent.

CNBC reports that many consumers with subprime credit scores are currently qualifying for the Apple Card. The network reports that Goldman Sachs, Apple’s partner, is bowing to pressure from Apple to approve as many of its customers as possible -- even those with less-than-stellar credit.

‘Didn’t reinvent the wheel’

"As with all Apple products, the team behind the Apple Card has created an attractive-looking product, but they didn’t reinvent the wheel when it comes to credit cards,” said Sara Rathner, credit card expert at NerdWallet. “Consumers owe it to themselves to shop around when choosing a new credit card and select one that rewards them the most where they spend most often.”

As an alternative, Rathner suggests taking a look at the Citi Double Cash rewards card, which pays 2 percent back on all purchases. Its interest rate range is not much higher than the Apple Card’s -- 16.24 percent to 26.24 percent.

Of course, as CNBC’s reporting shows, some people can qualify for the Apple Card who can’t get a card designed for people with good to excellent credit.

Apple’s rewards

Apple saves its most generous rewards for the purchase of Apple products. It will pay 3 percent cash back on any Apple transaction, including iCloud storage. It pays 2 percent on any Apple Pay transaction and 1 percent on purchases made with the physical card or virtual card number.

“Unless the bulk of your budget goes toward buying new Apple products, there are a variety of cards on the market that may be a better fit," said Rathner.

Apple says its new card has some advantages that other cards don’t have. It doesn’t charge late fees and there is no annual fee. It also waives foreign transaction fees.

The Apple Card, Apple’s branded credit card announced earlier this year, began to roll out this week. Some iPhone owners were able to apply for the car...
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Credit card interest rate cap loses support when details are known

Lenders say capping interest will reduce access to credit

Democratic presidential hopeful Sen. Bernie Sanders (I-Vt.) has gotten a lot of attention for his proposal to wipe out all student loan debt. His proposal to cap credit card interest rates is less known but just as popular.

Sanders has proposed capping the interest rate consumers pay on credit card balances at 15 percent. The average rate on credit cards is slightly higher than that, and many cardholders pay an even higher rate, making it difficult to pay off large balances.

While consumers like the idea of a cap, a new survey from CompareCards, a division of LendingTree, finds that support goes down when consumers are told how such a cap would affect credit.

Eighty-three percent of respondents support the concept of capping credit card rates at 15 percent. But the support falls to 51 percent when they learn that the cap would make it harder to qualify for a credit card.

Unsecured loans

Lenders say credit card rates are so much higher than other types of loans because credit card debt is unsecured. If a consumer defaults on the debt, the credit card company can sue, but it has little other recourse. There is no collateral securing the loan, so lenders charge everyone a higher rate to compensate for their expected losses from consumers who don’t pay.

"Americans love the idea of a credit card rate cap,” said Matt Schulz, chief industry analyst at CompareCards. “It's one of the few things that both Republicans and Democrats agree on these days, but that love isn't unconditional." 

Schulz says the survey showed a large number of cardholders would have second thoughts about an interest rate cap if it made it harder for them to get access to credit. Even cardholders with good credit are less supportive of a cap when they learn credit card companies would likely reduce rewards and incentives if a cap is imposed.

No limits on interest

Currently, there are few limits on what interest rate credit card companies can charge. The rate for cards offered to consumers with subprime credit can be more than 30 percent. 

One credit card company recently set the rate on its card at 79.9 percent. That jaw-dropping rate was found to be legal as long as the bank disclosed the terms in accordance with the Truth in Lending Act.

Even with the knowledge that it might reduce some consumers’ access to credit, an overwhelming majority -- 77 percent -- agreed there should be stronger regulations in place to protect credit card customers.

Democratic presidential hopeful Sen. Bernie Sanders (I-Vt.) has gotten a lot of attention for his proposal to wipe out all student loan debt. His proposal...
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Consumers should be cautious when looking at credit card-driven travel insurance

Lots of ifs, ands, or buts so read the fine print and ask questions before making a commitment

With dust-ups like Carnival Cruise Lines being threatened with a ban from U.S. ports and the Boeing 737 MAX grounding, consumers are starting to take a look at credit cards that come with built-in travel insurance benefits.

That sounds like a good idea in theory, “but depending on each traveler and their trip specifics, this limited coverage may be exactly what they need, or it may not provide the right benefits or coverage amounts,” Jenna Hummer, a spokesperson for Squaremouth, a travel insurance comparison site, told ConsumerAffairs.

Hummer recommends that the consumer do a little more investigating before they sign up for a new credit card for the sole purpose of a travel insurance perk. “One big concern is when travelers assume their credit card offers the trip protection they need but they do not check the coverage details in advance of their trip.”

A broken foot diving in Aruba?

Squaremouth found three situations where third-party travel insurance policies can cover costs that credit cards won’t necessarily guarantee.

At the top of Squaremouth’s warning list is the fact that most credit cards don't include medical coverage if a traveler has a medical emergency while traveling. Keyword there being “most.” If the credit card you sign up for promises that it does indeed cover travel medical benefits, check the amount. Often, the amount is limited, ranging from $2,500 to $5,000.

If medical coverage is something you want to have just in case, it might be smarter to take a look at third-party medical insurance. Those policies usually offer more comprehensive medical coverage, with benefits starting around $10,000 for Emergency Medical and $100,000 for Medical Evacuation. Third-party policies can also offer some added pluses like coverage for pre-existing conditions, dental, including chronic conditions and recent diagnoses, illnesses, or injuries.

Squaremouth’s guidance? At least $50,000 in Emergency Medical coverage and $100,000 in Medical Evacuation coverage for international travel, plus higher amounts for cruises or remote travel.

When ConsumerAffairs tested Squaremouth’s $50,000 medical coverage suggestion at travel insurer Allianz, the rate we received was $152 (for a 50-year old Alabama resident visiting Aruba over the Fourth of July) which also included trip interruption, trip cancellation, baggage loss/delay, etc.

When travel plans get off the tracks

“Many credit cards offer Trip Cancellation coverage to customers who pay for trips through their card, reimbursing travelers who are unable to take their trip as planned,” Hummer said, but with a slight “but” -- those cards usually cap coverage at a certain amount.

And, just like emergency medical, travelers who want to make sure their plane or boat gets them where they’re going, checking out third-party insurers would be smart. Typically, they cover much higher trip costs and offer reimbursements up to 100% of prepaid and non-refundable travel expenses, like airfare, hotels, and tours.

Squaremouth raises one important point about Trip Cancellation coverage: While you’d rather not have to ask the credit card company or travel insurance company for approval, unfortunately, the standard Trip Cancellation benefit typically only reimburses travelers who cancel for specific reasons, such as illness, death, severe weather, or terrorism.

The all-in-one option

Want a catch-all? While Cancel for Any Reason policies can run as much as 40 percent more, the coverage is broad and will -- at least partially -- reimburse the consumer to cancel for reasons that are not covered by the standard Trip Cancellation benefit.

With dust-ups like Carnival Cruise Lines being threatened with a ban from U.S. ports and the Boeing 737 MAX grounding, consumers are starting to take a loo...
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More consumers trying to juggle payments around a five-figure credit card balance

Consumers with high credit card debt live mostly in big cities

Consumers owe more than $1 trillion in credit card debt, but how that debt is managed can make the difference between getting ahead or living paycheck-to-paycheck.

Carrying a balance of $1,000 or less? Those payments can be manageable even with a modest income and the balance can be paid off with some sustained effort. What about $5,000? That gets a little harder.

When a credit card balance goes over $10,000, that’s when you can find yourself behind the 8 ball, depending on your income and other expenses. Assuming a 17 percent interest rate -- and the rate on many cards is higher -- the interest payments alone would be $141.66 a month, assuming you never paid anything on the principle.

Unfortunately, a growing number of consumers find themselves trying to juggle payments around a five-figure credit card balance. About one in six consumers with credit cards in the nation’s largest metro areas carry a balance of $10,000 or more, according to a new report from CompareCards.

Big spenders in Bridgeport, Conn.

According to the study Bridgeport, Conn., has the highest percentage of consumers with a $10,000 credit card balance. Researchers say most of the cities with the highest percentages of people with five-figure credit card debt are along the East Coast and West Coast. And it’s not low income households that have gotten in over their heads in plastic debt -- it's often the wealthiest cities that carry the biggest card balances.

About 23 percent of credit card holders in the Bridgeport metro area carry balances in excess of  $10,000. Nearly 2 percent of Bridgeport consumers owe more than $50,000 on their cards.

Virginia Beach is second on the list, with 20 percent of cardholders owing at least $10,000 on their cards. Washington, D.C. is third with just under 20 percent in the five-figure club. New York is fourth and Los Angeles rounds out the top five.

Less debt in the South

While the biggest borrowers tend to be on the coasts, the South has fewer credit card customers who owe $10,000 or more. In fact, five of the seven cities with the lowest percentage of cardholders with five-figure card debt were in the South.

Winston-Salem, N.C.; Greensboro, N.C.; Chattanooga; Knoxville, Tenn.; and Jackson, Miss., have high percentages of five-figure credit card debt, but none higher than 12.4 percent.

"When your credit card debt hits five figures, it's crushing, and it can consume your life. I know. I've been there," said Matt Schulz, chief industry analyst at CompareCards. "But if you're struggling with credit card debt, the worst thing you can do is nothing.”

Sometimes seeking advice from a non-profit credit counselor can be the first step toward getting out of debt. The National Foundation for Credit Counseling (NFCC) can put you in touch with a non-profit counselor in your area.

Consumers owe more than $1 trillion in credit card debt, but how that debt is managed can make the difference between getting ahead or living paycheck-to-p...
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KeyBank rolls out contactless credit card

Tapping replaces dipping and swiping

Now that consumers have gotten accustomed to inserting their embedded-chip cards into a credit card terminal instead of swiping, the next trend may be just simply tapping the card on the terminal to record a purchase.

KeyBank is launching Mastercard contactless credit and debit cards, in partnership with Mastercard and FIS. The new cards, which are now being issued to account holders, will allow consumers to make in-store purchases by just tapping the terminal screen. The transaction is encrypted to provide security.

"We know that consumers value convenience and speed, and our new contactless cards make everyday purchases quick and simple, with the confidence that transactions are secure,” said Ken Gavrity, head of KeyBank Enterprise Payments. “We're thrilled to offer our customers this easy-to-use and safe way to pay."

Built-in antenna

Contactless cards come with a different kind of chip and a near field communication (NFC) antenna, which transmits data between the card and the terminal, usually in about half the time it takes to make a purchase using cards with the EMV chips.

Sara Rathner, NerdWallet’s credit card expert, says the contactless cards are popular in Europe, but U.S. consumers and businesses have been slow to adopt them.

“KeyBank is following other major credit and debit card issuers in offering this feature,” Rathner told ConsumerAffairs. “Wells Fargo, Chase, Capital One, and American Express have all started to roll out contactless payment capabilities on their products in the past few years. As more U.S. merchants update their point-of-sale hardware to accept contactless payments, consumers will adopt this faster way to pay in greater numbers.”

While consumers may worry about the security of contactless payments, a transaction is secured by using a one-time code rather than your personal information.

“While there’s always a risk of your credit or debit card being compromised, you have recourse if you report fraudulent charges to the issuer as soon as possible,” Rathner said.

According to CreditCards.com, the U.S. adoption of the EMV chip card as standard may pave the way to wider use of contactless cards. That’s because many of the new terminals that accept chip cards also work for contactless cards.

Digital wallets also use similar technology. Once you load your payment information into a digital wallet app, you can pay for purchases by holding your smartphone next to the credit card terminal. An estimated 30 million retailers are equipped to accept digital wallet payments.

Now that consumers have gotten accustomed to inserting their embedded-chip cards into a credit card terminal instead of swiping, the next trend may be just...
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Apple launches a new, security-driven credit card

At the end of the day, it’s still a credit card and the consumer has to ask themselves if they really need another one

Not one to be left out of the all-things-for-all-people game, Apple threw a giant welcoming party on Monday for its new video streaming service -- “TV+” -- and its new credit card, “Apple Card.”

Apple’s foray into fintech is a giant step for the company, but not a new one. Its “Apple Pay” is in its fourth year as a mobile payment and digital wallet service, and according to Apple CEO Tim Cook, Apple Pay transactions soared to more than 1 billion in 2018. If you’re doing the math, that’s about 11 million per day -- thought to be more than both Square and PayPal’s mobile transactions.

The big questions

Just looking at its history, let alone the numbers, it’s tough to call Apple’s move into the credit card world a bad one. However, within hours after the company’s announcement, tech and financial sages came out of the woodwork to weigh in with their own take.

Here’s what ConsumerAffairs found:

Apple’s pitch

As far as the upsides to Apple Card, the company has three points it wants the consumer to take away:

  1. “The card lives on your iPhone, in the Wallet app. And that makes all kinds of new things possible.

  2. When you buy something using Apple Card, you get a percentage of your purchase back in Daily Cash. Not a month from now, but every day. There’s no limit to how much you can get. And it goes right onto your Apple Cash card, so you can use it just like cash.

  3. Apple Card doesn’t have any fees. No annual, cash‑advance, over-the-limit, or late fees.”

Security

For one, TechCrunch’s security editor, Zach Whittaker, gave the card a nice fistbump.

“Chief among the benefits is a range of security and privacy features, which Apple says — unlike traditional credit card providers — the company doesn’t know where a customer shopped, what they bought or how much they paid. But its one feature — a one-time unique dynamic security code — will make it nearly impossible for anyone to use the credit card to make fraudulent purchases,” Whittaker said.

Charting new waters

Apple isn’t alone in this venture; it has Mastercard on its side to help guide it through processes that it may be new to.

In an interview with Mastercard’s Jorn Lambert, EVP of digital solutions, PYMTS learned that “the embrace of the Apple Card may span both the virtual and physical offerings, and...will likely prove useful in restaurants or bars where Apple Pay is not currently a payment option. The move from plastic to ‘digital first’ to ‘digital only’ may take several years.”

But Apple Card’s joint physical and digital card offerings may be what marks a “turning point.”

Need or want?

Credit card companies -- short of MasterCard, which is Apple’s partner in this deal -- won’t be taking this move lying down. It’s a safe bet that credit card companies around the world are getting geared up with similar products that will offer consumers more choices.

“They [Apple] are really lengthening this gap that other competitors can come into,” said credit card vlogger Brian Jung. “I believe from a business standpoint, credit cards are an excellent move, but as a credit card channel, I can't recommend this credit card to a lot of my people unless you guys are in it for the flex value. The only reason I would say to get this card now, in my opinion, it really is kind of a gimmick card because it is just for the name brand.”

It’s still a credit card

Dovetailing Jung’s point-of-view, iMore’s Rene Ritchie weighed in with this slant:

“It’s still a credit card, and that means the interest is still real, and the business model is still awful. The entire credit card industry is still absolutely and unabashedly evil. Apple's doing some good stuff to mitigate it. They're keeping [interest rates] low. They're suggesting ways to pay debt off faster, including bi-weekly and weekly payments. They're showing you how much interest you'll be paying if you choose different payment options. They're offering payment plan options to help you get debt free.”

“But the entire credit card system is still absolutely and unabashedly evil. If Apple has to get into bed with it, I'd much rather see something like American Express, the classic version, where you can't carry a balance and so there's no usurious interest rates and no debt-built business. Which, frankly, should be absolutely illegal anyway.”

The verdict?

It’s really too early to tell. The features are inviting, but like we said -- other credit card companies are likely to follow suit.

On the fintech end, it’ll be no stroll in the park for Apple, either. It has Google’s Google Pay service to contend with. Facebook’s WhatsApp is said to be rolling out a payment feature, too. And while Apple has its iPhone to carry some of Apple Card’s load via Apple Pay, Android Pay and Samsung Pay have a larger footprint around the world.

Not one to be left out of the all-things-for-all-people game, Apple threw a giant welcoming party on Monday for its new video streaming service -- “TV+” --...
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Apple and Goldman Sachs may be launching a credit card

The new Mastercard would adopt some features from Apple Pay

A new credit card provided by Goldman Sachs and Apple is reportedly in the planning stages. A report in The Wall Street Journal cites people involved in the project who say it will be a Mastercard product and use elements of Apple’s digital wallet, Apple Pay.

The sources say the new card is expected to launch later in 2019 around the time Apple upgrades the iPhone. While industry analysts say the card should be a winner for both companies, Arielle O’Shea, NerdWallet personal finance expert, says it could also be good for consumers.

“If reports are true and the card ends up offering 2 percent back on all purchases, it could directly compete with other top cash back cards on the market,” she told ConsumerAffairs.com.

O’Shea says Goldman Sachs would like to engage with millennials, and she sees an Apple credit card as an effective way to bond with this next generation of bank customers.

“The bank is likely hoping to piggyback on Apple's loyal following to convert users of the credit card to long-term Marcus banking customers that turn to the bank for other financial products,” O’Shea said.

Slow to adopt Apple pay

Apple Pay is widely used around the world, but the adoption rate among retailers lags far behind credit cards. The new Apple card is expected to go head-to-head with Chase’s Sapphire Preferred and Sapphire Reserve travel cards, which are already popular with millennial consumers

“Given that millennials tend to most value experiences and travel, they may continue to be attracted to travel rewards cards despite Apple's powerful brand,” O’Shea said. “Even the biggest Apple fans shouldn't blindly turn to this card: It's important to compare annual fees and features when shopping for a new card, and make sure it fits your spending habits.”

The Journal Report makes clear that consumers who are already using Apple Pay may stand to benefit the most. Cardholders may get some special features in Apple Pay such as setting a budget and managing payments.

A new credit card provided by Goldman Sachs and Apple is reportedly in the planning stages. A report in The Wall Street Journal cites people involved in th...
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How to get the most out of a balance transfer credit card

A study shows that most consumers end up paying a balance transfer fee

Consumers struggling to pay off credit card debt would be wise to consider a balance transfer credit card in 2019, but picking the right one and using it effectively is key to making it pay off.

CompareCards, a division of LendingTree, has studied the terms and conditions of more than 160 balance transfer cards and found that there are still plenty of zero percent introductory rate options. But it’s important to read the fine print and use the cards to your full advantage.

The study found that 41 percent of consumers have applied for a balance transfer card in the past, but 40 percent of them have failed to pay off the entire balance during the zero percent introductory period. After the introductory period, the interest rate often adjusts to one that is higher than the national average.

The advantage of zero percent, of course, is the entire payment goes to pay down the balance. If you have been paying $200 a month on your old card, chances are most of that amount goes to pay interest. Paying $200 for 15 months with no interest charges will reduce a balance by $3,000.

Length of introductory period vs. balance transfer fee

The study points out the need to carefully choose a balance transfer card. The length of the zero percent introductory period is an important factor, but so is the balance transfer fee most cards assess. It is a fee based on the amount of money being transferred, and it can be hefty -- especially on large balances.

Most cards charge at least 3 percent of the transferred balance, but some charge as much as 5 percent. Even at 3 percent, transferring $10,000 results in an upfront fee of $300. The study shows that only one in six consumers who transferred a balance in the past were able to avoid the balance transfer fee.

Matt Schulz, chief industry analyst at CompareCards, says consumers can achieve some real savings with a balance transfer card as long as they understand the fees, deadlines, and other quirks that can come with this tool.

“Don’t wait, though. Credit card interest rates continue to rise and as they do it is likely these offers will get less and less attractive,” Schulz said.

Here are three options

The Chase Slate balance transfer card remains an attractive option for its combination of no transfer fee and fairly long introductory period. Consumers get 15 months of zero percent interest.

The Amex Everyday Credit Card from American Express also offers 15 months of interest-free payments with no balance transfer fee.

The Citi Simplicity Card offers 21 months at zero percent interest, but that extra six months of interest-free payments come at a hefty price. There is a balance transfer fee of either $5 or 5 percent of the transferred balance, whichever is greater.

Consumers struggling to pay off credit card debt would be wise to consider a balance transfer credit card in 2019, but picking the right one and using it e...
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Mastercard cardholder signatures now optional on cards and receipts

Fewer steps and added security are promised for the consumer

The lightning-fast pace of technology has dug deeper into consumers’ billfolds. Mastercard announced on Friday that signatures will soon be optional for all cardholders, not only on the card but on receipts, as well. Mastercard issuers will start distributing the signature panel-less cards in April, 2019.

Having the luxury of get-it-and-go without having to sign anything offers consumers the ability to save time and deal with a little less hassle at the tail end of a transaction for those who “tap-and-pay.”

Mastercard didn’t come to this change quickly. In a study of 1,200+ credit card users, only 40 percent said they had put their John Hancock on the back of their cards, and one-third of those who haven’t signed said they didn’t really see any value in doing it anyway.

“With modern, advanced forms of authentication now available, removing the requirement for signature capture at the point of sale and now signature panels on Mastercard cards is an important step in support of our digital evolution,” said Linda Kirkpatrick, executive vice president, U.S. Merchants and Acceptance, Mastercard. “Issuers, merchants and cardholders will benefit from this change as faster, safer options improve satisfaction and increase sales.”

Mastercard said the move to signature-less was also delayed until cards embedded with chips became common.

Any security risk?

In Mastercard’s research, most of the survey takers didn’t believe that leaving their signature off posed a risk, and two-thirds of the respondents said they preferred biometrics over the standard signatures, PIN numbers, and passwords when paying with their card.

“We see this as a win for all. The investments we’ve made in technology like artificial intelligence and biometrics are what’s powering this next step,” said Ajay Bhalla, president of Mastercard’s cyber and intelligence solutions.

“We believe our merchant and issuing partners everywhere will embrace the ability to deliver a simpler checkout experience while maintaining the highest levels of security.”

To give consumers an extra ounce of confidence in Mastercard’s technology move, the company says that users will remain protected against fraud via Mastercard Zero Liability coverage. However, knowing the caveats of the policy will be important to ensure that there are no gaps.

If a consumer’s card ever gets compromised, the company’s Zero Liability policy states that the card user will not be held responsible for unauthorized transactions only if:

  • The user has used reasonable care in protecting their card from loss or theft; and

  • The user promptly reports loss or theft to their financial institution.

Verifi, an ecommerce solution provider, tells ConsumerAffairs that adding three-factor authentication through biometrics will help ensure that consumers’ identities are protected. However, there are drawbacks to consider.

“The plus for biometrics is that they cannot easily be counterfeited as they are unique to the customer and they are easily accessible for the user,” a company representative said. “On the flip side, this type of authentication is less convenient for consumers and usually requires a longer time commitment for the checkout process as the merchant is requiring an additional factor of authentication.”

The lightning-fast pace of technology has dug deeper into consumers’ billfolds. Mastercard announced on Friday that signatures will soon be optional for al...
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Kroger mulls over decision to stop taking Visa credit cards

The retailer says the cost of ‘swipe fees’ has gotten out of hand

Taking a shot directly across the credit card industry’s bow, Kroger’s California subsidiary Foods Co will no longer accept Visa as a form of payment.

Effective August 14, 2018, the Visa payment option will vanish from 26 Foods Co stores and fuel centers. It’s a strong first punch from the chain in retail’s continuing weariness over the estimated $90 billion paid in swipe fees every year.

“Our customers consistently tell us that one of the most important factors in choosing Foods Co as their supermarket of choice is our low prices,” wrote Bryan Kaltenbach, president of Foods Co, in a news release.

“We realize this will be a change for some customers, but we believe this change will benefit all our customers by allowing our Foods Co stores to continue to offer the things our customers value most, including our low prices, fresh produce and services more than payment type.”

Kroger CIO Chris Hjelm said in an interview with Bloomberg News that Food Co’s parent company might follow in its footsteps.

“It’s pretty clear we need to move down this path, and if we have to expand that beyond Foods Co, we’re prepared to take that step,” Hjelm said. “When the amount retailers pay in card fees gets out of alignment, as we believe it is now, we don’t believe we have a choice but to use whatever mechanism possible to get it back in alignment.”

Foods Co customers will still have plenty of available payment options at retail locations, including Visa debit cards, SNAP, MasterCard, American Express, Discover credit cards, and, naturally, cash and checks.

The cost of doing business?

The National Retail Federation (NRF) reports that swipe fees are often cited by retailers as the second or third highest cost behind wages and health benefits. Industry profits barely get over the 2 percent mark, and the added expense of credit card costs are usually passed on to consumers in the price they pay for goods.

By the NRF’s estimate, the typical household is quietly charged with hundreds of dollars in additional expenses per year thanks to price markups retailers use to offset swipe fees.

Swipe fees average around 2 percent but can be double that for premium rewards cards. VISA and MasterCard establish the fee structure, and participating banks issuing the cards agree to charge the same.

In a statement to ConsumerAffairs, R.K. Hammer -- Chairman and CEO of the credit card advisory firm Payment Industry Consultants -- said that Kroger's decision is likely more of a challenge to Visa over its swipe fees.

"Eliminating the largest payment brand in the world may not be something that Kroger’s shoppers will at all appreciate. I suspect that the 'test' being done in one tiny network of Kroger’s affiliates is designed to get Visa’s attention, and perhaps restructure a more acceptable, lower swipe fee. Maybe it will work. Maybe it will backfire. Time will tell," he said.

Is this legal?

Kroger is not the first retailer to try and bring a credit card company to its knees. In 2013, merchants in New York challenged the constitutionality of a state law forbidding merchants from imposing a surcharge on any customer who pays with a credit card.

And, just last month, the U.S. Supreme Court ruled that American Express' credit card rules for merchants, and the fees that it charges, do not violate antitrust laws.

The grocery giant’s volley comes on the heels of Walmart's move to jettison Synchrony Financial after the two couldn't agree to terms. Amazon is also said to be in talks with JPMorgan Chase, Capital One, and other banks and financial firms about creating a “checking-account-like” product for its customers, a move that could save the company $250 million.

Despite all the pushback against the credit card industry, Visa seems undaunted. Last year, Visa reportedly offered thousands of dollars to small merchants if they agreed to stop taking cash.

The credit card company called its path a "journey to cashless,” sermonizing that “At Visa, we believe you can be everywhere you want to be, and that it should be easy to pay and be paid in more ways than ever – whether it’s a phone, card, wearable or other device.”

Taking a shot directly across the credit card industry’s bow, Kroger’s California subsidiary Foods Co will no longer accept Visa as a form of payment.E...
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Many consumers incorrectly believe carrying a credit card balance raises credit score

A survey finds many younger consumers are guilty of this belief

There are several things consumers can do to raise their credit score, but carrying a credit card balance is not one of them.

Yet, a new survey from CreditCards.com shows 22 percent of consumers have carried a balance on the mistaken belief that it would add points to their credit score. All they got was a higher interest charge.

Having a credit card account does help your credit standing. Consumers get points when a lender extends them credit.

They get even more points when they use credit wisely. Paying off the balance each month makes a consumer look responsible in the eyes of a lender. On the other hand, utilizing too much of their credit line on an ongoing basis can drag down a credit score.

New idea

The idea that carrying a balance raises a credit score may be relatively new. The survey showed the younger you are, the more likely you are to believe it.

Education also plays a role. Twenty-seven percent of cardholders without a college education have carried a balance, thinking they'll help their credit score. Only 12 percent of college graduates have done so.

"It's painful to know that so many millions of Americans are essentially attempting to pay their card issuers to improve their credit scores," said Matt Schultz, CreditCards.com's senior industry analyst. "The fact of the matter is that carrying a balance will never improve your score."

With interest rates now rising, Schultz says consumers should make every effort to pay off their credit card bills in full each month. At the very least, they should pay on time.

Pay on time

Paying bills on time is one of the most important factors affecting credit scores. Paying on time will raise the score, missing a payment or paying late will drag it down.

Yet 42 percent of the consumers in the survey admitted to being late in paying their credit card bill -- with 24 percent doing so more than once. Schultz says many of these late or missed payments might have been avoided with a little organization.

Seventy-one percent of cardholders who said they missed a payment did so because they forgot to pay it, were busy, or were out of town. In addition to damaging a credit rating, a late payment can be costly, since most credit card companies assess a late fee of $30 or more.

Unfortunately, there are other reasons consumers missed credit card payments. Among those who are habitually late in making their payment, the most often cited reason is not having the money.

There are several things consumers can do to raise their credit score, but carrying a credit card balance is not one of them.Yet, a new survey from Cre...
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PayPal launches Venmo-branded debit card

Younger, millennial customers are Venmo’s target market

Venmo has announced that it is launching a new MasterCard debit card that will allow users to make in-store and online payments with their Venmo balance.

The card, which is issued by the Bancorp Bank, is being rolled out in an effort to expand Venmo’s monetization potential and help the company reach more younger consumers.

The peer-to-peer payment app says that if a cardholder has a low balance, the card will reload using the user’s preferred funding source. Venmo says its new card will allow up to $400 in daily withdrawals. There’s a $2.50 fee to withdraw money from your Venmo account using an ATM, but no fee to make regular purchases.

Card purchases will show up on a transaction history in the app, which will give users the ability to split charges among friends. Also within the app, users can deactivate the card when it’s misplaced and then reactivate it when it’s found.

The card features a vertical design and comes in a choice of six colors -- yellow, pink, blue, green, black, and white. It has a chip for security and an icon near the chip that indicates support for contactless payments.

Venmo says users can now “get in line” for the card, adding that it’s striving to quickly move people off the waitlist and process applications. There’s no fee to sign up for it, and it should arrive within 5 to 7 days after approval. The card can be used everywhere MasterCard is accepted, but only in the United States.  

Last fall, PayPal added the ability for Venmo users to shop on the mobile web at almost everywhere PayPal is accepted. In the first quarter of this year, Venmo processed around $12 billion in payments.

Venmo has announced that it is launching a new MasterCard debit card that will allow users to make in-store and online payments with their Venmo balance....
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Visa policy change credited with speeding dispute resolution

Merchants have less time to respond when it comes to chargebacks

When Visa recently introduced changes to its Visa Claims Resolution (VCR) policy, consumers found they were able to resolve credit card charge backs faster and more efficiently, a new report says.

MyChargeBack, a company assisting consumers in reversing disputed credit card payments, has found the new VCR is making it easier for consumers to recover their money.

The policy change was introduced last year and standardized procedures and timetables. Alan Tepfer, MyChargeBack's director of client strategies and fund recovery, said Visa's streamlined processes and automation has actually reduced the number of disputed credit card charges.

"The most significant improvement in the system is that Visa is taking every possible precaution to avoid disputes before they begin and speed them up once they do," Tepfer said. "Card holders now receive more detailed monthly statements, improved attention to customer service, an extra layer of security checks, and quicker approval of chargebacks when they are entitled to them."

What's a chargeback?

A chargeback occurs when a consumer makes a credit card purchase, then determines the sale was made under deceptive or false pretenses. If the merchant refuses to offer a refund, the consumer can then go directly to the credit card company and ask that it retrieve the money from the merchant.

Tepfer says consumers are now seeing a faster response when they request a chargeback. He credits Visa's streamlining of the dispute categories from 22 to four, and reducing the time limit that merchants have to respond, from 45 days to 30 days. In the future, he says that will fall to just 20 days.

"A major benefit for consumers is that merchants are now required to disprove customer evidence up front," Tepfer said. "Since no additional information is allowed be added afterwards, the merchant now has just a single opportunity to deny the consumer's allegations before Visa reaches its decision regarding the case."

Disputing a charge

The flip side of that, of course, is that consumers also have just one opportunity to present their evidence, so it's important to have all your facts straight.

Creditcards.com advises that a consumer's first step in a dispute is to request a refund from the merchant. If the merchant is not cooperative, call the customer service number on the back of your credit card and tell the representative you want to dispute a charge.

Different issuers may have different requirements, so follow their specific instructions. Provide any records or evidence to bolster your case.

Some of the most commonly accepted reasons for a chargeback include not receiving the item you ordered, receiving a substandard product, being incorrectly billed, and being billed for something you didn't order.

When Visa recently introduced changes to its Visa Claims Resolution (VCR) policy, consumers found they were able to resolve credit card charge backs faster...
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Credit card companies will stop requiring signatures this month

Experts say the chip is the highest form of security

This month, four of the largest credit card companies -- American Express, Discover, Mastercard, and Visa -- will stop requiring a signature for purchases made with a card that uses a security chip.

Credit card companies say the computer chips embedded in cards are much more effective at preventing fraud than scribbled signatures, since merchants rarely verify a person’s signature after asking for their credit card.

Experts say consumer signatures have become virtually meaningless in the age of chip cards and contactless payment systems (like Apple Pay), so phasing them out won’t likely have much of an impact.

Transitioning away from signatures

The change is optional, meaning some shops and restaurants -- such as those without chip card compatibility, for instance -- may not adopt the change right away. However, major retailers like Walmart have already decided to stop requiring signatures on card transactions.

Walmart considers signatures “worthless as a point of sales verification” and has already stopped recording them on most transactions, according to a company spokesman. It plans to get rid of them completely in the near future. Target will eliminate signature requirements this month.

The change will likely speed up the checkout process and likely won’t even be noticed by many consumers.

According to research by Mastercard, nearly one in five Americans (17 percent) don’t remember the last time they used their signature outside of a sales receipt, while 20 percent of those 18-34 years and 14 percent of those 55 and older don’t remember.

Chip is better at preventing fraud

Mastercard said the change had been a long time coming, but the decision to do away with signature requirements was delayed until cards embedded with chips became common. A separate report by Visa found that counterfeit fraud has dropped 70 percent since chip cards were introduced in October 2015.

“Our fraud capabilities have advanced so that signatures are no longer necessary,” said Jaromir Divilek, American Express’s Executive Vice President of Global Network Business, in a statement.

The four largest credit card companies in the nation will stop requiring merchants to ask for customers’ signatures starting April 14.

This month, four of the largest credit card companies -- American Express, Discover, Mastercard, and Visa -- will stop requiring a signature for purchases...
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USAA and Discover top annual credit card ratings

An analysis shows industry customer experience declined slightly

Considering a new credit card? Temkin Group has released its 2018 credit card ratings, giving USAA and Discover the highest marks for customer experience.

Temkin reviewed 11 companies that issue credit cards and gave USAA the highest score, with a rating of 77 percent. Discover finished second with a rating of 75 percent.

As an industry, credit cards fell slightly from last year's overall ranking. Here's how the various card issuers stack up:

  1. USAA: 77 percent

  2. Discover: 75 percent

  3. Barclaycard: 73 percent

  4. Chase: 72 percent

  5. American Express: 71 percent

  6. Citigroup: 68 percent

  7. U.S. Bank: 68 percent

  8. Capital One: 67 percent

  9. Bank of America: 66 percent

  10. Wells Fargo: 64 percent

  11. HSBC: 52 percent

'Legitimate improvements'

"In 2017, many of these credit card issuers saw double-digit increases in their scores," said Bruce Temkin, managing partner of Temkin Group. "The fact they managed – for the most part – to sustain those higher scores shows that those gains were not just an anomaly, but actually represented legitimate improvements to their customer experience."

USAA serves the military community, both active duty and retired, along with family members. It offers the Preferred Cash Rewards Visa Signature card, providing 1.5 percent cash back on every purchase.

It also issues the Cashback Rewards Plus American Express card, paying 5 percent cash back on the first $3,000 in gasoline and military base purchases. It pays 2 percent cash back on your first $3,000 in supermarket purchases and 1 percent on everything else.

Temkin says USAA's customer experience score showed the most improvement over the previous year, rising four percentage points. HSBC's score fell the most year-over-year, declining by 17 points.

Considering a new credit card? Temkin Group has released its 2018 credit card ratings, giving USAA and Discover the highest marks for customer experience....
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Survey finds 39 percent of rewards cardholders are paying interest

Carrying a balance cuts into a credit card's 'rewards'

Rewards credit cards are popular with consumers. Some cards pay cash back on purchases while some provide travel perks.

But consumers who load those cards up with debt that they carry month to month will find that interest charges erode many of those rewards. A recent survey by CompareCards.com found that 39 percent of consumers with a rewards card carry a balance. The researchers say the average balance is $2,547.

The net result isn't all that rewarding. Let's assume that the average cash back on those purchases is 1.5 percent; that means a consumer would earn $38.20 in rewards. But with the average credit card interest rate north of 16 percent, the cardholder pays hefty interest on that balance each month.

In a year's time, interest charges would amount to at least $407.52. While it's true that the rewards offset at least a small portion of those charges, the consumer would have been ahead by paying the balance in full each month.

Rewards should be used for something fun, not paying interest. Ironically, the survey found that the most popular use of rewards was paying down debt.

Many consumers have more than one rewards card

The survey also found that while most people with rewards credit cards only had one or two, a quarter of those in the survey said they carried three or more rewards credit cards.

The authors point out that having a lot of rewards cards isn't necessarily a problem, as long as you don't run up debt on all of them. When you do, they don't reward you -- they cost you.

If you have a credit card with a large balance, the most rewarding credit card -- the one that saves the most money -- is a balance transfer card with zero percent interest for a lengthy introductory period.

An example

The Chase Slate Card is just one of several balance transfer cards, but it is attractive because there is no balance transfer fee if the transfer is made within 60 days of opening the account. The cardholder would pay no interest on the transferred balance for 15 months.

Using the example of a $2,547 balance at 16 percent APR, eliminating the $407.52 interest charges beats the cash back rewards most credit cards will pay. Monthly payments of $169.80 would pay off the balance in 15 months without paying any interest.

That’s not a bad reward.

Rewards credit cards are popular with consumers. Some cards pay cash back on purchases while some provide travel perks.But consumers who load those car...
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Most credit card users rack up debt to meet basic expenses

Survey reveals trend that personal finance expert calls 'disturbing'

A new survey of consumers who carry chronic balances on their credit cards shows much of their spending is on basic daily needs–making ends meet.

The research from credit card site CompareCards.com found 42 percent of consumers in the survey group reported their shortage of cash at the end of the month was a significant driver in running up debt.

Aside from gasoline and groceries, consumers reported that emergency expenses such as car repairs and medical care went on credit cards because money was not available.

Bruce McClary, a vice president at the National Foundation for Credit Counseling, which represents non-profit credit counselors, says the survey should raise some warning flags.

'Disturbing'

"What I find disturbing about this survey is that it shows consumers are rolling over more than $5,000 in balances from month to month, coupled with the fact that much of that debt–some 42 percent–is related to simply making ends meet, covering expenses that would ordinarily have been covered using cash," McClary told ConsumerAffairs.

The survey focused on reasons for credit card debt and the stress that it causes among consumers. Millennials are more likely than older consumers to feel stress, yet baby boomers are having a harder time than millennials paying off their debt.

Also disturbing, the survey found about 28 percent of consumers had two or more credit cards with a balance they can't pay off in full.

"We are clearly in a trend where more people are falling behind on their credit card payments and people are carrying larger balances," McClary said. "That combination can be very dangerous."

The survey can be subject to different interpretations. Despite a soaring stock market and improving job market, a sizable group of consumers may still be struggling financially.

At the same time, McClary says some consumers with job security may have become too comfortable with debt over the last few years and are now in over their heads. He says it's easy to do.

Long term costs

"Consumers should think about the long term costs of the things they're buying on credit, he said. "If their credit card is simply charging them the average interest rate, which right now is around 16 percent, you can be adding a lot to the cost of the item you're buying."

McClary cites the example of carrying a $1,000 balance and paying the minimum $25 a month at 16 percent APR. At that rate, he says consumers would pay an additional $400 by the time they paid off the balance.

It might be difficult, but McClary says consumers struggling with credit card debt can turn it around.

"In my 20 years of non-profit credit counseling I have always found that there is the possibility of finding room in the budget for savings," McClary said. It's just a matter of where you look and how hard you're willing to work to make those adjustments."

For help, he suggests contacting a non-profit credit counselor. While some consumers may have little or no discretionary spending that can be cut, a credit counselor can suggest tactical moves that can save money on existing financial obligations.

A new survey of consumers who carry chronic balances on their credit cards shows much of their spending is on basic daily needs–making ends meet.The re...
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Consumers piled on credit card debt in second quarter

WalletHub study projects $60 billion in new debt by the end of the year

Consumers are putting more spending on credit cards, which is fine if it's paid off in a reasonable timeframe. But when the balances are allowed to grow, that can be trouble.

The folks at personal finance site WalletHub keep track of consumers' credit card habits and report we all did a pretty good job of paying down balances during the first three months of the year. After a record-setting year debt-wise, we paid off more than $30 billion in the first quarter.

But in the second quarter, the plastic came out of our wallets again. WalletHub reports consumers charged $33 billion in new debt.

"So it’s not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get," the authors write.

$60 billion in new debt

The report projects consumers will end up adding more than $60 billion in new credit card debt by the end of the year, pushing the total well past the $1 trillion level. This is a problem for three reasons.

First, a lot of credit card purchases are for things that aren't lasting -- things like meals in restaurants or vacations. When these bills are not paid off completely and allowed to build up, you're spending today's and tomorrow's money for things you consumed yesterday.

Second, debt cuts into your monthly cash flow so that you don't have as much money in your budget. If you are making $250 minimum payments on your credit card bill, you can't spend that $250 on things you need this month and you aren't making much progress on paying off your balance.

That brings us to the third problem: the interest rate is-sky high. The average interest rate is over 16% and will go even higher if the Federal Reserve continues to hike interest rates.

Staying out of trouble

The best way not to get in trouble with your credit card is to pay off the balance in full when the bill arrives. That way you aren't adding to your total. If you don't think you can pay for everything in one month, don't charge as much.

From time to time you might take two or three months to pay for a major purchase, like a new water heater, but make sure you pay for all the smaller purchases, plus a portion of your major expenses, with your monthly payments until the balance is back at zero.

If you are already in trouble and struggling to pay off your credit card balance, apply for a balance transfer credit card with a generous introductory period in which you pay 0% interest. If you can avoid double-digit interest for a year or more, then 100% of your monthly payment goes against the balance.

Just make sure you continue to pay for all your monthly purchases -- plus a payment on the balance -- each month.

Consumers are putting more spending on credit cards, which is fine if it's paid off in a reasonable timeframe. But when the balances are allowed to grow, t...
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American Express pays redress to Spanish-language customers

The company discriminated against consumers in Puerto Rico and elsewhere, feds say

American Express is paying $96 million in redress to Spanish-speaking consumers in Puerto Rico, the U.S. Virgin Islands, and elsewhere as part of an agreement with the Consumer Financial Protection Bureau (CFPB).

The bureau said that two American Express banking subsidiaries discriminated against the Spanish-language consumers by providing them with credit and charge card terms that were inferior to those available in the 50 states.

“Consumer financial protections are not confined within the 50 states,” said CFPB Director Richard Cordray. “American Express discriminated against consumers in Puerto Rico and the U.S. territories by providing them with less-favorable financial products and services."

Cordray said that no civil penalties were being assessed because American Express discovered the problem, reported it, and "fully cooperated" with the CFPB's investigation.

Over the course of at least ten years, more than 200,000 consumers were harmed by American Express’ discriminatory practices, which included charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness, the CFPB said.

American Express has already paid approximately $95 million in consumer redress and today’s order requires it to pay at least another $1 million to fully compensate harmed consumers.

The full text of the CFPB’s consent order is available here.

American Express is paying $96 million in redress to Spanish-speaking consumers in Puerto Rico, the U.S. Virgin Islands, and elsewhere as part of an agreem...
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The difference between 'deferred-interest' and '0% interest'

Consumer agency seeks more transparency in these kinds of offers

The Consumer Financial Protection Bureau (CFPB) is urging retailers to clear up some confusion surrounding store credit card promotions.

Specifically, the agency called for more transparency when retailers make promotional offers like “no interest for 90 days,” which is essentially a “deferred interest” promotion. The consumer who makes a purchase with the store's card pays no interest if they pay off the entire balance within the set time limit, such as 90 days.

But if they fail to pay off the entire balance in the prescribed time period, they are then charged the full interest on the purchase, which can blindside consumers who didn't understand the terms of the promotion.

Letters to retailers

The CFPB has fired off letters to major retailers asking them to consider more transparent promotions, like 0% interest during the introductory period. A number of credit card issuers take that approach, not charging interest for the first 12 to 21 months the account is open, if certain conditions are met, such as making a purchase during the first 60 days.

“With its back-end pricing, deferred interest can make the potential costs to consumers more confusing and less transparent,” said CFPB Director Richard Cordray. “We encourage companies to consider more straightforward credit promotions that are less risky for consumers.”

CFPB says one major retailer recently took that step, announcing it will drop its deferred-interest promotions in favor of a promotional period with 0% interest, much like the credit card companies offer. With that approach, consumers don't get hit with unexpected interest charges if they haven't paid off the balance by the time the promotional period ends.

How to tell the difference

How can you tell a deferred-interest promotion from a 0% interest one? CFPB cautions consumers to look for the word “if.” When an offer says “No interest if paid in full in 12 months,” that's a deferred-interest pitch. Escaping interest charges is fully conditional upon paying off the balance in the allotted time.

On the other hand, 0% interest offers say something like “0% intro APR on purchases for 12 months.” That means you are only on the hook for interest charges for the amount of the unpaid balance at the end of 12 months. It's a much better deal.

The problem is that consumers often confuse the two types of offers because they sound similar. The CFPB says the number of purchases using deferred-interest promotions jumped 21% between 2010 and 2013.

For consumers making a major purchase at a retailer whose store card only offers a deferred-interest promotion, consider this option: apply for a credit card, such as the Citi Diamond Preferred, that offers a lengthy introductory period at 0% interest, and purchase with that card instead.

The Consumer Financial Protection Bureau (CFPB) is urging retailers to clear up some confusion surrounding store credit card promotions.Specifically, t...
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Credit card debt closing in on $1 trillion

Credit card balances rapidly catching up with student loans

A few years ago total student loan debt in the U.S. topped the $1 trillion mark, causing many economists to express concern. Now, a new report from the Federal Reserve shows total credit card debt is rapidly closing in on that milestone.

Overall, the Fed reported that total consumer credit increased in April at a seasonally adjusted rate of 2.5%. Of that total, revolving credit, which includes credit card debt, increased 1.8%.

In breaking down the data, personal finance site WalletHub found that consumers repaid more than $31 billion of their credit card debt in the first quarter, a big improvement over last year. Still, it was below the average first quarter pay-down since the Great Recession, and could be cause for concern.

The stepped-up pay-down came on the heels of a huge run-up in credit card bills last year, so there was a lot to pay off – and a lot still unpaid. Crunching the numbers further, the WalletHub editors project that U.S. consumers will add some $60 billion in new credit card debt in 2017, ending the year with a total balance over the $1 trillion mark.

Cautionary flag

Here's why the WalletHub editors are raising a cautionary flag: last year consumers started the year with a very weak pay-down of credit card debt. It finished the year by adding post-2007 records for new debt in the second, third, and fourth quarters.

“So it is not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get,” the editors write. “And WalletHub projects that we will end 2017 with more than $60 billion in new credit card debt. That would mean we’d owe well over $1 trillion in credit card debt overall.”

And credit card debt is very expensive debt. The average rate on credit card balances is currently at a record high of 15.83%. While this poses challenges for the economy, it also can put individual households in a bind, limiting their ability to make other purchases.

Credit card management tips

If you are struggling to pay off credit card debt, here are some tips that might make the process more manageable:

  • Make a budget and stick to it. Use any eliminated expenses to pay down credit card balances faster
  • If you can manage to save some money each month, put it toward an emergency fund. It may take a while to build it up, but it can provide a way to pay for an unexpected expense, instead of putting it on plastic.
  • If you have marginal credit, work on improving it. The best way to do that is to pay every bill on time. As your credit score rises, you may be able to qualify for a balance transfer card offering a lengthy introductory 0% interest rate period.
  • If you have more than one credit card balance, work on paying off the highest interest account first.
A few years ago total student loan debt in the U.S. topped the $1 trillion mark, causing many economists to express concern. Now, a new report from the Fed...
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What's the best credit card for overseas travel?

According to WalletHub, it's the Barclaycard Arrival Plus World Elite Mastercard

Choosing the right credit card is important. After all, some cards are more rewarding than others.

But in addition to how much cash back a card gives you, or how many miles in offers, there are other things to consider. How useful is the card in certain situations? In particular, how useful will it be to you in your specific situations?

For example, one card might be just fine if you never leave the country. But if you travel abroad every once in a while, you might consider a card that takes that into consideration.

Personal finance site WalletHub has compiled a report, comparing 69 of the most popular credit cards on the benefits they extend to international travelers. Among the things the report took into consideration are foreign transactions fees, and whether the card issuer requires notification before the cardholder leaves the U.S.

Top cards

Coming out on top is the Barclaycard Arrival Plus World Elite Mastercard. The card's very name suggests it was designed for travel, and it is.

Close behind are the USAA Visa Signature Card, the Citi Prestige Card, the Citi Thank You Premier, the BankAmericard Travel Rewards Visa Signature Card, and the Merrill Visa Signature Card.

Each of the cards have international-friendly aspects, some of which rate higher than others in the methodology. You can see the complete rankings here.

Key findings

Among the key findings, Barclaycard, USAA and Capital One are the best credit card companies for international travelers. Three of the largest card issuers do not charge a foreign transaction fee.

Two companies -- American Express and Capital One -- are the only card issuers that can automatically detect when you have left the United States, and do not require cardholders to notify them.

Finally, only three of the top 10 card companies will send you a free replacement card if yours is lost or stolen while traveling overseas. Four will send a replacement card, but not for free. Wells Fargo charges as much as $50 for a replacement card. U.S. Bank, Discover, and Capital One do not ship to international addresses, according to the report.

Choosing the right credit card is important. After all, some cards are more rewarding than others.But in addition to how much cash back a card gives yo...
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Are you using your credit card rewards?

A report finds nearly a third of cardholders are leaving money on the table

In the last decade, credit card companies have stepped up the rewards they offer to cardholders, providing everything from cash back to points toward travel discounts.

Surveys have found consumers like these rewards, and the offers often sway a decision on whether or not to apply for a card.

But once you have a card in your wallet, what do you do with the rewards? A new report by financial website Bankrate.com addressed that question and found 31% of consumers with a rewards card have never redeemed the rewards.

In fact, most of us fall into one of two categories: either we are nearly obsessive about redeeming rewards or we don't do it at all. Bankrate's Robin Saks Frankel says it's hard to figure out.

Not gaining value

"Credit card rewards don't usually gain value over time," Frankel said. "In fact, they're more likely to lose value as companies require more points or miles for the same perks. Your best move is to cash them in regularly."

Bankrate found that when consumers do take advantage of their rewards, nearly half prefer to get cash back. That's actually a very savvy choice.

It might be hard to place a quantitative value on other types of rewards, such as airline miles or hotel points. But cash is money in the bank. It can be accumulated to pay for a purchase or can be applied each month to pay a portion of the bill.

Of all the types of rewards, cash seems like the most useful. Millennials favor it over older consumers by a wide margin.

Airline miles a distant second

The Bankrate report found airline miles were a distant second, with only 17% of consumers opting for this perk. Twelve percent of consumers prefer to get their rewards in the form of gift cards.

One drawback to some of the more generous rewards cards is a sometimes hefty annual fee. With so many other rewards cards available with no fee, it's wise to carefully consider all offers before selecting a card that charges a fee.

"The credit card market is very competitive right now, so if you're not happy with a fee, you can either shop around to find another card that doesn't have one or you can see if the issuer is willing to waive the fee to keep your business," Frankel said.

In fact, as we recently reported, a study found more than 80% of cardholders were able to get an annual fee waived or reduced just by asking.

In the last decade, credit card companies have stepped up the rewards they offer to cardholders, providing everything from cash back to points toward trave...
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Will your credit card company waive your late fee?

Chances are, it will if you'll just ask

Consumers hate fees, whether they are levied by a bank or credit card company. Overdraft fees were such a major bone of contention a few years ago that Congress passed legislation to reduce them.

But fees don't always have to be paid. Sometimes, if you ask, a credit card company will waive them. And it happens a lot more than you might think.

CreditCards.com reports its latest research which shows that 87% of consumers who asked a credit card company to waive a late fee were successful. It also found that 69% of the time, if a customer asked a credit card company to lower the interest rate, the answer was "yes."

While it is true that banks and credit card companies depend more on fees than ever these days, it is also true that they are in a very competitive industry. Consumers have lots of options.

Competition works in your favor

In many cases, a credit card company would rather waive a fee once than possibly lose a customer. If a customer has a good credit score, he or she can open a new credit card account and transfer a high interest balance, often getting more than a year of 0% interest. Credit card companies know this.

That said, CreditCards.com found that only 25% of credit card customers ever asked for a waived fee or a lower interest rate. That means consumers are spending money needlessly.

There's even wiggle room when it comes to annual fees. Many rewards credit cards charge as much as $100 or more for the privilege of using their cards. But CreditCards.com found more than half of credit card customers in the U.S. were able to persuade the company to drop the fee altogether. Thirty-one percent were able to negotiate a lower fee.

More power than you realize

"People have far more power with their credit card company than they realize," said Matt Schulz, CreditCards.com's senior industry analyst. "Competition among card issuers is incredibly high these days and customer retention is a priority."

Schulz says you can't be afraid to ask for an exception because, very often, you're likely to get it.

That also holds true for credit limits. Of those customers who simply asked their credit card company to raise the card's credit limit, 89% got what they asked for.

As we have previously reported, this also works in other highly competitive services, such as insurance. If you have been with your insurance carrier for several years, chances are you can get a discount by saying you are shopping for a new policy.

If you are a senior citizen, or getting close to being one, you can get a discount almost anywhere. But, you have to ask for it. Again, surveys show most people don't.

Consumers hate fees, whether they are levied by a bank or credit card company. Overdraft fees were such a major bone of contention a few years ago that Con...
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GOP lawmakers seek to block prepaid debit card rule

Critics charge it's just another attack on the Consumer Financial Protection Bureau

In the wake of the financial crisis, millions of consumers became "unbanked," meaning they had no bank account.

Some became "unbanked" by choice, but many were either dropped by their banks or could no longer afford the fees associated with bank accounts.

These consumers often turned to prepaid debit cards as an alternative. These cards provided easy access to cash and an ability to pay bills online. But just like banks, these cards were often loaded with fees, including hefty overdraft fees.

In October, the Consumer Financial Protection Bureau (CFPB) finalized rules to increase consumer protections for prepaid card users. The rules require prepaid card issuers to provide many of the same protections to consumers that credit card companies provide. They also require issuers to give consumers clear information about fees before an account is opened.

Lawmaker claims rules hurt consumers

Now, seven Republican members of the U.S. Senate are seeking to block implementation of those rules. Sen. David Perdue (R-Ga.) is the primary sponsor of the legislation, claiming the rules are actually hurting consumers who use prepaid cards.

“If the CFPB wants to continue to impose rules and regulations that impact every American’s financial well-being, it must answer to the American people,” said Perdue, a member of the Senate Banking Committee. “As a business guy, I have experienced first-hand the impact overregulation has on growth and innovation. This rule is entirely too broad and would cripple the electronic payment marketplace which Georgians and millions of consumers across the country depend on.”

But the National Consumer Law Center (NCLC) contends that isn't the case at all. It claims the primary beneficiary of the CFPB rules rollback would be a prepaid card company called NetSpend (an Authorized Partner), whose parent company, TSYS, is based in Perdue's state.

More overdraft fees

NCLC contends a successful repeal of the rules would result in Netspend (an Authorized Partner) collecting $80 million a year in overdraft fees while blocking the expanded fraud protections.


“It is outrageous that Congress may block basic fraud protections on prepaid cards so that NetSpend (an Authorized Partner) can keep gouging struggling families with overdraft fees that have no place on prepaid cards,” said Lauren Saunders, associate director of the NCLC.

Sauders says the move is a continuation of the GOP's campaign against the CFPB, which was established under Dodd-Frank financial reform legislation. GOP lawmakers say the CFPB is not accountable as other government agencies are and has repeatedly overstepped its bounds.

But Saunders say CFPB has been an effective consumer watchdog that has returned nearly $12 billion to consumers since it was established.

In the wake of the financial crisis, millions of consumers became "unbanked," meaning they had no bank account. Some became "unbanked" by choice, b...
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Three good hotel rewards credit cards

The Starwood Preferred Guest card from American Express tops the list

Not all travel rewards credit cards are alike. In addition to the variety of perks they offer, they tend to also reward different kinds of travel.

An airline card rewards frequent flying. A gasoline card provides extra cash back when you fill up. And a hotel credit card can give you a free night's stay here and there. Sometimes, it can give you a lot more.

When it comes to hotel credit cards, the card comparison site CreditCards.com singles out the Starwood Preferred Guest card as number one in its class. It sets itself apart with its flexibility.

It not only provides hotel perks, its points can be transferred to more than 30 airline loyalty programs, usually without any loss of points. And because Starwood points are generally worth more than other card points, cardholders usually get more bang for their buck.

All about flexibility

"To me, a good rewards card is all about flexibility," says CreditCards.com senior industry analyst Matt Schulz. "While the Starwood card doesn't have the flashiest sign-up bonus in the bunch, it does give cardholders plenty of options beyond just free hotel nights."

Starwood Hotels is owned by Marriott and operates more than 1,200 hotels under 11 brands, including Westin, Sheraton, and St. Regis.

New cardholders earn 25,000 bonus points after spending $3,000 during the first three months the account is active. There's a $95 annual fee that is waived the first year.

Other options

CreditCards.com also likes the Hilton HHonors Reserve credit card from Citi. New cardholders get rewarded with two free weekend nights at a Hilton hotel after spending $2,500 in the card's first four months.

Cardholders also receive an extra weekend night certificate every year when they spend at least $10,000. Other perks include trip cancellation and interruption protection, lost baggage insurance, and other extra insurance benefits.

“The only downside is Hilton points tend to be worth significantly less than the average card rewards point,” CreditCards.com says.

A third alternative is the Club Carlson Rewards Visa Signature card. CreditCards.com is impressed with its initial sign-up bonus – 50,000 points with the first purchase and 35,000 more after spending $2,500 in the first 90 days.

Cardholders can also earn 40,000 points and a free night every year if they spend $10,000 or more. But just like the Hilton HHonors Reserve card, the points provided by the Club Carlson card tend to be valued less than the industry average.

Not all travel rewards credit cards are alike. In addition to the variety of perks they offer, they tend to also reward different kinds of travel.An ai...
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Retailer group rebels against Visa network

Claims new EMV terminals steer debit purchases to more expensive network

The nation's retailers appear to be renewing their feud with credit card companies over the fees they charge for processing credit and debit purchases.

Earlier this week, the National Retail Federation (NRF) filed a friend-of-the-court brief in support of the Justice Department motion that the full Second Circuit Court of Appeals hear its case against American Express. The government maintains American Express is still blocking retailers from suggesting customers use a different card, in violation of the law.

Now, the NRF has sent a letter to Visa, asking that it stop using new EMV terminals to steer debit card transactions to its own processing network, which NRF says is more expensive for retailers to use.

In a letter to Visa CEO Charles W. Scharf, NRF points out the Federal Reserve has said Visa's action run counter to the law.

More expensive choice

NRF complains that many credit/debit card readers installed since the card industry began implementing new EMV chip card technology present debit card users with a screen that asks them to choose between “Visa Debit” and “U.S. Debit.”

Though they don't know it, when consumers choose Visa Debit, their transaction is routed over Visa's more expensive network. Instead of a PIN, the consumer is usually required to use only a signature to approve the transaction.

On the other hand, when a consumer chooses the U.S. Debit option, NRF says the transaction goes over the retailer’s choice from about a dozen competing networks that charge merchants less but provide more protection by allowing the use of a secret, secure PIN.

“Visa charges more and offers less security while the competition charges less and does a better job of keeping consumers’ debit cards safe,” NRF Senior Vice President and General Counsel Mallory Duncan wrote.

Retailers say they should choose

Duncan says retailers should be allowed to choose the processor that provides the best value and offers their customers the best protection. He says that's what the law requires.

Why should consumers care? NRF says when costs rise for retailers, those costs get passed along to consumers in the form of higher prices.

NRF claims Visa is steering transactions toward the Visa network, and that the higher fees charged by Visa must be built into the cost of merchandise, ultimately contributing to higher prices paid by consumers.

The organization says the Fed ruled in early November that Visa's actions violate a 2010 debit card reform law that says retailers must be allowed to choose between at least two unaffiliated networks to process debit transactions.

The nation's retailers appear to be renewing their feud with credit card companies over the fees they charge for processing credit and debit purchases....
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Consumers battered by financial crisis getting their credit back

It's been seven years since many of these people lost their homes to foreclosure

It takes seven years for a foreclosure, short sale, or bankruptcy to come off a consumer's credit report.

Since the height of the foreclosure tsunami was 2009, a lot of former homeowners, whose credit has been practically non-existent since then, are getting back on their financial feet.

According to an analysis by Experian, one of the three credit agencies, 2.5 million consumers will see their credit standing improve sharply between last June and next June. Of these, the credit agency says 68% are scoring at near-prime or higher credit levels.

Back in the credit market

It means that millions of consumers, largely shut out of the credit market since 2009, will be able to take out loans again. Those who want to buy a home again will most likely qualify for a mortgage, putting even more pressure on extremely tight inventory levels around the country.

Experian also reports that formerly foreclosed or bankrupt borrowers who have already shed those events from the credit reports have returned to the credit markets in large numbers and, by and large, are showing good financial behavior.

The Experian analysis shows 29% of consumers who sold short between 2007 and 2010 have opened a new mortgage, with a delinquency rate that is a full percentage point below the national average.

Win-win

"With millions of borrowers potentially coming back into the housing market, the trends that we're seeing are promising for both the mortgage seeker and the lender," said Michele Raneri, vice president of analytics and new business development at Experian.

Raneri predicts that in the years ahead, these so-called “boomerang borrowers” will be a critical segment of the real-estate market, and perhaps could propel prices still higher.

The Experian report shows that homeowners who had a foreclosure in the past but now have qualified for a mortgage have an average credit score of 680, more than 20% higher than their score at the time of foreclosure.

The record is even better for consumers who sold short. Those who have now qualified for a new mortgage have an average credit score of 706, up 16.5% from when they were forced to sell.

It takes seven years for a foreclosure, short sale, or bankruptcy to come off a consumer's credit report.Since the height of the foreclosure tsunami wa...
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Will mobile wallets make headway this holiday season?

Fin-Tech executive says they can increase consumer security

What will you use to make your holiday purchases this year? Consumers concerned about compromised credit or debt card information may choose cash.

A survey by TransUnion shows consumers are probably going to use a mix of payments to buy things this year, with 74% saying they plan to pay for at least some of their purchases with cash.

But 80% of parents with children under 18 said they will be using credit cards, with 89% of dads and 73% of moms saying they expect to pay off all their holiday spending within three months.

Vincent Alimi, Vice-President, Product & Innovation at Mobeewave, a Montreal-based Fin-Tech firm, says consumers shouldn't overlook using a mobile wallet when they shop. He says there are five good reasons to pay with a mobile wallet, including security. In terms of fraud reduction, he says mobile wallets use a surrogate card number.

Real-time transaction alerts

“Unlike when you use a credit card, details such as your PIN, name or consumer behavior are not shared when you use a mobile wallet,” Alimi said in an email to ConsumerAffairs. “They also include practical features, such as fingerprint verification to unlock the payment functionality, and real-time transaction alerts.”

But wait, don't credit cards offer generous rewards? They do, but Alimi says consumers can still reap rewards by adding retailer loyalty and reward cards to a mobile wallet. In fact, you can use your rewards credit card with a mobile wallet.

Sometimes called “contactless” payment systems, a mobile wallet is a way to carry your card information in a secure, digital form on your smartphone. Instead of using your actual plastic card to make purchases, you can pay with your smartphone, tablet, or smartwatch, simply by holding it close to an equipped point-of-sale terminal.

Faster check-out

Alimi also says mobile wallets get you checked out faster, while the transition to EMV “chip” cards has slowed things down. He says paying with a mobile wallet makes it easier to shop online and also harness the various complementary features on your smartphone.

“Not only can you keep track of your transaction history, you can also ensure you never have to deal with the embarrassment of having your maxed out credit or debit card declined at the checkout,” he said.

Apple Pay may be the most widely used mobile payment system, allowing consumers to pay with their iPhones in about three million locations in the U.S. Samsung has a competing mobile wallet for its Android phones.

What will you use to make your holiday purchases this year? Consumers concerned about compromised credit or debt card information may choose cash.A sur...
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Consumers rejected for credit cards take it personally

But knowing why you were rejected can help you get accepted next time

Lenders tend to be cold and objective when they decide whether or not to grant a consumer's credit card application. Meet the requirements and you get a card. Fall short, and you don't.

Consumers don't look at it quite the same way. A new survey from NerdWallet shows we tend to take it personally when a bank says no. The survey found 70% of consumers would stop doing business with a bank that turned down their credit card application.

Rejection of any kind usually is hard to take. But the survey suggests there's an additional ingredient when it comes to financial matters. If a bank declines to extend you credit, you believe it to be a reflection on your financial standing.

It's embarrassing

About half of consumers said a credit card rejection would be embarrassing and they would not tell family or friends about it. About a third believe people who are rejected for a loan or credit card are irresponsible with money, which is far from the case.

If you are rejected for a credit card, the lender is required by law to tell you why. Knowing the reason may not only make you feel better, it can be useful information. In many cases, knowing the reason why you were turned down can guide you to a lender who would be happy to open an account for you.

In many cases, consumers apply for credit cards that are designed for consumers with higher credit scores. That's important, because these cards usually have lower interest rates and more generous rewards. That's because the lender considers these high credit score consumers a better risk.

However, the very same lender may have other credit cards that don't have those stringent requirements. Your chances of success may be much better if you apply for a card within your credit score range.

A number of reasons for rejection

As NerdWallet points out, consumers get rejected for a number of reasons, not just because they have bad credit. They might have too much outstanding debt, a thin credit history, or insufficient income.

That's why before applying for a card, it's a good idea to obtain your credit score and review your credit report, to make sure the information in it is accurate. Once you know your score, look for a card targeted to other consumers in your range.

Many of the credit card comparison websites list credit cards available for those with “excellent,” “good,” “fair,” and even “bad” credit. So, with a 640 credit score you probably are not going to qualify for the Capital One Venture Rewards Card, which is heavily advertised on TV. But you probably will qualify for the Credit One Bank Unsecured Visa.

It doesn't have the advantages of cards designed for excellent credit, but it will give you the chance to show you can use a credit card responsibly and raise your credit score so that you'll soon have more credit options and fewer rejections.

Lenders tend to be cold and objective when they decide whether or not to grant a consumer's credit card application. Meet the requirements and you get a ca...
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Three highly rated airline credit cards

Consumers who travel a lot might benefit from one of these

Consumers should be aware by now that there are big advantages to using a rewards credit card, and in particular, a card that rewards certain things.

For example, most consumers are probably better off with a cash-back credit card, which pays as much as 2% on all purchases or as much as 5% on certain categories.

But frequent air travelers might profit more from using a card that rewards in miles. We've identified three such cards that are worth a look.

Capital One VentureOne Reward

Consumers who carry the Capital One VentureOne Reward Card earn an unlimited 1.25 miles on every purchase, making it easy to rack up miles. As an added bonus, there is no annual fee – a rarity in this class of credit card.

When you earn 100 miles, you've earned $1 dollar in travel rewards. But the rewards come a lot faster for new cardholders, who get 20,000 bonus miles if they make $1,000 in purchases within the first three months of card activation.

You can redeem your miles as a statement credit. As added perks, the rewards don't expire and you can carry a balance the first year without paying any interest.

Barclaycard Arrival Plus World Elite MasterCard's Rewards

Another good choice for frequent travelers is the Barclaycard Arrival Plus World Elite MasterCard's Rewards Card. You earn two times the miles on all purchases.

Right off the bat, new cardholders get 50,000 bonus miles if they spend $3,000 in the first 90 days of card activation. That adds up to a $500 travel statement credit.

The miles don't expire and you get 5% miles back every time you redeem, to use toward the next redemption. There's an $89 annual fee, but it's waived the first year. The card also has a 0% introductory balance transfer rate for 12 months if the transfer is made within the first 45 days.

Gold Delta SkyMiles Credit Card from American Express

For consumers who find themselves flying Delta most of the time, the Gold Delta SkyMiles Credit Card from American Express might be a good fit. It pays two miles for every dollar spent on purchases made directly with Delta, and a mile for every dollar spent on all other eligible purchases.

New card members earn 30,000 bonus miles if they make $1,000 in purchases within the first three months of card activation and earn an extra $50 statement credit just by making a Delta purchase during that time.

There are also some air travel-specific perks as well. Card members can check their first bag for free on every Delta flight, saving $100 on a round-trip. They also enjoy jumping to the head of the line with priority boarding.

There's a $95 annual fee, but it's waived the first year.

Consumers should be aware by now that there are big advantages to using a rewards credit card, and in particular, a card that rewards certain things.Fo...
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Why you should do your holiday shopping with a credit card

The rewards can be significant

The holiday shopping season is fast approaching and surveys have shown that many consumers have been making purchases since Labor Day.

So now might be a good time to point out that if you plan to do a lot of end-of-the-year spending, doing it with a rewards credit card might help you save as much money as hitting the stores early on Black Friday.

In recent years personal finance experts have emphasized rewards credit cards as an easy way to save money. Like any credit card, a rewards card needs to be used responsibly, but if utilized to make purchases you would ordinarily make with a debit card or cash, credit card purchases can put money in your pocket.

How much varies from card to card, but the folks at Discover have rolled out some special holiday promotions, upping the rewards consumers can earn during the holidays, using the Discover it Card or Discover it for Students. Both cards normally pay 1% on all purchases but also have special quarterly promotions.

5% bonus

For example, for the fourth quarter Discover will pay a 5% cashback bonus on purchases at Amazon.com, department stores, and Sam's Club – places where consumers probably do the lion's share of their shopping. The 5% bonus applies to a total purchase amount of $1,500. Above that, any additional spending earns the regular 1% cash back.

“We try to make sure that we don't make our program complicated,” Maureen Powers, vice-president of rewards for Discover, told ConsumerAffairs. “We don't want customers to have to start planning how they are going to earn their rewards, or having to do math.”

Added bonus for new customers

There's an even better payoff for consumers who just recently obtained a Discover it Card, or plan to get one soon.

“Our card members can earn Cash Back Match,” Powers said. “They are earning all of these rewards, and then at the end of the first 12 months that they have the card, we will double all of those rewards.”

How much can that add up to? Let's assume you are a new cardholder who ends up spending $1,750 at Amazon, a number of department stores, and Sam's Club. You earn $75 on the first $1,500 and $2.50 on the difference between $1,500 and $1,750. Then, because you qualify for Cash Back Match, the amount is doubled for a total of $155 in cash rewards.

Powers also says Discover offers price protection, in case you find the item you purchase later at a lower price.

“What consumers will do is send in the receipt and show where they found a better price, and Discover will refund the difference up to $500, if you do it within 90 days of the purchase,” she said.

While doing your holiday shopping with cash may keep you from overspending, it doesn't put money in your pocket. But it bears repeating, using a rewards credit card for all your holiday purchases will only put you ahead if you exercise discipline and don't over-spend.

The holiday shopping season is fast approaching and surveys have shown that many consumers have been making purchases since Labor Day.So now might be a...
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Prepaid cards get new federal protections

Consumer Financial Protection Bureau issues new rule to cover all prepaid cards

The Consumer Financial Protection Bureau (CFPB)  has issued a new rule covering prepaid debit cards, providing a series of new consumer protections. The rule goes into effect October 1, 2017.

Consumers often use these cards instead of bank accounts. Money can be directly loaded on the cards, which can be used to make purchases or pay bills. The problem for consumers has been the fees associated with the cards and the lack of transparency for some of them.

That's because not all of these cards are the same. The cards have their distinct set of features, functions, and fees. Right now, it can be hard to compare cards because each card displays fee information differently.

The CFPB says the new rule will require clear, upfront information about fees so consumers will more easily shop for the best deal.

Reins in overdraft fees

The rule also tightly regulates overdraft fees connected to prepaid cards, which Nick Bourke, director of consumer finance at the Pew Charitable Trusts, is one of the most important features.

“The CFPB’s rule on prepaid cards is a big win for consumers,” Bourke said in an email to ConsumerAffairs. “First and foremost, it keeps the cards free from overdraft penalties, which aligns with consumers’ preferences.”

Bourke points to research that shows many consumers turn to prepaid cards to control spending and to avoid overdraft fees.

“Moving forward, we strongly encourage the bureau to rein in these harmful fees for checking accounts, the most widely used financial product in the U.S.,” he said.

Growing use

The use of prepaid cards has rapidly grown since the financial crisis, when many consumers joined the “unbanked” population. But Pew researchers say the cards are also widely used by people who also have bank accounts.

Use of prepaid cards rose more than 50% from 2012 to 2014, driven primarily by increased adoption among consumers with bank accounts, with approximately 23 million U.S. adults regularly using prepaid cards, according to Pew data.

Pew found that 72% of unbanked consumers and 45% of those with bank accounts say they use prepaid cards to avoid overdraft fees. A huge majority – 86% – prefer to have a transaction declined for insufficient funds than pay a $35 overdraft fee.

The rule also provides new features to make sure prepaid cards are safer to use at retail point-of-purchase locations and online. Currently, if an unauthorized person accesses a prepaid cardholder's account, the level of protection depends on the issuer. Under the new rule, there will be universal protections for all cards in case they are lost or stolen.

The Consumer Financial Protection Bureau (CFPB)  has issued a new rule covering prepaid debit cards, providing a series of new consumer protections. The ru...
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Should you cancel your fraudulent Wells Fargo credit card?

Doing so will probably lower your credit score, at least for a while

What if you are one of the two million Wells Fargo customers who recently discovered that the bank opened a fraudulent bank or credit card account in your name?

If so, you're probably angry, since you didn't ask for the card. So you'll show them – you'll close the account.

But not so fast. Closing a credit card account, even one opened in your name without your permission, can negatively impact your credit score. So you might not want to act until you are able to figure out what the damage will be.

Diane Moogalian, Vice President, Customer Operations at Equifax, one of the three main credit agencies, says closing a credit card account that has no balance will reduce the amount of credit at your disposal. Often, she says, that can be a mark against you.

“Lenders and creditors want to see that a consumer is able to make a financial commitment and honor it – over time," Moogalian told ConsumerAffairs. “In other words, that ability to show responsibility can take time, and sometimes keeping an account open can be a good thing.”

But if you don't want the credit card, you will probably suffer less of a hit by closing it if the card has a low credit limit. Chances are, most of the fraudulent accounts have low credit limits. By closing it, you aren't reducing your credit availability that much.

Is it costing you money?

Moogalian says a consumer may also want to consider closing an account that has no balance if that account is costing money. The trade off between spending unnecessary money and having your credit score go down temporarily should go in favor of not spending money needlessly.

How much will closing a credit card account affect your credit score? It depends on how much credit you have, how much you've used, and how good your credit is.

If you have a total credit limit of $20,000 on all your cards but only have balances totaling $4,000, you have a low credit utilization rate and closing an account that reduces your limit by only $1,000 or so won't make a lot of difference, especially if you already have a pretty good credit score.

And if you do have a good credit score, the hit you take for closing your Wells Fargo account should be fairly small and short-lived. By continuing to pay all your bills on time and not opening new credit lines for a while, your score should quickly recover.

What if you are one of the two million Wells Fargo customers who recently discovered that the bank opened a fraudulent bank or credit card account in your...
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When it comes to credit card rewards, consumers like cash

Consumers have lots of good choices

Consumers are learning that it pays to be choosy about which credit card they use. Many now offer some type of reward or incentive, so instead of using a card that pays nothing, it's clear consumers should choose a card that offers some type of reward.

But what kind of reward? While there are many choices, a survey by Ally Bank shows most consumers prefer cold, hard cash.

Fifty-eight percent of the consumers in the survey chose cash back instead of miles, store promotions, and low introductory rates.

Ally Bank, of course, recently introduced a cash back card which has gotten some pretty good reviews. However, there are other cash back cards that offer attractive benefits as well.

First, let's take a look at the Ally CashBack Credit Card. The card, introduced in June, will provide a 2% cash back reward when the card is used for eligible gasoline and grocery purchases. It provides 1% cash back on all other purchases.

Having a bank account can add to rewards

The Ally credit card also pays an additional 10% bonus if earned cash back rewards are deposited into an Ally Bank non-IRA savings, interest checking, or money market account. That makes it similar to another attractive cash back card, the BankAmericard Cash Rewards Card.

The BankAmericard product pays 3% on gasoline purchases, 2% on groceries, and 1% on everything else, on spending of $2,500 per quarter. It too provides a 10% bonus when you redeem rewards into a Bank of America account.

While the BankAmericard caps rewards and the Ally card doesn't, the BankAmericard has the added benefit of a one-time cash bonus of $100 when you spend $500 in the first 90 days of account activation.

Meanwhile, the Chase Freedom Card is among the most generous of cash back credit cards. It pays 5% on up to $1,500 of purchases per quarter, with the categories eligible for the rewards changing on a quarterly basis. Still, if you managed to max out the purchases each quarter, you could earn $75 cash back.

Don't want to keep up with rotating categories? There are plenty of cash back cards that pay 1% to 1.5% on everything, with no caps.

When choosing a cash back rewards card, the important thing is to choose one with no annual fee. Otherwise, the rewards won't be quite so rewarding.

Consumers are learning that it pays to be choosy about which credit card they use. Many now offer some type of reward or incentive, so instead of using a c...
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Whose credit card application is the easiest to understand?

A study finds banks are now doing a better job at transparency

When you shop for a new credit card, there may be several deciding factors. You may want a card with specific types of rewards, or you may want the lowest interest rate.

But how will you know which card to select if the applications aren't clear and transparent, presenting the positives and negatives in plain language?

That's why personal finance site WalletHub compiles an annual study of the credit cards with the clearest applications. The study evaluated online credit card listings from the websites of the 10 largest banks and 10 biggest credit unions. The sites were judged on how clearly they spelled out important information.

Can you understand the rewards program?

For example, the applications were judged on how clearly they presented information about rewards and how a consumer could redeem them. It looked at how prominently information about an annual fee was displayed.

Could the average consumer, the authors asked, figure out the annual cost of financing new purchases using an introductory rate? How was information about balance transfers presented?

On the plus side, the study gave high marks to Capital One, U.S. Bank, Bank of America, State Employees Credit Union, Boeing Employees Credit Union, Pentagon Federal Credit Union, and Navy Federal Credit Union.

On the other hand, the authors said Wells Fargo and San Diego County Credit Union finish at the bottom when it comes to clean, transparent credit apps.

Most improved application

Navy Federal Credit Union took the honors for most improved application. The study found Navy Federal's online credit card listings improved 18 points over last year. It credits the improvement to new-purchase and balance-transfer financing clarity.

While credit unions have the reputation for being more consumer friendly than banks, the WalletHub study found banks stepped up their game in 2016 and are now about as transparent with their credit card applications as credit unions.

The area where financial institutions are most vague tends to be about balance transfer fees and how cardholders go about using rewards.

It's important for consumers to remember that most cards that offer a 0% introductory rate for balance transfers usually charge a 3% fee to transfer a balance. When considering one of these cards, consumers should look for that information, and if the financial institution has a clear application, that fee should be readily apparent.

The good news? WalletHub says banks and credit unions continue to improve their applications. It says transparency is now at its highest point since the annual study began in 2010.

When you shop for a new credit card, there may be several deciding factors. You may want a card with specific types of rewards, or you may want the lowest...
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RushCard introduces new mobile app

Cardholders can easily freeze their account if the card is lost or stolen

RushCard, a popular prepaid money card, is introducing a new. free mobile app it says will provide new safety features, while enhancing the card's functionality.

It is available on both the Android and iOS platforms.

One of the safety features allows the user to freeze activity if the card is lost or stolen. By engaging “Pause Protection,” a user can temporarily stop purchases on the card.

Another feature is “One Touch Access,” which allows cardholders to access their accounts on a mobile device by using a fingerprint instead of a password or PIN.

The app also includes a pharmacy benefit e-card, which gives cardholders discounts on prescription drugs at Walmart.

"We are dedicated to providing safe, simple and affordable products to our customers to help them achieve their personal and financial goals," said Ron Hynes, CEO of RushCard.

Popular alternative to bank accounts

Founded in 2003 by hip-hop impresario Russell Simmons, RushCard is billed as a solution to the millions of "unbanked" consumers, those who for one reason or another do not have a traditional bank account with checking and debit card privileges.

The card is an inexpensive service that allows consumers to have their paychecks and benefits payments direct-deposited to their cards, allowing them to make purchases immediately and get cash from ATMs. It has generally recorded high satisfaction scores from consumers. Simmons says the new app is simply a way to make the card easier to use.

"From the early days of prepaid, RushCard helped shape this industry and continues to provide innovative products that are easy to use, convenient to access and help provide financial opportunity to our customers," he said.

RushCard customers can get directions for downloading the “Make Moves” app here.

RushCard, a popular prepaid money card, is introducing a new. free mobile app it says will provide new safety features, while enhancing the card's function...
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Consumers encountering fewer credit card fees

However, choosing the wrong prepaid card can be costly

Oil prices aren't the only thing going down. A new report from CreditCards.com found fewer credit cards are charging foreign transaction fees – a significant cost savings for consumers who travel outside the U.S.

According to the report, 77 credit cards levied the fee last year but this year only 61 do.

When you add up all the fees charged by the 100 credit cards, the report says the total number is 593, down from 613 a year ago.

"Many card issuers are eliminating foreign transaction fees in an effort to win business from high-spending international travelers," said Matt Schulz, CreditCards.com's senior industry analyst.

$3 for every $100 spent

The typical foreign transaction fee is 3%, adding $3 to every $100 charge. Schultz says getting rid of the fee is a smart way for credit card companies to become the go-to card in travelers' wallets.

The report also looked at the credit cards with the most and fewest potential fees. In the most category, First Premier Bank Credit Card and First Premier Bank Secured MasterCard top the list at 12 each.

Close behind are Club Carlson Business Rewards Visa and Credit One Visa Platinum with 11 each.

On the other hand, Pentagon Federal Credit Union Promise Visa Card has no fees and seven cards have only two. The report says the average credit card has six different fees, with the late fee and cash advance fee being the most common.

"The trend toward fewer credit card fees is a great thing for consumers," Schulz said. "It's such a crazy-competitive time in the credit card business and lower fees are just another way that Americans are reaping the benefits."

Prepaid card fees

Prepaid cards, while technically not credit cards, also carry a lot of fees. A new report by CardHub.com finds selecting the wrong card can cost consumers more than $300 a year.

Among the report's findings, prepaid cards offered by big national banks tend to be 82% less expensive to use than those issued by smaller banks. The report also found that nearly half of prepaid cards lack the necessary features to make them suitable for the average consumer.

“Perhaps surprisingly, prepaid cards charge far fewer fees than their first cousin, checking accounts,” the authors write.

The report found the best prepaid card to use as an alternative to a checking account is American Express Serve, followed by Bluebird and the Green Dot Gold Card.

Oil prices aren't the only thing going down. A new report from CreditCards.com found fewer credit cards are charging foreign transaction fees – a significa...
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Retailers blame credit card companies for delay in chip roll-out

Claim industry has been too slow to certify the new card readers

Why are there so few chip-enabled card readers at retailers around the country? It depends on who you ask. The nation's retailers say they've done their jobs – it's the credit card companies that have dropped the ball.

The National Retail Federation (NRF) points to a survey that found 48% of retailers have implemented the new EMV chip card system, or are expected to within weeks. A total of 86% said they expected to be EMV compliant by the end of 2016.

But the NRF said the survey also found that 57% of the retailers who had not yet implemented the new system had installed the card readers, but were waiting for certification by the credit card industry. About 60% said they had been waiting for six months or longer.

NRF says those numbers are in sharp contract to the statistics issued by the banking industry, which it says has tried to shift blame for the slow start to retailers. The survey, NRF says, found retailers are eager to begin using the chip card system since it protects them from liability connected to fraud.

Certification process

The certification process for the chip card system checks out a number of important functions to ensure the new technology is working properly. It can be a complicated process because the system must check out across multiple card platforms, including MasterCard, Visa, American Express, and Discover.

The size of the retailer can also complicate things. Big retailers with more point of sale positions take a lot more time.

Hundreds of tests may be required and the process might take two weeks or eight months. The cost to the retailer might be as little as a few hundred dollars or could run into the tens of thousands of dollars.

Visa says it's helping

Visa, meanwhile, recently announced steps it said could help speed up the implementation of the chip card technology. It said it has streamlined testing requirements, made the certification process simpler, and made commitments to improve the technology. It also said it is changing its policy to help limit exposure to counterfeit fraud liability for merchants who are not yet chip-ready.

While retailers might feel frustration at the pace, Visa maintains that progress has been “significant,” with over 300 million chip cards in the hands of consumers and 1.2 million retail locations now equipped to accept them.

But the NRF said it is disappointed the credit card industry has not provided enough personnel to make sure certification happens in a timely manner. In the meantime, it says consumers are confused as to whether they continue to swipe their cards or begin “dipping.”

Why are there so few chip-enabled card readers at retailers around the country? It depends on who you ask. The nation's retailers say they've done their jo...
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Five questions (and answers) about your credit report

Consumers should have a basic understanding of how credit reports work

Surveys have shown that there are significant knowledge gaps among consumers when it comes to credit reports. Yet these documents are very important to consumers when they want to finance a home or car, or even get insurance.

So it is very important to have at least a basic understanding of credit reports and how they work. With information provided by the Federal Reserve, here are five key questions consumers might have.

1. Where does the information in the report come from?

Your credit history is compiled into an ongoing report by three credit reporting agencies – Experian, Equifax, and TransUnion. These companies get the information from other companies that have extended you credit.

That includes the obvious, like mortgage lenders and credit card companies. But it can also include your cell phone provider, the utility company, and many other companies that send you a monthly bill. The report lets these companies know if you pay your bills on time.

2. Who gets to see my credit report?

The information in your credit report is highly confidential, but there are a number of entities that, with your permission, may get access to it. Anyone extending you credit may see it, as can a prospective employer.

Insurance companies you are doing business with can also review your credit report, and so can some government agencies reviewing your financial status for benefits.

3. Can anything be done if there is incorrect information in my report?

Yes. If you are denied credit because of something in your credit report, you have a right to know what it is. If the information is incorrect, you may appeal to have it removed.

If you appeal within 60 days you can get a free copy of your credit report – in addition to the free report you can get annually – and review the information. If you find information you believe is erroneous, follow these steps to have it removed.

4. If the negative information is legitimate, how long does it remain?

In most cases, negative credit information will remain in your credit report for seven years. A personal bankruptcy filing will stay in your report for 10 years.

If you have been sued or there is an unpaid judgment against you, it can remain for either seven years or until the statute of limitations runs out, whichever is longer. If you have been convicted of a crime, that fact may stay on your credit report indefinitely.

5. Can I see a copy of my credit report?

Absolutely. The law allows you to obtain a copy from each of the three credit reporting agencies once a year, at no charge. This only includes the report, not your credit score – that costs extra.

To receive a free copy of your credit report, go to www.annualcreditreport.com, or call (877) 322-8228.

Surveys have shown that there are significant knowledge gaps among consumers when it comes to credit reports. Yet these documents are very important to con...
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Which credit cards provide the best travel insurance protection?

According to a study, the Chase Sapphine Preferred comes out on top

There are many things that can derail a vacation, leading to some hefty expense for those with non-refundable reservations. That's why many consumers choose to purchase travel insurance.

But a new report from CardHub, a credit card comparison site, finds a handful of credit cards provide pretty good insurance coverage, if used to purchase the trip. They don't cover all contingencies, but some you might not expect.

The CardHub study found that travel insurance perks by credit card companies can reimburse customers when a trip gets cancelled, when a connecting flight is missed, when damage is lost or delayed, and even in the event of death.

The coverage varies from card to card, so the study compared 57 personal and 23 business credit cards to evaluate the coverage.

Nearly 93% of the cards in the study offer travel accident insurance, providing an average of $352,000 in coverage. Chase Sapphire Preferred was judged to be the best, providing $500,000 in coverage.

43% insure lost luggage

Almost 43% of cards will compensate travelers when luggage is lost, with an average of $2,500 included in the coverage. The Sapphire Preferred and Citi Prestige Card tied for best, with $3,000 in coverage. They both also pay up to $500 per trip for delayed bags.

The Chase Sapphire Preferred also wins in the category of best trip delay/cancellation coverage, paying $10,000 per trip. That beats the card average of $3,300, offered by 33% of cards in the study.

Not surprisingly, the Chase Sapphire Preferred also wins in the category of best overall card for travel insurance.

Among business credit cards, the Chase Ink Plus swept all categories as the best card to protect business trips. It achieved an overall score of 93%, compared to its nearest competitor, the Chase Ink Cash, at 84%.

Consumers using these cards do not have to register or sign up to receive the coverage. They simply have to contact their credit card company if they want to file a claim.

There are many things that can derail a vacation, leading to some hefty expense for those with non-refundable reservations. That's why many consumers choos...
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Credit scores: what you don't know could hurt you

Difference in car insurance rate just one area where a bad score can hurt

First, the good news. Most consumers understand the basics of credit scores and how they work.

An annual survey by the Consumer Federation of America (CFA) shows about 80% of Americans know that credit scores are important and are a major factor in whether people get a mortgage or a credit card.

But the survey also reveals some significant knowledge gaps. For one thing, consumers very often underestimate the cost of having a low credit score. Just 22% of respondents knew that a low score could increase the cost of a 60 month auto loan of $20,000 by up to $5,000.

More than half were unaware that credit scores are also used by businesses and organizations that are not in the business of extending credit. Businesses like insurance companies.

Effect on car insurance rates

In an independent study, the personal finance site WalletHub found that consumers with absolutely no credit rating paid 53% more on average for car insurance than someone with an excellent credit score. In some states the rate spread was as high as 122%.

The study found that Farmers Insurance relies on credit scores the most in setting auto insurance rates. Geico relies the least on credit data.

WalletHub said it obtained quotes for two hypothetical consumers who were identical, expect for credit score. One had no credit score while the other possessed an excellent credit profile.

While it is important for a consumer with a poor credit history to know which companies place the most importance on credit scores, WalletHub said that information is more accessible from some companies more than others. It found Travelers to be the most transparent about its use of credit information when setting rates. It said State Farm is the least transparent.

Other uses of credit scores

In addition to insurance rates, CFA says credit scores are often used by utility companies to determine whether a new customer is required to place a deposit for service. Cellphone providers and landlords also consider credit information when evaluating a potential customer or tenant.

Here are some other key facts about credit scores:

  • Credit scores are negatively affected by missed or late payments
  • Carrying a balance that approaches your credit card's limit will reduce your credit score
  • Cancelling a credit card will lower your credit score
  • Paying every bill on time, every time is the fastest way to raise a credit score
  • Paying off your credit card balance each month helps raise your credit score

“The good news is that consumers understand the basics of credit scores, such as the importance of making loan payments on time,” said Stephen Brobeck, CFA’s executive director. “The bad news is that this knowledge is limited and, each year, can cost them hundreds of dollars in fees on services and additional interest on consumer loans.”  

First, the good news. Most consumers understand the basics of credit scores and how they work.An annual survey by the Consumer Federation of America (C...
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Police can now strip the money right off your card

Civil asset forfeiture takes a big leap forward, thanks to technology

Carrying a lot of cash is dangerous. Criminals may take it and so may the cops, who increasingly view having a lot of cash as evidence of wrongdoing. But now, police have added a new twist -- they've started using a scanner that lets them swipe the money right off prepaid cards.  

The device is called an ERAD -- Electronic Recovery and Access to Data machine, and Oklahoma's state police began using 16 of them last month. Hundreds of other police departments around the country are also using the device but haven't fessed up to it. 

It's all pretty simple. If a state trooper or other police officer suspects you are tied to some type of crime, he can scan your prepaid cards and seize the money on them. No formal charges, no trial, no due process.

It's an extension of a long-standing practice of shaking down anyone police think is suspicious. All too often, as the Washington Post demonstrated in a Pulitzer Prize-winning investigation a few years ago, all you need to do to look suspicious is have a lot of money.

"Different factors"

The police, of course, say the process is completely straightforward.

"We're gonna look for different factors in the way that you're acting,” Oklahoma Highway Patrol Lt. John Vincent said, according to a Washington Post report. “We're gonna look for if there's a difference in your story. If there's some way that we can prove that you're falsifying information to us about your business."

Of course, when Lt. Vincent says police will "prove" you're falsifying information it doesn't mean they'll prove it in court, where you can confront the witnesses and challenge the evidence. And that's what has critics upset.

State Sen. Kyle Loveless (R-Oklahoma City) said he will introduce legislation in the next session of the state legislature that will require a conviction in a court of law before anyone's assets are seized.

"If I had to err on the side of one side versus the other, I would err on the side of the Constitution,” Loveless said. “And I think that's what we need to do."

Loveless said there have been too many documented cases of abuse in Oklahoma to allow police to continue treating citizens as criminals without benefit of trial.

"We've seen single mom's stuff be taken, a cancer survivor his drugs taken, we saw a Christian band being taken. We've seen innocent people's stuff being taken. We've seen where the money goes and how it's been misspent," Loveless told a local television station.

Where it goes

As for what happens to the money seized with ERAD, 7.7% of it goes to the ERAD Group, a Texas-based company. The rest? Oklahoma Watch, an investigative journalism organization, says records show that in one recent year, 70% of all forfeiture amounts were used to fund salaries for law enforcement. 

Oklahoma law currently allows police and prosecutors to keep the money they take from citizens, even those who are never convicted or indicted, so those victimized by modern-day highway robbers basically have no recourse.

The Post's series caused a stir when it was published, but progress in cleaning up the practice has been slow. New Mexico, Montana and New Hampshire recently passed laws requiring a conviction before property can be forfeited, although the Post says New Mexico police routinely ignore the law.

The ERAD devices, by the way, can strip money off prepaid cards, but they can also decipher quite a bit of information from the magnetic strips on credit and debit cards, information police could conceivably use to track down and swipe additional assets.

ERAD claims its devices are an invaluable tool in fighting money laundering. 

"Each year, there are about $120 billion dollars moved to Mexico, Iran, Colombia, China as well as others as a result of illicit activity in the US," ERAD says on its website. "Prepaid debit cards are becoming the preferred process to move funds for pick up in these countries."

No right to privacy

ERAD CEO T. Jack Williams claimed recently at a conference that American citizens have no right to privacy when it comes to magnetic encoding on their cards, Oklahoma Watch reported.

“Prepaid cards are cash, they are not bank accounts,” Williams said. He claimed that prepaid cards are not protected by the Bank Secrecy Act and are not protected by the Constitution's Fourth Amendment protections against unreasonable search and seizure.

Brady Henderson, legal director for ACLU Oklahoma, says that's debatable and predicted Oklahoma's Department of Public Safety will find itself facing legal challenges to warrantless search and seizures using ERAD.

The situation is not unique to Oklahoma. The ERAD devices are in use around the country by "hundreds" of police agencies, Williams said, although he refused to give an exact number or name any of the police departments using the devices. 

Carrying a lot of cash is dangerous. Criminals may take it and so may the cops, who increasingly view having a lot of cash ...
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Best credit cards for rental car coverage

Nearly all cards provide some coverage, but there can be plenty of exclusions

Your credit card can get you more than cash back on purchases and points toward perks. Most provide some basic rental car insurance. Some coverage is better than others.

But to make it pay, a cardholder first needs to know it exists, and then what it covers. Progressive Insurance has found that about 20% of rental car customers always pay for the damage waiver, with another 20% doing so occasionally. But since all rental car payments are made with credit cards, it is very likely most of those purchases are unnecessary.

The credit card review site CardHub has analyzed credit cards, choosing the ones that provide the most coverage for rental cars. Among individual cards, it found the cards issued by CitiGroup provide the most extensive rental car coverage.

Citi cards achieved a score of 95.5%, with American Express' 89.5% being the closest competitor. Chase cards are third, with a score of 87.5%.

MasterCard is best

Cards in the MasterCard network provide the best coverage, but all four networks are ranked fairly close together in their coverage.

The top ranked cards don't require you to sign up for the coverage. It is activated when you decline the rental car company's damage loss waiver. The best cards cover costs stemming from damage to or theft of rental vehicles, up to $100,000.

Like any insurance policy, there are some exclusions. Here's where it pays to have one of the higher-rated cards, because they have fewer exceptions to their coverage.

The average card won't cover a truck, open-bed vehicle, exotic or antique car, or even a large van or full-size SUV. The best cards do cover those vehicles, but draw the line at off-road vehicles. Another common exclusion is tire and rim damage. CardHub found that more than 60% of cards don't cover it.

Almost 40% of cards only cover domestic rentals for up to 15 days, but the best cards will extend coverage up to 31 days.

Fewer global options

You're safe with just about any card if you are renting in the U.S., but only Citi and Discover cards provide global coverage. Ireland, Israel and Jamaica are the most common exclusions among other issuers.

There is something else to understand about rental car coverage. Neither the company's damage loss waiver nor your credit card's coverage will protect you from liability in the case of an accident. You'll need to buy a liability supplement or rely instead on your personal auto insurance policy.

It should cover you but not all policies do. It is a good idea to call your insurance provider before renting a car and asking.

Your credit card can get you more than cash back on purchases and points toward perks. Most provide some basic rental car insurance. Some coverage is bette...
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Chase Sapphire Preferred wins honors as best travel card

Initial 50,000 bonus points impressed the judges

If you were to choose a credit card solely for use to pay travel expenses, CreditCards.com recommends the Chase Sapphire Preferred card.

The credit card website says the Chase Sapphire Preferred came out on top in its latest rankings. It won points for the 50,000 points cardholders get just for opening an account.

It also won praise for ease in cashing in those points and its collection of rewards the judges described as “user friendly.”

Popular card

There is no doubt the Sapphire Preferred is a popular card. Back in March it ranked very high when ConsumerAffairs rated the best reward cards, singled out for its many travel-related perks.

We pointed out that to earn the 50,000 bonus points, new customers needed to charge $4,000 on the card in the first three months the account is open. Those points are good for $625 toward airfare and lodging when you redeem them through Chase Ultimate Rewards.

On the downside, the card carries a $95 annual fee, but it is waived the first year. After that it costs you nearly $100 to carry this card, so you have to take advantage of the rewards to make it pay.

The CreditCards.com judges were also impressed that customers who dine out frequently can easily rack up extra bonus points.

“Hit the sweet spot”

"The Chase Sapphire Preferred card has hit the sweet spot for the frequent but not constant traveler," says CreditCards.com Editor-in-Chief and travel card judge Daniel Ray.

He notes the sign-up bonus provides a generous head start and a frequent traveler can easily accumulate valuable points.

Placing second in the competition is Capital One's Venture Rewards card. It gained points for its low interest rates and consumer-friendly redemption policy.

Coming in third was the Barclaycard Arrival Plus World Elite MasterCard. It impressed judges by granting cardholders two miles for every dollar they spend. On top of that, it comes with a generous 40,000-mile bonus.

If you were to choose a credit card solely for use to pay travel expenses, CreditCards.com recommends the Chase Sapphire Preferred card.The credit card...
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Alaska Air expands credit card benefits

Card no longer carries foreign transaction fees

Alaska Airlines has made a couple of benefit changes to its Visa Signature Card. The credit card no longer carries foreign transaction fees, and bonus miles for new customers have been increased to 30,000, as long as the new cardholders meet the qualifying spending level.

"As we continue to expand our global partnerships and add to our growing list of more than 800 partner destinations worldwide, eliminating foreign transaction fees is the right thing to do for our world-traveling cardholders,” said Sangita Woerner, Alaska's vice president of marketing.

The expanded perks are in addition to the other benefits the card carries, including a free checked bag for the cardholder and six others included in his or her party; three times the miles on Alaska Air purchases; and an annual companion fare for $121.

Alaska Air's mileage plan currently features 17 international and domestic airline partners, flying to more than 800 global destinations. Alaska Air says its mileage plan was rated number one among airline rewards programs by U.S. News.

It should be noted that an airline credit card is probably not the best choice for people who rarely travel by air. While there are other rewards associated with the cards, the most lucrative are associated with air travel.

Other options

For example, the Frontier Airlines Credit Card is another attractive choice. Right off the bat, new cardholders earn 40,000 bonus miles after spending $500 the first 90 days the account is open. Those 40,000 bonus miles are good for two round-trip domestic tickets, subject to availability.

Customers earn double miles per $1 spent on Frontier Airlines purchases and one mile per $1 spent on all other purchases.

Customers earn a $100 Frontier Airlines flight discount voucher after spending $2,500 or more in purchases during the card membership year.

For consumers who do not travel by air that much, a rewards card with a generous cash back feature is the better choice. Here are some options to consider.

Alaska Airlines has made a couple of benefit changes to its Visa Signature Card. The credit card no longer carries foreign transaction fees, and bonus mile...
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Walmart sues Visa to require PIN use with chip credit cards

Retailers continue to insist the new cards aren't as fraud-proof as they could be

Walmart, the nation's largest retailer, has filed a lawsuit in New York against Visa, charging that the payments network had blocked implementation of a PIN system, favored by retailers, to make the new chip credit cards more secure.

The suit, filed in the New York State Supreme Court, alleges the current system, in which a chip card user authenticates the purchase with a signature, is “fraud prone.”

Fortune quotes a Walmart spokesperson as saying Visa's influence in the adoption of the signature authentication system creates “unacceptable risk.”

Unhappy retailers

On October 1, 2015, when the new system took effect, liability for fraudulent credit card purchases flipped from credit card companies to merchants.

Walmart's position appears to represent that of retailers in general, who have not been happy with the newly implemented chip card system. Many have been slow to install the new readers that extract information from a chip embedded in the plastic, rather than from a magnetic strip on the back.

Just days after the new chip cards, known as EMV cards, went into use, the National Retail Federation (NRF) took its case to Congress, arguing that the new chip-and-signature credit cards that do not also require a PIN won't stop fraud. It said small businesses should not be pressured to install the new equipment.

“The new EMV equipment does not stop breaches,” NRF Senior Vice President for Government Relations David French said in October 2015 testimony before the House Small Business Subcommittee. “Indeed, in many cases it provides no significant benefits either to the business or to the business’ regular customers. It is merely an additional expense small businesses are being told to bear.”

FBI also supports a PIN

The retailers weren't alone in their early concerns about the new cards. The FBI issued a statement within days of the new cards becoming active, warning law enforcement officers, merchants, and consumers to be aware that the EMV cards, while perhaps more secure than the cards they replaced, were still vulnerable to fraud.

The FBI noted that the chip allows a merchant to verify that the card is authentic and not one made by a fraudster with stolen credit card data. But the agency pointed out that wouldn't stop someone from using a chip card they had stolen. All they had to do was sign the name that was on the card. Requiring the user to provide a PIN, the FBI argued, would be more secure.

The following month, several state attorneys general echoed the FBI's concerns about the lack of a PIN. Attorneys general of eight states and the District of Columbia signed a letter to the nation’s top credit card companies and banks, calling for the use of PINs rather than signatures to approve purchases made with new chip-based credit cards.

So why don't the new chip cards require PINs? In its suit, Walmart says credit card companies balked at imposing the requirement, believing consumers would rebel at having to remember another password.

Walmart, the nation's largest retailer, has filed a lawsuit in New York against Visa, charging that the payments network had blocked implementation of a PI...
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Chase offers new rewards credit card

Chase Freedom Unlimited pays 1.5% cash back on everything

Chase is now advertising a new credit card, the Chase Freedom Unlimited Card, a companion to its Chase Freedom Preferred.

While the Preferred pays 1% cash back on most purchases, and 5% on rotating categories, the Unlimited, as its name implies, pays 1.5% cash back on an unlimited amount of everything, with no annual fee.

The card has four main features that make it attractive. First, the aforementioned 1.5% cash back on every purchase. Other cards usually have caps.

You can redeem for cash back at any time, and the rewards you rack up don't expire, assuming your account remains active.

Bonus cash

The card also pays a $150 bonus after you spend $500 during the first three months the account is open. If you add an authorized user, you earn another $25 reward, if that user also makes a purchase during the first three months.

The Unlimited also has a 15 month introductory rate of 0% APR on purchases. That would allow you to finance a significant purchase and pay for it over 15 months without paying any interest.

If you want to transfer a balance from another card, you get the same 15 month introductory period at 0% interest. However, there is a 5% balance transfer fee.

After the 0% introductory period, the variable interest rate on both purchases and balance transfers is 14.24%, 19.24%, or 23.24%, depending on creditworthiness.

Consumer protections

Like many credit cards, the Unlimited comes with some consumer protections. In case of fraud, the cardholder has zero liability. It also allows you to decline a rental car company's collision damage waiver, providing replacement coverage at no extra charge, as long as you use the card to pay the entire cost of the rental car.

There is also an insurance policy of sorts on new purchases. The Unlimited's Purchase Protection feature covers your new purchases for 120 days against damage or theft up to $500 per claim and $50,000 per account.

Its price protection feature can make sure you always get the best price. If a card purchase made in the U.S. is advertised for less in print or online within 90 days, you can receive the difference, up to $500 per item and $2,500 per year.

Chase is now advertising a new credit card, the Chase Freedom Unlimited Card, a companion to its Chase Freedom Preferred.While the Preferred pays 1% ca...
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Three credit cards for consumers with excellent credit

Excellent credit has its privileges when it comes to credit cards

How's your credit score? If it is a number that's considered “excellent,” you shouldn't respond to just any random credit card offer.

If you do, you could be leaving money and services on the table. That's because credit card companies have cards for different levels of credit worthiness. They save the best benefits for consumers with excellent credit and, as a rule, have no annual fee.

Excellent credit, by the way, is considered a FICO score of between 750 and 850.

Chase Slate

The Chase Slate has a couple of features that make it an attractive choice. If you are carrying a balance on another card, you can transfer the balance to your Chase Slate card with no transfer fee, as long you do it during the first 60 days the account is open.

On the other hand, if you have an excellent credit score, you might not be carrying a balance, negating one of the card's primary benefits.

Another nice feature is a monthly FICO credit score, given at no charge. While there are several sites now that provide a “free credit score,” these scores are not always your FICO score, a proprietary formula that most lenders rely on to make credit decisions.

What you won't get with the Chase Slate are generous cash back rewards, so it might be wise to consider a rewards card instead if you don't need the balance transfer feature.

BankAmericard Cash Rewards

While there are many cash back rewards cards for consumers with excellent credit, the BankAmericard Cash Rewards card is definitely worth a look, especially if you are already a Bank of America customer.

Upon signing up, the card pays a $100 cash bonus after you spend $500 in the first 90 days the account is open. You earn 3% cash back at the gas pump, 2% at the supermarket, and 1% on all other purchases. In all, you can earn up to $1,500 in combined purchases each quarter.

If you are a Bank of America customer, you can get a 10% customer bonus every time you redeem your cash back into your checking or savings account. For Bank of America Preferred Rewards clients, that bonus can be 25% or more.

There are plenty of other good rewards cards. You can check out some of them here and here.

Citi Diamond Preferred

If you would like a lot of extra services with your credit card, then you might consider the Citi Diamond Preferred card. VIP treatment is its main attraction.

Cardmembers are entitled to 24/7 access to personalized concierge service, providing help in booking hotels, flights, and concert tickets.

It also has a fairly lengthy 0% introductory period for balance transfers – 21 months. However, there is a fee for these transfers, ranging from a minimum of $5 to a maximum of 3% of the transferred amount.

How's your credit score? If it is a number that's considered “excellent,” you shouldn't respond to just any random credit card offer.If you do, you cou...
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Dick's Sporting Goods relaunches rewards credit card

Store-issued cards can be rewarding but usually carry higher interest rates

Sporting goods retailer Dick's Sporting Goods is relaunching its Rewards of Sport Credit Cards, issued by Synchrony Bank.

The company said it would continue to offer two different cards under the program. One – the Rewards of Sport Credit Card – remains a private label card for use at all Dick's Sporting Goods, Field & Stream, and Golf Galaxy locations.

The Rewards of Sport MasterCard is a more general purpose card. It can be used at all the same locations, in addition to any other retail location that accepts Mastercard.

Dick's says its cardholders will get some new benefits under the relaunch, including 10% back in rewards on in-store purchases the first day the account is active.

Periodically, consumers using the card may have the option of financing in-store purchases.

Cardholders will also still get upgraded ScoreCard Rewards benefits on purchases. They include 6% back in rewards on routine in-store purchases and 1% back in rewards on purchases in other stores where MasterCard is accepted. That benefit will apply only to Rewards of Sport MasterCard holders.

Other store-issued cards

Store-issued credit cards have become more common in recent years, with retailers using them as a means to build brand loyalty. Some are more rewarding than others, but consumers who choose a store-issued card should make sure the store is a place they shop frequently.

In its analysis of store-issued credit cards, Consumer Reports says most store-issued credit cards carry interest rates much higher than you would pay on other cards. If you are in the habit of paying the balance in full, each month, it's not really an issue.

Often retailers will offer an attractive discount of 15% or so on whatever you happen to be buying if you apply for their card on the spot. While that might be tempting if you are making a very large purchase, consumers should guard against opening too many credit card accounts because of the potential negative impact it can have on credit scores.

Sporting goods retailer Dick's Sporting Goods is relaunching its Rewards of Sport Credit Cards, issued by Synchrony Bank.The company said it would cont...
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Survey finds college students credit card knowledge lacking

Two-thirds who have credit cards carry a balance each month

In many cases, young people have their first experience with credit cards when they go off to college. Some handle the experience better than others.

Lendedu, a student loan marketplace, recently quizzed college students at three different four-year institutions about their credit card knowledge. The results suggest that colleges would do well to add a few personal finance courses to the curriculum.

Off the bat, the survey found that only 38.46% of the students it polled have a credit card in their own name. That means the rest either do not have a credit card or, more likely, use a card that is in their parents' name. As a result, these students never see a credit card bill and have less accountability.

The survey found only 9.44% of students knew the interest rate on their credit card. If you paid off your account in full each month, you would have no real need to know the rate. But the survey shows that, unfortunately, this is not the case.

Two-thirds carry a balance

A full two-third of students – 67.78% – carry a balance on their credit card, exposing them to mounting debt, in addition to any student loans they might have. Perhaps because so many students carry a balance, a fairly large percentage – 58.89% – knew precisely the credit limit on their card.

Not all students have credit cards, and the survey takers wondered why not. Forty-three percent said they had considered applying for a credit card, but had not done so.

Almost the same number admitted the reason they had not applied was the fear they would run up too much debt.

CARD Act

In years past, college freshmen were bombarded with credit card offers as soon as they moved into their dorms. In 2009, Congress passed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act.

The Card Act enacted a number of reforms, including curbs on credit card marketing efforts targeting college students. Students still get credit cards but are under much less pressure to do so.

A credit card can be a useful financial tool if used properly. A rule of thumb is to never charge anything you can't pay for at the end of the month. If you pay the bill in full, you start each billing cycle with a clean slate and won't accumulate debt.

Several credit cards are specifically designed for people who are new to credit, with forgiving features to keep consumers out of trouble. We recently profiled three cards that could be good choices for students who are considering a credit card.

In many cases, young people have their first experience with credit cards when they go off to college. Some handle the experience better than others.Le...
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There are big differences between rewards credit cards

Choose the one that best rewards your spending patterns

There are many rewards credit cards to choose from, and some rewards are better than others. But do you know how much better some are?

The personal finance website CardHub.com recently calculated what cardholders stand to get over a two year period, then did a side-by-side comparison. Over that two year period, the study found an $800 difference between the best and worst rewards.

According to the authors, Capital One offers the best credit card rewards program, with a score 49% higher than last place finisher TD Bank. The difference between the two programs is $812 over two years.

Capital One offers two Quicksilver rewards cards – the Quicksilver Card for excellent credit and the Quicksilver One Card for just average credit.

The Quicksilver Card for excellent credit provides unlimited 1.5% cash back on every purchase. In addition, there is a one-time $100 bonus if you spend $500 on purchases within the first three months.

The Quicksilver One Card is almost as rewarding. It has the same unlimited 1.5% cash back on every purchase but lacks the $100 bonus. It also charges a $39 annual fee while there is no fee with the Quicksilver Card.

By way of comparison, the TD Bank Visa Credit Card pays a $100 bonus when you spend $500 in the first 90 days. It also pays 2% on purchases from local delis, fast food restaurants, and coffee shops, as well as casual restaurants and fine dining, plus 1% on all other eligible purchases.

Most rewarding for travel

How you use your rewards can also make a difference in the benefits. For example, the study found using Capital One rewards for travel produced 54% more value than using the points for merchandise.

Ease of use for rewards is sometimes a major factor. The study found Discover has the most consumer-friendly redemption policies; Fifth Third Bank has the most restrictive policies.

The authors offer some advice for choosing a rewards card. They say to start with identifying where you tend to spend the most money and to find a card that rewards that particular activity. For example, if you rarely eat out, don't choose a card that weights its rewards toward restaurant spending.

Consider a card's earning potential, but don't overlook the redemption value. Both are important. Look for a nice balance between the two.

If you are not particularly detailed-oriented, choose a card with the fewest hassles. If you are undecided about which rewards suit you best, go with cash back. It's usually hard to beat cash.

Finally, don't overlook annual fees. Choosing a card with no annual fee will put you ahead. Paying an annual fee will cut into any rewards you might gain.

There are many rewards credit cards to choose from, and some rewards are better than others. But do you know how much better some are?The personal fina...
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First-time homebuyers worry about their credit scores

With tighter mortgage underwriting standards, a good credit score has never been more important

Shopping for a home is a pretty intimidating process, but a new report from Experian suggests that it is often even more so for today's first-time homebuyer.

It's hard enough to save for a down payment. Beyond that, however, the survey found that many consumers approaching the buying process for the first time worry about their credit score.

There may be good reason to worry. In the wake of the collapse of the housing market, mortgage underwriting standards have tightened considerably. Lenders are demanding higher scores from buyers than ever before.

In the Experian survey, 34% of would-be buyers expressed worry that their credit score might hurt their chances to obtain a loan. Another 45% said they would put off a home purchase to give themselves more time to raise their credit score.

"Your credit profile is one of the factors that can have a substantial impact on securing a home loan because it is used by lenders as an indicator of your financial health," Rod Griffin, director of Public Education at Experian, said in a release. "Consumers planning to purchase a home should check their credit scores and reports to see where they stand.”

Once consumers know their score, they pretty much know where they strand. From there, they can develop a financial plan that results in obtaining a mortgage.

Also determines interest rate

What many would-be buyers don't realize is that a credit score not only determines whether you will get a loan, it also determines the interest rate you will pay. An excellent credit score will usually qualify a borrower for the best rate.

According to Bankrate.com, a credit score of 740 or above will qualify you for the best rates. A score below 620 not only makes it less likely that you'll get a loan, but will saddle you with the highest interest rate.

The difference between the best and worst mortgage rate can be a swing of 1.5%. In terms of dollars and cents, on a $150 mortgage, that can mean a difference of $135 in the monthly payment, adding up to an extra $1,620 per year.

How to improve your credit score

If you are trying to improve your credit score so you can go home shopping, Fair Isaac, the company that produces credit scores, says there are three important things you can do:

Check your credit report: You can get a free copy at www.annualcreditreport.com. Download a copy from all three credit reporting agencies and check it for accuracy. If there are errors – and there can be – you'll need to get the information corrected.

Pay your bills on time: One of the biggest influences on your credit score is how reliable you are when it comes to paying your debts. Make sure all bills get paid, in full, on time.

Reduce your debt: If you have a large credit card balance, particularly if you have nearly maxed out your card, work on reducing it. You don't have to pay it down to zero, but the balance should not greatly increase your debt to income ratio. Showing you can manage debt will do wonders for your credit score.

Shopping for a home is a pretty intimidating process, but a new report from Experian suggests that it is often even more so for today's first-time homebuye...
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A 0% balance transfer card can save you thousands

Two cards now offer 21 months of 0% interest

If you are like most consumers, you are trying to pay off a balance on a credit card or two. Given the high interest rates on credit cards, that's often hard to do.

By transferring a balance from a high interest credit card to one that has no interest charges, the payoff can occur much faster. There are several credit cards that are specifically designed for balance transfers, giving the cardholder a few months of 0% interest.

Lately, these introductory periods have gotten longer, so if you are not taking advantage of them, you're leaving money on the table.

How much can you save? Let's do an experiment to find out.

Experiment

Let's suppose you have a $10,000 balance on a credit card that charges 15.9% interest. You have found $500 a month in your budget to apply to paying off the balance, so how many months will it take?

Using a credit card payment calculator at Bankrate.com, we discover that it will take two years – 24 months.

But suppose you were able to roll the entire $10,000 over to a credit card with 0% interest. Making the same $500 a month payment, you would pay off the balance in 20 months – four months sooner, saving $2,000 in interest payments.

But is any credit card going to give you 20 months of 0% interest? We know of two that will.

Citi Simplicity

The Citi Simplicity card offers a 0% rate on balance transfers for 21 months, meaning you would pay no interest during our hypothetical payoff period. Other perks of the Citi card include no late fees, no penalty rate, and no annual fee.

With just about any balance transfer card, there will be a fee involved in moving a balance from one card to another, which will cut into your interest savings. The Citi Simplicity card charges $5 or 3% of the transferred balance, whichever is greater.

In our experiment, that would amount to a fee of $300, meaning the total savings from the transfer would be $1,700.

Citi Diamond Preferred

The Citi Diamond Preferred card also has a 21-month 0% interest on balance transfers. Like the Simplicity card, it has no annual fee and charges the same balance transfer rate – $5 or 3% of the transferred balance.

Cardmembers also get 24/7 access to personalized concierge service, providing help in booking hotels and flights and finding entertainment.

Both cards are good options for saving on interest costs while paying off debt. However, you'll need a pretty good credit score to get either one.

If you want to avoid a balance transfer fee, the Chase Slate is the card for you. The 0% interest introductory period is a little shorter – 15 months instead of 21 – but there is no fee to move the balance. Credit score requirements are also a bit less than for the two Citi cards.

If you are like most consumers, you are trying to pay off a balance on a credit card or two. Given the high interest rates on credit cards, that's often ha...
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What you should know about your credit report and score

The biggest influence on your credit score is timely bill payment

To understand money, it helps to understand credit. Today, big ticket items, like homes and cars, usually require a loan in order to purchase them.

Every consumer who has opened a credit account somewhere has a credit report and a credit score. Understanding both can help you be a better money manager. The Federal Reserve has compiled this helpful consumer guide.

Your credit report tells your credit history. It lists all the credit accounts you have, or had in the past. It indicates what the balance is and whether they are in good standing.

It will also show any existing public record involving you and your finances. If there is a court judgment against you, tax liens against your property, or bankruptcy, they will show up in your credit report.

A credit report will also contain a list of people or companies that recently requested a copy of your credit report.

Why it's important

Here's why your credit report is important: banks, insurance companies, prospective employers, and a lot of other people you interact with may get a copy of your credit report. What they look for is evidence of how you manage money.

A lender looks at your credit report to decide whether or not to lend you money. Insurance companies may adjust your rate depending on what they see in your credit report.

Prospective employers, if you give permission for them to review your credit report, may base their decision on whether or not to hire you by what they see in your credit report.

Service providers and landlords will also take a look at your credit report before doing business with you, so having a clean report is important.

The information contained in your credit report is used to assign you a credit score. That way, someone reviewing your credit history knows at a glance whether you have excellent credit or just fair.

Adding up your credit score

There are a number of factors that go into a credit score, but perhaps the most important – and the one you can most easily control – is whether you pay your bills on time. Paying every bill on time, every month, will push up your credit score faster than anything you can do. Having one or more debt collection actions against it will drag it down faster than anything else.

Having too many accounts open – or too few – can bring down a score. Tapping out the credit limit on a credit card will do the same.

By law, every consumer is entitled to review copies of his or her credit report compiled by all three credit reporting agencies each year. It's free, and you can start the process at www.annualcreditreport.com.

Getting a copy of your FICO credit score is not free, but can usually be obtained for a small fee.

To understand money, it helps to understand credit. Today, big ticket items, like homes and cars, usually require a loan in order to purchase them.Ever...
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Consumers missing the boat on travel rewards credit cards

When you sign up can determine the payoff

When it comes to travel rewards credit cards, when you apply can make a big difference. At certain times of the year the rewards are much greater.

NerdWallet's 2016 Travel Credit Card Study shows most consumers are oblivious to this fact and are leaving an average of 15,338 rewards points on the table by applying for a card at the wrong time. That works out to an average of $177 in lost value.

Sean McQuay, NerdWallet's credit card expert, says consumers may love travel credit cards, but they aren't making the most of them.

Limited time offers

"Many consumers know that signing up for a travel card means getting a sign-up bonus, but most don't realize that there are limited-time offers that often push those sign-up bonuses up by an average of nearly $200 and that those offers follow a seasonal pattern every year,” McQuay said in a statement.

But by signing up at an optimal time, he says consumers can significantly improve the value of their credit card.

For general travel, November is the best month to sign up based on the sign up bonus. Despite that, the study found most consumers sign up for this type of card in July. As a result, NerdWallet estimates about 91% of consumers miss out on maximum rewards.

November is also the best month to sign up for an airline rewards card, but the study found that most consumers sign up for them in January.

For a hotel rewards card, the best time to sign up is August. Unfortunately, most consumers sign up for one in April, missing out on the maximum bonus.

Wait five months

It usually is not a good idea to sign up for a travel credit card just for a specific trip. In fact, it pays to wait at least five months between the time you get the credit card and when you take a trip. That's because many cards require a minimum amount of spending before the maximum reward kicks in.

But McQuay says if you are not currently earning rewards, it may be advantageous to take the current sign-up offer to make sure you begin accruing rewards immediately.

“Ultimately, only you can make the best decision about when you apply for a credit card," he said.

When it comes to travel rewards credit cards, when you apply can make a big difference. At certain times of the year the rewards are much greater.NerdW...
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Three good credit cards for students

All three offer some rewards and forgiving features

Not all credit cards are alike, and some are better than others for certain periods of life. When you're young, it pays to have a credit card that takes that into account.

Fortunately, there are several credit cards designed specifically for young people still in school. Here are three pretty good ones.

Discover It Chrome for Students

The Discover It Chrome for Students has some forgiving features that might come in handy. There is no annual fee, no fee for going over your limit, no foreign transaction fee, and no late fee on first late payment. In fact, a late payment won't raise your interest rate, as it would with most other cards.

The rewards are pretty good too. You'll get 2% cash back at restaurants and gas stations, capped at $1,000 spending on the combined categories. You'll get 1% back on all other purchases.

Currently, Discover will match all the cash back received in the first year for new cardholders. It will also reward students for hitting the books, adding $20 cash back each school year your GPA is at least 3.0.

Freeze-It is a nice security feature, allowing you to prevent new purchases, cash advances, and balance transfers on misplaced cards instantly, using a mobile app or PC.

Wells Fargo Cash Back College Visa

The Wells Fargo Cash Back College Visa Card is another credit card that can benefit a young person with limited credit history. You can build your credit as you use the card – as long as you use it responsibly. There is no annual fee.

You can also rack up a few rewards along the way, earning 3% cash rewards on gasoline, groceries, and drug store purchases the first six months you have the card and 1% cash back on virtually all other net purchases.

Cash rewards can be redeemed in $25 increments and you can set it up so that the money is deposited into a Wells Fargo savings account. You can also apply the money to a qualifying Wells Fargo credit account or receive a check.

Journey Student Rewards card from Capital One

The Journey Student Rewards card from Capital One is another good choice for someone starting out to build a positive credit profile. You get 1% Cash back on everything you buy and there's no annual fee, so you are already ahead of the game.

Beyond that, Journey will send you text alerts so you know when your payment is due. Make the payment on time and Journey will give you a 25% bonus on the cash you've earned.

Not all credit cards are alike, and some are better than others for certain periods of life. When you're young, it pays to have a credit card that takes th...
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Car shoppers getting new tool to check their credit

Free tool will be accessible through dealer websites

Equifax and Black Book Avtivator are teaming up to give consumers an easy way to check their credit score before heading to a car dealer. The tool – Black Book Activator eCredit – will be accessible on participating dealer websites.

The tool will allow car shoppers to check their Equifax Risk Score at no charge. While it isn't the consumer's FICO score, generally regarded as the industry standard, Equifax says its score is a key measurement that can help consumers better understand the financing options they will be offered.

Knowing your credit score going into a vehicle transaction is generally regarded as an important piece of knowledge. A good score should get you a good rate. A lower score may limit your financing options.

The information provided by the new tool is both instant and private. Equifax says it is not shared with third parties, including the dealer. The dealer will access the consumer's FICO score if and when the financing process begins.

Social Security number unnecessary

Equifax says using the new tool will also be secure. Unlike some sites providing free credit ratings, users will not have to enter Social Security numbers. The tool only needs a name, address and a couple of answers to a multiple choice quiz, to verify the identity of the user.

"Our testing and consumer feedback have shown that car shoppers want access to their credit scores as they are making buying decisions, but until now, there hasn't been a simple, non-intrusive way for auto shoppers to get an instant, accurate score without sharing a lot of detailed information," Mike McFall, president of Black Book Activator Division, said in a release."Working closely with Equifax, we've created an easy plug-in for dealers, and a truly risk-free way for consumers to gain insight about which vehicles might make the most sense for their budgets, moving them one step closer to purchase."

Market testing

The tool has been tested with several dealers before the rollout. Frances Looper, Internet Manager at Love Chevrolet in Columbia, S.C., says the tool is helpful for a dealer that makes its initial contact with prospective customers online.

“As a bonus, users don't leave our site to get the information, and they don't feel as if their privacy has been compromised,” she said. “It makes everything friendlier.”

Your credit score not only determines what kind of loan you receive, it may determine whether you can actually get a loan. Carfax notes that auto lenders generally have a more flexible definition of excellent credit than mortgage lenders.

It says a minimum credit score to finance a used car might be 640 to 680, depending on the dealer. Below that, you might be assigned a subprime loan, with rates three to five times higher than prime borrowers.

Credit score benchmarks are generally higher for new car loans.

Equifax and Black Book Avtivator are teaming up to give consumers an easy way to check their credit score before heading to a car dealer. The tool – Black...
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Citi unveils Costco Go Anywhere credit card

New card offers more rewards, including 4% cash back on gas

In early March, Costco announced it had entered into a new credit card agreement with Citi to replace its current co-branded American Express card. Now, Citi has announced that the launch date for its new Costco card will be June 20.

Once issued, the Citi Visa Costco Go Anywhere credit card will serve as the Costco membership card, while providing rewards to users in the U.S. and Puerto Rico.

Citi says the new Costco Visa cards will be mailed in May. Costco members should follow the directions for activating the card but should keep using their current American Express card until the switch-over on June 20.

Rewards

Citi says its new Costco card will allow users to earn 4% cash back on eligible gasoline purchases, including at Costco pumps. The 4% reverts to 1% after $7,000 in gas purchases in a given year.

The card will pay 3% cash back at restaurants and eligible travel purchases. It pays 2% cash back on Costco purchases and 1% everywhere else.

Citi says Costco members who currently use the American Express card do not have to apply for the new Visa card. It will automatically be sent to members, who should destroy the Costco American Express card on June 20.

Current points

But what about any rewards that members may have piled up from American Express? Citi says customers won't lose them.

“Rewards that were not previously distributed to you will be transferred automatically to your new card on June 20, 2016, so you won’t lose any of the rewards you’ve already earned,” Citi said on its website. “Your February 2017 cash back rewards coupon from Citi will include cash back rewards earned on your Costco card from American Express during 2016 that were not previously distributed to you by American Express.”

However, if your Costco card from American Express earned Membership Rewards points, they will not transfer to your new card.  

In early March, Costco announced it had entered into a new credit card agreement with Citi to replace its current co-branded American Express card. Now, Ci...
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Credit cards can help insure your rental car

We highlight three that provide primary coverage at no extra charge

When you travel, your credit card may offer a number of rewards, ranging from miles to cash back. A very useful reward is insurance coverage at the car rental counter.

Most consumers have been confronted with the question – do you want the rental car company's coverage? It's pricey, often costing $25 or more a day.

Actually, it isn't even insurance. It's technically a “collision damage waiver (CDW),” meaning the rental car company will assume liability, up to a certain amount of money. Usually it's enough money to cover most accidents.

Credit card protection

Most credit cards will offer some level of protection, usually secondary protection – meaning it would pay if the costs exceed the primary coverage – either the CDW or the consumer's personal auto insurance.

If you want primary insurance coverage at no extra charge, then it may be to your advantage to pay for the car rental with a card that provides it, such as the Chase Sapphire Preferred Card.

“Decline the rental company's collision insurance and charge the entire rental cost to your card,” Chase says on its website. “Coverage is primary and provides reimbursement up to the actual cash value of the vehicle for theft and collision damage for most rental cars in the U.S. and abroad.”

As a bonus, you can earn two Ultimate Rewards points for every dollar spent on travel.

Two other options

The Discover Escape Card also provides primary rental car coverage. Discover says all you have to do is use the card to pay for the rental car and you're covered for damage to the car.

A third option is the Fairmont Visa Signature Card. It provides an Auto Rental CDW benefit that will reimburse for damage due to collision or theft up to the actual cash value of most rental vehicles.

It is also primary coverage, which means you do not have to file a claim with your personal insurance carrier.

There is one big caveat, however, to all of these options. As you may have noticed, they all address damage, not personal injuries. Should you be in a rental car accident resulting in injuries, you will need to rely on your personal auto insurance policy.

Before renting a car, it's a good idea to review your policy to see if there are any exclusions that apply to rental cars.

When you travel, your credit card may offer a number of rewards, ranging from miles to cash back. A very useful reward is insurance coverage at the car ren...
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Survey: 42% of retailers are still swiping credit cards

More than half of consumers think that's just fine

It's been six months since the official switch-over from magnetic strip credit cards to ones with embedded computer chips. The new EMV technology, used in many other parts of the world, is more secure.

While you may have received replacement cards with the embedded chips, you may not be finding many retailers where you can use them. Personal finance website CardHub.com has conducted a study, finding that 42% of retailers have not upgraded terminals in any of their stores.

The study authors call this “shocking,” since for the last six months, retailers have been liable for any fraudulent purchases made in their stores.

Waiting for certification

Retailers, meanwhile, say it isn't their fault. A spokesman for the National Retail Federation (NRF) recently told Yahoo Finance that once chip readers have been installed, the installation must be certified by the credit card industry. That process, he says, is taking longer than anyone expected.

The CardHub survey suggests consumers are either confused or ambivalent about the whole issue. Among the consumers questioned, 41% don't have an embedded chip credit card. More than half of consumers – 56% – didn't care if a retailer's terminal was EMV compliant.

Retailers have not been overly enthusiastic about the move to chip readers. For one thing, it means investing in new technology. For another, retailers have not been sold on the system's security.

Arguing for better security

As we reported in early October, the NRF urged adoption of an EMV system that requires a PIN, arguing that a simple signature is easily forged, negating the cards' enhanced security features.

The NRF also warned that if small businesses were forced to adopt EMV technology, alternatives like near-field communication contactless payment, mobile wallets, and other smartphone-based technology “may effectively be locked out of the market.”

According to the CardHub survey, about one-third of retailers in the survey have upgraded to chip readers at 90% to 100% of their stores. They include some of the nation's major retailers, such as Costco, CVS, and The Home Depot.

It's been six months since the official switch-over from magnetic strip credit cards to ones with embedded computer chips. The new EMV technology, used in...
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Banks tracking customers' cell phone locations to detect fraud

The opt-in program should also reduce declines when customers are traveling

As long as your cell phone and your wallet are in the same place, a new security effort by banks should improve your protection against credit card fraud.

U.S. Bancorp is one of the first banks planning to use a new service that tracks the locations of customers' cell phones to ensure that credit card charges are legit, according to a Wall Street Journal report. The service will be offered on an opt-in basis.

The tracking will help banks detect when a card is not in the customers' possession, a prime indicator of potential fraud. That saves money for banks, which typically cover the costs of fraudulent transactions, and could also be a big convenience for clients whose charges might be declined when they're away from home.

Discover and USAA are also planning to adopt the program, according to the Journal, which says Visa has estimated the tracking could reduce unnecessary declines by 30%.

While the tracking raises privacy concerns, the banks say they will use the location information only for security, not for marketing purposes. Nevertheless, while both Visa and MasterCard are offering the tracking program, most banks are taking a wait-and-see attitude.

As long as your cell phone and your wallet are in the same place, a new security effort by banks should improve your protection against credit card fraud....
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Higher One to pay restitution to nearly one million college students

Regulators say company omitted key information about fees in its marketing materials

Nearly one million college students who received financial aid payments through Higher One, an institution-affiliated party of WEX Bank, were victims of deceptive practices, according to the Federal Deposit Insurance Corporation (FDIC).

The affected students will share $31 million in restitution, according to the terms of a settlement between the financial institutions and the government. In addition, the financial institutions will pay a total of nearly $4 million in civil penalties.

When colleges and universities hand out financial aid to students, they use a firm such as Higher One to actually make the payments. After tuition and fees are paid directly to the schools, the rest of the aid, such as money for books, supplies, and living expenses, can be disbursed to students through Higher One's "OneAccount."

The OneAccount is a debit card-based product that is offered in partnership through financial institutions. WEX Bank has offered the OneAccount since May 4, 2012, according to FDIC.

Omitted important facts

After an investigation, the FDIC concluded that the Higher One website and marketing materials, which were approved by WEX Bank, omitted important facts about certain fees, features, and limitations of the OneAccount in violation of the Federal Trade Commission Act.

Left out, the complaint alleges, were details about other disbursement methods available to students, a full and complete fee schedule, and the availability of fee-free ATMs. As a result of these material omissions, FDIC charges Higher One improperly collected $31 million in fees from students from May 4, 2012, to July 15, 2014, the period covered by the enforcement action.

"It is important that financial products offered to college students under the sponsorship of their universities are clear, transparent, and trustworthy," FDIC Chairman Martin J. Gruenberg said. "Today's action holds both the bank and its student card partner accountable for the practices related to the products they offered to college students and provides restitution to those students harmed by these practices."

In trouble before

This is not Higher One's first brush with regulators. In 2012, it was required to pay $11 million to 60,000 students over the ATM transaction fees it charged.

If you are an affected student, the FDIC says you do not have to take any action to collect compensation. The financial institutions will contact you.

At the same time, former students should be on guard against scammers who claim to be representing one of the parties and demand some kind of “fee.” No payment of any kind is required to receive compensation.

Nearly one million college students who received financial aid payments through Higher One, an institution-affiliated party of WEX Bank, were victims of de...
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Feds tout benefits of CARD Act

Still, the CFPB concedes concerns remain about some practices

It's nice to know that every now and then a government action really does what it's supposed to do -- more or less. Case in point, the Credit Card Accountability Responsibility and Disclosure Act or CARD Act.

The Consumer Financial Protection Bureau (CFPB) has released a report that says the Act has helped reduce the cost of “gotcha” credit card fees by more than $16 billion. In fact since the reform law, total costs to consumers have fallen with the elimination of certain back-end pricing practices such as over-limit fees.

In addition, the CFPB says credit has generally become more available to consumers and the number of new accounts has grown faster than in almost every other major consumer credit market.

However, concerns remain about other back-end practices such as deferred-interest promotions that can hit consumers with unexpected costs.

“The CARD Act has helped people avoid more than $16 billion in gotcha credit card fees,” said CFPB Director Richard Cordray. “The law made it easier for consumers to evaluate costs and risks by eliminating the worst back-end pricing practices in the market. There is more work to do. But with commonsense rules in place, credit cards are safer and more affordable, credit is more available, and companies remain profitable with improved customer satisfaction.”

Big business

More than 60% of adults own at least one credit card account. In the first six months of 2015, more than 14.5 billion credit card transactions accounted for more than $1.4 trillion in purchase volume.

Before the CARD Act, widespread back-end pricing practices racked up costs for consumers through hidden fees and other gotchas. The intent of the CARD Act was to create a fairer and more transparent market by protecting consumers against unexpected interest rate hikes, excessive late fees, and hard-to-avoid over-limit fees.

The report finds that, generally, consumers are paying less for their credit cards than they did before the law, and those costs are easier to predict before they are incurred. In addition, credit availability has continued to expand for consumers. Specifically, the report found that since the CARD Act:

  • Consumers have avoided more than $9 billion in over-limit fees
  • Consumers have saved more than $7 billion in late fees
  • Total cost of credit is roughly 2% lower than before the CARD Act
  • Available credit has increased 10% since 2012
  • More than 100 million credit card accounts offer consumers free access to their credit scores

Continued concerns

While the CARD Act addressed many problematic practices in the market, the CFPB has outstanding areas of concern from the report, including:

  • Deferred-interest promotions that can hit consumers with back-end pricing
  • Subprime credit card companies charging much more for credit
  • Rewards programs containing obscure and incomplete terms and conditions
  • Debt collection practices that pose risks to consumers
  • Agreements that are still long and complex

It's nice to know that every now and then a government action really does what it's supposed to do -- more or less. Case in point, the Credit Card Accounta...
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Chase will pay $50 million to consumers for debt collection abuses

Wrongdoing included obtaining default judgments against active-duty military

JPMorgan Chase will pay $100 million to settle allegations that it committed debt-collection abuses against tens of thousands of its credit card holders, California Attorney General Kamala D. Harris announced today.

The settlement specifically addresses debt collection wrongdoing that includes collecting incorrect amounts, selling bad credit card debt, and running a debt collection mill that involved illegally “robo-signing” thousands of court documents and improperly obtaining default judgments against military servicemembers.

As part of the settlement, Chase will pay $50 million in restitution to consumers nationwide, including an estimated $10 million to California consumers, and significant restitution to servicemembers in California, some of whom were on active duty when Chase obtained illegal default judgments against them. 

Chase will also pay $50 million in penalties and other payments to California, through the Office of the Attorney General. The judgment includes injunctive terms that fundamentally change Chase’s credit card debt-collection practices to prevent similar misconduct in the future, and is subject to court approval.

“Abusive and illegal debt collection practices will not be tolerated in California,” Harris said. “This settlement provides real relief to tens of thousands of Californians, including servicemembers, and prevents JPMorgan Chase from continuing  these deceptive and illegal debt collection practices.”

Robosigners

Between 2009 and 2013, Chase filed more than 125,000 credit card collection lawsuits against California consumers relying on illegally robo-signed sworn documents and provided an additional 30,000 robo-signed sworn statements in support of lawsuits filed against California consumers by third-party debt-collectors, Harris said. 

Chase also made systematic calculation errors regarding the amounts owed, and sold “zombie debts” to third-party debt-collectors that included accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectable, she said.

The Attorney General’s investigation and litigation further revealed that Chase sent letters to consumers that contained illegal threats and were signed by attorneys who did not review the accuracy of the information, determine if litigation was appropriate, or intend to follow through on some of the threats made.

Chase also filed false declarations regarding military service and improperly obtained default judgments against servicemembers on active duty, in violation of the Servicemembers Civil Relief Act and the California Military and Veterans Code.

JPMorgan Chase will pay $100 million to settle allegations that it committed debt-collection abuses against tens of thousands of its credit card holders, C...
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Small businesses “overwhelmed” by new chip cards

National Retail Federation renews push to add PINs to new card system

Just weeks after new rules went into effect for the use of credit cards with embedded security chips, the National Retail Federation (NRF) complains small businesses are being pressured to make an expensive investment without receiving the full level of security that could be provided.

NRF arranged for a small business owner to testify before Congress this week. Keith Lipert, owner of The Keith Lipert Gallery, a single-location, three-employee store in Washington, told lawmakers small businesses are being overwhelmed.

“Overwhelmed”

“The EMV transition is overwhelming and expensive for an independent, small retailer,” Lipert said. “Small retailers are entirely at the mercy and whims of the big players. We have no say and no way to use the marketplace to make our objections heard and our concerns valued.”

Retailers say the EMV cards, which have an embedded computer chip, don't go far enough to promote security. NRF wants the system to an include a PIN, which would make it less likely a lost or stolen card could be used.

Consumers may have noticed that many retail locations, especially small businesses, are still using the old “swipe” card readers, not the new “dipping” readers.

Unresponsive banks


“EMV is all new to me, and banks and the networks are not contacting small businesses to help the transition in any way,” Lipert said. “No one from my bank, processor or existing supplier even contacted me about the need to add a new EMV device, let alone a deadline by which to do so.”

The House Small Business Committee is investigating how Europay MasterCard Visa cards will affect small businesses. The hearing followed this month’s deadline set by the card industry for merchants to install chip-card readers be on the hook for fraudulent card usage.

Seven times more secure

Lipert said the EMV cards being issued by banks are chip-and-signature cards, instead of the chip-and-PIN cards used in nearly all other countries where EMV cards are used. He pointed to Federal Reserve data showing that a secure, secret PIN to approve transactions is seven times more secure than an easily forged and often-illegible signature.

Lipert also said small businesses are seeing “significant delays” in obtaining chip card readers or getting them certified once they are installed. He says small businesses just aren't a priority for hardware manufacturers.

Chip card terminal can cost as much as $2,000 when installation, software and other expenses are included.

Just weeks after new rules went into effect for the use of credit cards with embedded security chips, the National Retail Federation (NRF) complains small ...
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FBI weighs in on safety of new chip card

An improvement, the agency says, but a PIN system would make it better

The FBI has joined the discussion of the new EMV, or chip cards that are replacing credit and debit cards in the U.S.

“While EMV cards offer enhanced security, the FBI is warning law enforcement, merchants, and the general public that these cards can still be targeted by fraudsters,” the Bureau said in a public service announcement.

The EMV cards replace the traditional magnetic strip on the back with a small chip that holds encrypted data. It allows merchants to verify a card’s authenticity, providing the cardholder greater security and making the EMV card less vulnerable to hacking while the data is transmitted from the point of sale (PoS) to the issuing bank.

But the FBI says that may not be enough. It says EMV cards can be counterfeited using stolen card data obtained from the black market.

Prefers a PIN system

The FBI says the best defense is for consumers to use a PIN instead of a signature when making purchases.

“Merchants are encouraged to require consumers to enter their PIN for each transaction, in order to verify their identity,” the FBI said. “If a consumer uses a signature, merchants should ask to also see a government-issued photo identification card to verify the cardholder’s identity.”

This was music to retailers' ears, since they delivered an almost identical warning to Congress this week.

“What the FBI is saying is what the rest of the world already sees as common sense,” Mallory Duncan, National Retail Federation vice-president said. “It’s the right thing to do, and we hope the banks are listening.”

Leaving the back door open

Not using all of the card's potential security features, says Duncan, is like locking the front door but leaving the back door wide open.

“Retailers have long-argued that PINs are essential to providing cardholders with the security that they deserve,” said Brian Dodge, executive vice president of the Retail Industry Leaders Association (RILA), another retail industry trade group. “The FBI’s alert should be a wake-up call to the banks and card networks that continue to stand in the way of making PIN authentication the standard in the U.S. just as it has been around the world for years.”

The retailers complain that virtually all of the chip cards being issued in the United States are chip-and-signature rather than chip-and-PIN, leaving consumers without the option to use a PIN. By contrast, EMV cards used in 80 countries around the world for 20 years or more are routinely chip-and-PIN.

“They’re encouraging consumers to use PIN and they’re encouraging merchants to request PIN – the only thing missing is to encourage the banks to issue PIN cards,” Duncan said.

The FBI has joined the discussion of the new EMV, or chip cards that are replacing credit and debit cards in the U.S.“While EMV cards offer enhanced se...
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Best credit cards for travel in 2015

Some will give you hundreds of dollars in statement credits just for signing up

When oil prices started to dive about one year ago, no one thought they would go this low and stay this low for this long.

As a result, gasoline prices and competitive air fares have made travel more affordable than it's been in some time. To make it even more affordable, consumers who used a rewards credit card geared to travel can save even more.

According to personal finance website CardHub’s latest Credit Card Landscape Report, some cards offer consumers sign-up bonuses worth up to $625 and various other perks. The key to landing these perks, of course, is to have an above-average credit rating.

CardHub compared more than 1,000 credit card offers – and in the interest of full disclosure, some originate from CardHub advertising partners – in order to identify the best travel deals.

Best Initial Bonus

The survey found the value of initial rewards bonuses consumers can reap just by signing up appears to have stabilized near record highs during the third quarter. That said, bonuses offered in the form of points or miles have more than doubled in value over the last five years.

In the category of “Best Initial Bonus,” CardHub selected two cards; the Citi Thank You Premier Card and the Chase Sapphire Preferred Card.

The Citi card will award you 50,000 bonus points if you spend $3,000 during the first three months of card activation. You can then trade those points for a $625 statement credit that will go to pay travel-related charges that post to your account.

In addition, you rack up three points per $1 spent on travel and gas, two points per $1 on dining and entertainment, and one point per $1 on everything else. On the downside, there's a $95 annual fee, but it doesn’t kick in until the second year.

Putting at least $4,000 on a Chase Sapphire card during the first three months your account is open will result in a 40,000-point rewards bonus, which can be redeemed for $500 in travel accommodations booked through Chase's Ultimate Rewards Program or a $400 statement credit.

Best All Around

The Barclaycard Arrival Plus and Capital One Venture Rewards Card share honors for “Best All Around” travel cards.

The Barclaycard gives you a 40,000-mile rewards bonus, redeemable for $400 in travel expenses, but only if you spend $3,000 during the first three months the account is open. You’ll also earn the miles-equivalent of 2% cash back on all other purchases and receive a 5% rebate on miles redeemed for travel.

Spending $3,000 in the first three months will also get you 40,000 bonus points on the Capital One card. These points can be used to receive a $400 statement credit to pay for any travel-related expenses. The ongoing reward rate is two miles per $1 spent, with no limits or expiration dates.

This card also charges a $59 annual fee, but it is not assessed during the first year.

Other categories include “Airline Rewards,” “Hotel Rewards,” and “Road Trip Rewards.” After selecting the right credit card, the authors say the next step is to use it. In addition to the rewards, Credit cards offer $0 fraud liability guarantees, the lowest possible currency conversion rates, and complementary rental car insurance coverage.  

When oil prices started to dive about one year ago, no one thought they would go this low and stay this low for this long.As a result, gasoline prices...
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Small businesses not yet ready for new secure card payment system

Wells Fargo survey finds just 31% have installed new EMV chip card readers

October 1 is an important date for businesses that accept credit cards. That's when a new rule takes effect, shifting the liability for fraudulent credit card purchases from the banks to the business making the sale, if it has not installed EMV chip card technology.

Unfortunately, a survey by Wells Fargo shows small businesses, by and large, are not only unprepared – they aren't aware of what's coming.

In its quarterly Small Business Index Survey, just 49% of small business owners who accept point-of-sale card payments today report being aware of the impending liability shift, when a card issuer or merchant that does not support EMV chip card technology will assume liability for any fraudulent point-of-sale card transactions.

Financial institutions have been sending their customers new EMV chip-enabled credit and debit cards. These cards are designed to protect against fraudulent transactions by encoding cardholder information within an encrypted microchip and data that changes with each transaction.

For the cards to work, merchants must convert to new card readers or add EMV capability to their existing magnetic stripe card reader payment terminals. That costs money.

Only 31% compliance

With only three months remaining before the deadline, Wells Fargo and Gallup, which conducted the survey, found that only 31% of small business owners said that their existing credit card processing system accepts chip-enabled cards.

When asked if they plan to upgrade their point-of-sale credit card terminals to accept EMV chip cards, just 29% said they would before the Oct. 1 deadline. Another 34% said they will at some point in the future after October. Twenty-one percent said they never plan to upgrade.

"While our industry has made great progress in the last year informing and preparing small business owners for the EMV liability shift, the survey findings show us that we have more work to do," said Debra Rossi, head of Wells Fargo Merchant Services.

The bank said it is trying to build awareness, prepare small businesses for the EMV liability shift, and encourage business owners to adopt EMV chip-card technology. It has been providing EMV-capable equipment to customers since 2012.

It said all new and re-issued Wells Fargo Business Credit Cards and Business Elite Cards provided to customers are chip-enabled.

Card issuers take the lead

In fact, card issuers have been well ahead of businesses in adopting the EMV technology. Visa and Mastercard announced last year that they had formed a “new cross-industry group focused on enhancing payment system security” to spearhead adoption of the new technology, which has been in use in Europe for years.

Despite the split between businesses that intend to upgrade their payment terminals to accept EMV chip cards and those that don’t, small business owners seem to agree on one thing: when consumers buy something, they told the Wells Fargo survey takers, they prefer customers pay with cash or a check.

October 1 is an important date for businesses that accept credit cards. That's when a new rule takes effect, shifting the liability for fraudulent credit c...
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Citibank fined $700 million for illegal credit card practices

CFPB: Consumers spent millions of dollars for services they didn't order

The Consumer Financial Protection Bureau (CFPB) says Citibank, N.A. bilked roughly 7 million customers through deceptive marketing and billing for debt protection and credit monitoring services.

It has ordered the bank to pay $700 million in relief to consumers and $35 million in penalties.

A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls, the CFPB said. 

“We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray. “In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”

According to the CFPB, Citibank actively marketed and enrolled consumers in five debt protection add-on products: “AccountCare,” “Balance Protector,” “Credit Protection,” “Credit Protector,” and “Payment Safeguard.”

These products promised to cancel a consumer’s payment or balance, or defer the payment due date, if the consumer experienced certain hardships, such as job loss, disability, hospitalization, and certain life events, such as marriage or divorce.

Citibank also marketed and sold other add-on products – “IdentityMonitor,” “DirectAlert,” “PrivacyGuard,” and “Citi Credit Monitoring Services” – that offered credit-monitoring or credit-report-retrieval services. Citibank also offered “Watch-Guard Preferred,” a wallet-protection service that notified credit and debit card issuers if the consumers reported a card lost or stolen.

Deceptive marketing

The service were marketed through a variety of deceptive methods, including telemarketing calls, online enrollment, “point-of-sale” application and enrollment at retailers, or when enrolled consumers later called tocancel certain products, the CFPB said. 

For example, confusing text on pin-pad offer screens at the point of sale increased the likelihood that consumers applying for credit cards at a retailer would not realize they were both applying for credit and purchasing debt-protection coverage.

The full text of the CFPB’s consent order is available online

The Consumer Financial Protection Bureau (CFPB) says Citibank, N.A. bilked roughly 7 million customers through deceptive marketing and billing for debt pro...
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European Union accuses MasterCard of gouging tourists

The card giant's "artificially high" interbank fees are being investigated

The European Union's quibbles with Google are well-known and now it's taking on another symbol of American domination -- MasterCard. EU regulators say the credit card giant overcharges travelers for their purchases.

The EU for two years has been conducting an antitrust investigation into whether MasterCard stifles competition by charging "arrtificially high" interbank fees that stifle competition (and tourism) by driving up the total cost of purchases made by tourists.

The fees are not paid directly by tourists but are passed on to retailers, who in turn build them into the prices paid by consumers, even those who pay with cash.

"We currently suspect MasterCard is artificially raising the costs of card payments, which would harm consumers and retailers in the EU," said competition commissioner Margrethe Vestager, according to Courthouse News Service. "We have concerns both in relation to the rules MasterCard applies to cross-border transactions within the EU, as well as the fees charged to retailers for receiving payments made with cards issued outside Europe. MasterCard now has an opportunity to respond to our charges."

MasterCard said it is "working with the European Commission on the issue" and promised to release a formal response soon.

The European Union's quibbles with Google are well-known and now it's taking on another symbol of American domination -- MasterCard. EU regulators say the...
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Chase slapped for selling zombie debt, illegally robo-signing court documents

The bogus debt sales led to collection efforts against consumers

JPMorgan Chase faces more than $200 million in penalties and refund payments for selling "zombie debts" and illegally robo-signing court documents as a result of enforcement actions by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and 47 states.

Chase allegedly sold bogus debts to third-party debt buyers -- accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible. Many of the debt buyers then began hounding consumers in an attempt to collect the non-existent debts.

“Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray. “Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers.”

The order requires Chase to document and confirm debts before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt buyers from reselling debt and is barred from selling certain debts. Chase is ordered to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’ accounts.

Chase will pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of the Currency (OCC) in a related action.

The CFPB found that Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices. Chase sold faulty and false debts to third-party collectors, including accounts with unlawfully obtained judgments, inaccurate balances, and paid-off balances.

Chase also sold debts that were owed by deceased borrowers. Chase also filed misleading debt-collections lawsuits against consumers using robo-signed and illegally sworn statements to obtain false or inaccurate judgments for unverified debts.

JPMorgan Chase faces more than $200 million in penalties and refund payments for selling "zombie debts" and illegally robo-signing court documents as a res...
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Customer-card security breach at Fred's Super Dollar

Hackers planted malware on POS systems; full extent of the breach not yet known

Southern and Midwestern shoppers beware: it looks like Fred's Super Dollar, a discount pharmacy and general merchandise retailer, is the latest business to lose customer payment-card data after hackers planted malware on the point-of-sale (POS) systems used in checkout lanes at Fred's locations.

Security expert Brian Krebs reports that he contacted the company last week, after “about a pattern of fraud on customer cards indicating that Fred’s was the latest victim” of malware planted on POS systems.

Fred's Inc. responded in a formal statement on Friday, admitting that:

Fred’s Inc. recently became aware of a potential data security incident and immediately launched an internal investigation to determine the scope of the issue. We retained Mandiant, a leading independent forensics firm, to examine our data security systems.

We want to assure our customers that protecting their information is one of our top priorities and we are taking this potential incident very seriously. Until this investigation is completed, it will be difficult to determine with certainty the scope or nature of any potential incident, but we will continue to work vigilantly to address any potential issues that may affect our customers.

Scope unknown

So far, that's the only information available: Fred's had a security breach, and hired investigators to look into it. The scope of the breach has not yet been determined: how long ago did the hackers plant the malware? How long were the hackers then able to monitor any transactions on those infected POS systems? And how many Fred's locations were affected?

Krebs' sources are “unclear” on that last bit, but said “the pattern of fraudulent charges traced back to Fred’s stores across the company’s footprint in the Midwest and south, including Alabama, Arkansas, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Tennessee and Texas.”

So if you are or have been a Fred's shopper in any of those states, and paid with a card rather than in cash, check your card statement extra-closely to see if you can spot any fraudulent charges.

Southern and Midwestern shoppers beware: it looks like Fred's Super Dollar, a discount pharmacy and general merchandise retailer, is the latest business to...
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ATM debit-card theft soars to highest levels in 20 years

Fraud crackdowns in one area lead to increased criminal activity elsewhere

Cracking down on data theft is kind of like squeezing a balloon: press down on a bulge in one area, and it'll only swell somewhere else.

So perhaps it's no surprise that today's Wall Street Journal reports the distressing statistic that, while brick-and-mortar merchants have been cracking down on data fraud at the checkout counter, criminals responded by attacking automatic teller machines, targeting not just bank-owned ATMs but the independently owned “cash kiosks” common in shopping malls, restaurants and other businesses.

(And that's not even counting the prevalence of hidden “skimmers” used to steal data from any ATM card swiped through them.)

Relatively easy

For a thief equipped with the right tools, it's relatively easy to steal debit card information and make counterfeit debit cards, which are then used to steal money from ATMs. The Journal said that according to FICO, the credit-scoring and analytics firm, the period spanning from January to April 9, 2015 saw more debit-card ATM attacks than any previous period in the past 20 years:

Debit-card compromises at ATMs located on bank property jumped 174% from Jan. 1 to April 9, compared with the same period last year, while successful attacks at nonbank machines soared by 317%, according to FICO. … The company declined to disclose the total number of such incidents, citing contractual restrictions with its customers.

ATM fraud has been growing overseas, too. Just last week, we reported the discovery of a new form of ATM fraud plaguing banks in Britain: thieves armed with nothing more than an iPod and a piece of plastic can spy on would-be ATM customers, steal their passcode and arrange for the machine to “eat” their cards – which are then retrieved and used to drain money from the account while the victim contacts bank personnel about their apparently faulty ATM. However, that form of fraud involves stealing and using legitimate ATM cards, not making counterfeit cards as reported by FICO.

It's important to remember that from an individual cardholder's perspective, debit card fraud is much worse than credit card fraud, because debit cards withdraw money directly from your savings accounts, whereas credit card purchases essentially borrow money from the credit card company.

This means that even if your debit-card fraudulent-charge complaint is ultimately settled in your favor, with the bank ultimately making full restitution to you – you still have to go without your money while the matter is being resolved.

If you do have a debit card, even if you're convinced that your account numbers are safe from thieves, you still need to check your account activity on a regular basis, whether you've used the card recently or not, so that if fraudulent withdrawals do occur, you can report them to your bank as soon as possible.

Cracking down on data theft is kind of like squeezing a balloon: press down on a bulge in one area, and it'll only swell somewhere else.So perhaps it's...
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Newest ATM security threat: one iPod plus a little plastic equals a big problem for banks

Be especially wary if an ATM “eats” your card; that's how this scam starts

British police have uncovered the latest security threat to ATM cardholders, a threat so simple from a thief's perspective that it's pretty much guaranteed to come to America — if it hasn't already.

Security-savvy ATM users have known for years now to watch out for illegal “skimmers” — electronic devices placed over a legitimate ATM-card reader to steal personal identification numbers (PINs) and other information from any swiped cards.

Many of these skimmers are small and thin enough to escape a typical ATM user's notice (unless that sharp-eyed user knows exactly what to look for) — but a thief hoping to use a skimmer generally needs either technological ability sufficient to build his own, or criminal “connections” sufficient to buy one.

No barriers

However, as Security Affairs reported yesterday, the latest criminal threat to ATM security has no such barriers to entry. An off-the-shelf iPod hidden behind a panel with a pinhole drilled in it is all it takes to make a pinhole spy camera capable of recording the PINs of anyone who visits that particular ATM.

Though there's a little more to the scam than that. Apple's iPods have been on the market for years, but only last January was the first such incident of this particular iPod-based ATM spy camera scheme discovered in Gatley, Stockport (a suburb of Manchester, England). As the oft-sensationalist Daily Mail reported last January:

These pictures show the lengths criminal gangs are going to in an attempt to steal card details at ATM machines - as a trick of using hidden iPods as spy cameras continues to spread.

It involves strapping the musical device to the roof of a cash point and setting it to record video of a person inputting their personal identification number (PIN).

The iPod is concealed in a specially-designed fascia with the camera recording through a pinhole-sized gap.

A fascia is simply a long, thin board covering the area where a wall joins a roof or ceiling — the architectural equivalent of a beveled edge, more or less.

Card-eater

So long as the thief has a few minutes of privacy, it's very easy to attach an iPod to the roof or upper wall of an ATM cash point, hidden behind a fascia of the same color. After installing this hidden camera, the fraudsters then slip a thin piece of plastic into the actual ATM card slot.

Now they're ready to pull their scam, which works like this: a victim walks to the ATM, inserts his card and types his PIN, unaware of the hidden camera recording this information. Meanwhile, that piece of plastic in the card slot traps the card inside the ATM. So the victim can't get his card out of the machine, and eventually leaves – most likely to contact the bank and complain about a faulty card-eating ATM.

Once the victim leaves, the thieves go to the ATM, retrieve the card from the slot and the PIN from the video recording, and use these to withdraw cash from the victim's account.

When British police discovered such a setup at a Barclays ATM, they immediately removed the device and informed Barclays, which in turn urged its customers to keep a sharp eye on their accounts and immediately contact the bank if they notice any signs of fraudulent activity.

And if you're an American ATM user, regardless of who you bank with, you need to do the same thing.

British police have uncovered the latest security threat to ATM cardholders, a threat so simple from a thief's perspective that it's pretty much guaranteed...
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Understanding credit reports is key to building wealth

But survey finds wide knowledge gaps among consumers

Access to credit allows you expand the power of your money. Having $25,000 in cash won't pay for much of a house but it might allow you to borrow enough to pay for a very nice home. As long as you appear to a lender to be a good risk.

Credit often gets a bad rap because it is easily misused. When people take on more debt than they can repay, they end up in a downward financial spiral that can end in bankruptcy.

That's why it is important to know what is contained in your credit report, maintained by the three credit reporting agencies Trans Union, Experian and Equifax, and the three-digit number that makes up your credit score.

Don't know

A survey by Chase Slate has found that 39% of U.S. consumers admit to not knowing their credit score and 52% were not aware that not paying bills on time has the largest impact on their credit score.

“Having healthy credit could mean the difference between achieving major life goals, such as buying a home or starting a small business, and never realizing those dreams,” said Pam Codispoti, President of the Mass Affluent Business for Chase Card Services. “Yet too many Americans don’t have access to information and tools that empower them to properly plan for the future and manage their credit health.”

Under federal law, every consumer can get free access to their credit reports once a year. You can access these reports by going to a single website – www.annualcreditreport.com. You can download the credit reports from Experian, Equifax and Trans Union all at once or one at a time throughout the year.

The reports will show what credit accounts are open in your name and whether these accounts are current. In addition to making you aware of your financial health, these reports will show if someone has stolen your identity and opened accounts in your name.

FICO credit scores aren't free

While access to your credit report is free, access to your credit score is not. The website CreditKarma.com advertises that it will provide a credit score at no charge, which is true. But the score is a proprietary one generated from data in your credit report. Your actual FICO score costs money.

Still, you can keep up with your FICO credit score by paying for it or by receiving a copy from your lender whenever you finance an automobile or home purchase. It's a number worth knowing.

“Your credit score is much more than just a number – it’s a key indicator of credit health that helps you assess where you stand and what’s within reach,” said personal finance expert and Chase Slate financial education partner Farnoosh Torabi. “Checking your score, and checking it regularly, is a simple step you can take now to introduce more positive financial habits into your life. The higher your score, the more likely you are to be deemed eligible for a loan or receive better terms and interest rates.”

For the record, credit scores run from 300 to 850, with the higher the number, the better your credit. A good credit score is generally considered to be 720 and higher. Once your score falls below 660, you are headed into poor to bad credit territory, significantly limiting what you can borrow and how much you'll pay for it.

Raising your credit score

Need to raise your credit score? Here's the best way to do it.

First, pay all your bills on time. If your cell phone provider reports your payment as delinquent, that's going to drag down your credit score.

Next, focus on paying down your credit card balances. The gap between your credit limit and the amount you owe should be as wide as possible. If you have an account with a $5,000 credit limit and a $4,400 balance, that doesn't look good.

Refrain from opening new credit accounts unless it is absolutely necessary. When checking out and the cashier asks if you'd like to open a store credit card to get $10 off your purchase, it's best to decline. Not worth it.

Some consumers with credit score issues they're unable to resolve themselves may benefit from legal representation. To learn more, visit our credit repair companies guide.

Finally, bite the bullet and pay down your debt instead of moving it to another credit card. There are times when moving a balance from a high interest credit card to one offering 0% interest might make sense, but it can also ding your credit score.

Access to credit allows you expand the power of your money. Having $25,000 in cash won't pay for much of a house but it might allow you to borrow enoug...
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Costco picks Citi Visa to replace American Express

Costco customers will be offered a new co-branded card to replace their Amex

Costco members will be getting a new credit card next year. The wholesale superstore chain has chosen Citigroup to succeed American Express as its exclusive issuer of co-branded cards in the U.S.

Costco said last month that it would be ending its relationship with Amex after the companies were unable to reach agreement on a renewal. There had been speculation that Capital One would snag the account but Citi apparently offered a sweeter deal.

The new arrangement takes effect April 1, 2016, when a co-branded Citi Visa card will become Costco's exclusive card.

The deal is actually two deals -- one with Citi to issue co-branded cards and the other with Visa to provide the payment network. American Express operates both a credit card company and a payment network.

Citi will be buying the existing portfolio of co-branded cards, Costco said in a statement

"Once issued, Costco's co-brand Visa credit card would provide generous rewards to Costco members, serve as the Costco membership card, and would be accepted at Costco locations in the United States and Puerto Rico, as well as all merchants worldwide that accept Visa credit cards," Costco said.

"Costco will provide its members with additional information in the coming months regarding the anticipated transition from its existing co-brand credit card program," the company added.

Citi limits?

So does this mean Costco customers will be required to have a Citi-issued Visa card? Probably. Costco said the Citi Visa card would serve as customers' Costco membership card. It might, however, be possible to use a different Visa card to pay for purchases. The companies haven't yet made that clear.

Currently, customers can use any American Express card -- not just the Costo/Amex co-branded Visa card to shop at Costco, presenting their Costco membership card at check-out.   

Currently, customers can also use MasterCard and Visa debit cards at Costco.

Anyway you look at it, it's bad news for American Express, which has said that the Costco account amounts to about 20% of its business. Analysts said Citi would make about $100 million annually off the Costco account.

Amex has been struggling to hold onto market share, while also trying to find ways to encourage its cardholders to put more of their purchases on the card. Its large portfolio of affluent customers makes Amex the biggest U.S. credit card issuer in terms of dollar volume. 

In other words, American Express has fewer cardholders than its biggest competitors but the customers it does have tend to be big spenders.

Amex said last week it would sweeten the deal for its Premier Rewards Gold cardholders.

“We’re making one of our most popular cards even better. This latest investment for our Premier Rewards Gold Card Members is designed to deepen our relationship by providing more value in the areas they spend most -- from everyday spending on things like gas and groceries, to dining and larger travel purchases,” said Lisa Durocher, Senior Vice President, Consumer Charge Cards & Benefits at American Express.

Costco members will be getting a new credit card next year. The wholesale superstore chain has chosen Citigroup to succeed American Express as its exclusiv...
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Hackers may have stolen payment card info from White Lodging's Marriott hotels

Possbly connected to breach from 2013

Travelers beware: it looks like hackers managed once again to steal credit or debit card data from the hotel franchise firm White Lodging Services Corporation, specifically a handful of Marriott properties which White Lodging owns.

Security blogger Brian Krebs said that multiple financial institutions have noticed a pattern of fraudulent charges on cards which appear to share one trait in common: all had been used at a White Lodging-owned Marriott. (White Lodging, meanwhile, says it is investigating, but has found no sign of a new breach.)

If confirmed, this security breach would be the second one to be discovered at White Lodging properties in a little over a year. In January 2014, information came to light suggesting that hackers had managed to lift customer information from various White Lodging properties throughout most of 2013 – not just White Lodging-owned Marriotts, but certain hotels under the names Hilton, Sheraton and Westin, as well.

Now, 13 months later, Krebs' sources in financial institutions are once again seeing evidence of security breaches at many of the same White Lodging-owned hotel properties hit before:

Banking sources say the cards that were compromised in this most recent incident look like they were stolen from many of the same White Lodging locations implicated in the 2014 breach, including hotels in Austin, Texas, Bedford Park, Ill., Denver, Indianapolis, and Louisville, Kentucky.  Those same sources said the compromises appear once again to be tied to hacked cash registers at food and beverage establishments within the White Lodging run hotels. The legitimate hotel transactions that predated fraudulent card charges elsewhere range from mid-September 2014 to January 2015.

Contacted about the findings, Marriott spokesman Jeff Flaherty said all of the properties cited by the banks as source of card fraud are run by White Lodging.

So if you've stayed at a White Lodging-run Marriott hotel in the past few months – or if you merely had a drink in the hotel bar or dined in the hotel restaurant – keep an extra-sharp eye out for indications that the card you used for payment has been compromised.

​Travelers beware: it looks like hackers managed once again to steal credit or debit card data from the hotel franchise firm White Lodging Services Corpora...
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Texas company sued for sham credit card

Consumers were duped into thinking the company was affiliated with unions

When is a credit card not a credit card? According to the Consumer Financial Protection Bureau (CFPB), when it's offered by Union Workers Credit Services.

The agency is suing the  Texas-based company on charges it deceived consumers into paying fees to sign up for a sham credit card. According to the CFPB the company falsely advertises a general-use credit card that -- in actuality -- can only be used to buy products from the company.

Union Workers Credit Services also deceptively implies an affiliation with unions by -- among other things -- using pictures of nurses, firefighters, and other public servants in its advertising, the lawsuit says. The court action seeks compensation for victims, a civil penalty and an injunction against the company.

“The business model for Union Workers Credit Services is built on duping consumers into signing up for a sham credit card,” said CFPB Director Richard Cordray. “Hundreds of thousands of people, including a great many union members who were specially targeted, have been tricked into spending millions of dollars for a so-called credit card that can really only be used to buy the company’s own products. From the misleading photos of nurses and firemen on its website to its bogus credit card, Union Workers Credit Services is illegally deceiving consumers.”

History of deception alleged

The CFPB claims that the company, which has been in operation since roughly 2004, generates the vast majority of the its revenue from selling a buying-club membership card that it falsely advertises as a general-purpose credit card.

Most consumers never use the membership card but cannot recoup their membership fees -- $37 if they apply through the mail or $95 if they apply online. Union Workers Credit Services allegedly has collected membership fees from hundreds of thousands of consumers throughout the U.S., totaling millions of dollars.

According to the lawsuit, Union Workers Credit Services is:

  • Falsely advertising a general-use credit card: The complaint alleges that through direct-mail ads and on its website, the company advertises a credit card that it falsely implies is for general use. The company’s ads suggest to consumers they can receive a pre-approved “platinum card” with a credit limit of up to $10,000 and a 5% annual percentage rate. The offer says consumers do not have to worry if they “have been denied access to a Visa or MasterCard.” Later, many consumers realize what they really bought was a buying-club membership card to purchase only goods from the company itself, rather than from other retailers.
  • Falsely advertising an association with unions: The CFPB also claims that the company deceives consumers by falsely suggesting that it is affiliated with labor unions. The banner of its website has photos of police, firefighters, and medical workers. The online application form asks consumers to select their union membership from a drop-down list.
  • Misusing consumer credit reports: Federal law requires that when companies use consumer credit reports to target certain advertisements to consumers without their advance consent, they must advise those consumers of their right to opt out of receiving such advertising. The lawsuit alleges that Union Workers Credit Services failed to do this.

Thousands of consumers have filed complaints with law enforcement agencies and the Better Business Bureau about Union Workers Credit Services, which has also been sued by multiple government authorities, including the New York State Attorney General and the U.S. Postal Service.

In addition to seeking to stop the alleged unlawful practices of Union Workers Credit Services, CFPB has requested that the court impose penalties on the company for its conduct and require compensation be paid to consumers who have been harmed.  

When is a credit card not a credit card? According to the Consumer Financial Protection Bureau (CFPB), when it's offered by Union Workers Credit Services. ...
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Sprint faces huge fine for unauthorized charges

It's the latest to be snagged for wireless cramming violations

In October, AT&T Wireless was fined $105 million for billing customers hundreds of millions of dollars for bogus cellphone subscriptions to horoscopes, love tips and other detritus they had never ordered. It was the largest fine in the FCC's history.

Now it's Sprint's turn. The Consumer Financial Protection Bureau (CFPB) today sued Sprint charging it illegally billed wireless consumers tens of millions of dollars in unauthorized third-party charges.

“Today we are suing Sprint for allowing illegal charges to be crammed onto consumers’ wireless bills,” said CFPB Director Richard Cordray. “Consumers ended up paying tens of millions of dollars in unauthorized charges, even though many of them had no idea that third parties could even place charges on their bills. As the use of mobile payments grows, we will continue to hold wireless carriers accountable for illegal third-party billing.”

The Bureau’s complaint alleges that Sprint operated a billing system that allowed third parties to “cram” unauthorized charges on customers’ mobile-phone accounts and ignored complaints about the charges. The CFPB seeks refunds for affected consumers and penalties to deter unauthorized third-party charges in the future.

The practice of billing customers for third-party services they did not order is known as cramming, and it is one of the plagues of the deregulated telecommunications environment. The charges tend to be small -- usually about $10 a month -- and are often missed by consumers when they examine their bills each month.

The charges are for such generally useless services as horoscopes, ring tones, sports scores and other information and features that are widely available at no charge on the Internet. 

The CFPB said that Sprint outsourced payment processing for these digital purchases to vendors called “billing aggregators” without properly monitoring them.

The lack of oversight gave aggregators near unfettered access to consumers’ wireless accounts. Sprint’s system attracted and enabled unscrupulous merchants who, in some cases, only needed consumers’ phone numbers to cram illegitimate charges onto wireless bills. The charges ranged from one-time fees of about $0.99 – $4.99 to monthly subscriptions that cost about $9.99 a month. Sprint received a 30-40 percent cut of the gross revenue from these charges.

Most consumers were targeted online. Consumers clicked on ads that brought them to websites asking them to enter their cellphone numbers. Some merchants tricked consumers into providing their cellphone numbers to receive “free” digital content and then charged for it. Many others simply placed fabricated charges on bills without delivering any goods or communicating with consumers, the suit alleges.

Others charged

Besides AT&T, the FCC has also sued T-Mobile in a case that is still pending. Prosecutors have said they will argue that T-Mobile made hundreds of millions of dollars through similar cramming schemes.

Consumers rate Sprint PCS

The Federal Trade Commission (FTC) and other agencies have gone after the third-party operators who promote the schemes and process the bills. 

Today the FTC said that one of the defendants behind a massive landline cramming operation that placed more than $70 million in unauthorized charges on consumers’ phone bills has agreed to settle charges against him.

Nathan M. Sann, one of the defendants in the American eVoice, Ltd. case has agreed to settle the FTC’s charges related to his alleged participation in the scheme.

In its complaint, the FTC alleged that the operation placed charges ranging from $9.95 to $24.95 per month on consumers’ landline phone bills for voicemail services they never signed up for and never even knew they had.  The case against the other entities and individuals involved in the scheme is on-going.

The settlement contains a monetary judgment of more than $21 million, which represents the amount of consumer injury attributable to Sann during his involvement with the scam.  The judgment will be suspended due to Sann’s inability to pay upon his surrender of certain personal assets.  Under the terms of the settlement, if Sann has misrepresented his financial condition, the full judgment would become due.

In August, the FTC reached a settlement from Andrew Bachman, who with a number of other defendants pitched text message services offering “love tips,” “fun facts,” and celebrity gossip alerts, and placed charges for these services – typically $9.99 a month – on consumers’ wireless bills without their permission.

Bachman, who appears to be typical of the relatively small operators who have turned wireless telecommunications networks into treacherous territory, agreed to surrender more than $1.2 million in assets, including the contents of numerous bank accounts, two luxury cars, shares in a number of startup companies and multiple luxury watches.

Unlike Bachman and other small-time defendants who lose all of their personal assets in negotiated settlements, AT&T, Sprint and other telecom giants simply pay the fines and move on, their executives free of personal liability and virtually never threatened with jail terms for the misdeeds that occurred on their watch.  

In October, AT&T Wireless was fined $105 million for billing customers hundreds of millions of dollars for bogus cellphone subscriptions to horoscopes, lov...
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Payment systems breached at U.S. bebe stores

Hackers had access to customer information for most of November

There's bad news for shoppers of bebe clothing stores. On Friday, the company confirmed what security blogger Brian Krebs had reportedthe day before: for most of the month of November, hackers managed to breach bebe stores' payment systems and steal customer data, possibly including their name (as it appears on the card), account number, the expiration date and verification code.

If you shopped with a payment card at a physical bebe store location in the U.S., Puerto Rico or the U.S. Virgin Islands between Nov. 8 and Nov. 26, 2014, your information might be compromised. However, the company said that its website and mobile payment apps, as well as its physical stores in Canada and other international locations, were not affected.

"Our relationship with our customers is of the highest importance," said Jim Wiggett, Chief Executive Officer, bebe. "We moved quickly to block this attack and have taken steps to further enhance our security measures."

As usually happens in such cases, bebe stores is offering customers a year of free credit monitoring protection even though, as Krebs pointed out, such services “do nothing to help consumers block fraud on existing accounts.”

Whether you have professional credit monitoring or not – and, for that matter, even if you've never shopped at a bebe store or any other retailer known to have been hacked, you need to carefully scrutinize your credit-card statements every month, to ensure that you recognize and authorized each and every one of them.

There's bad news for shoppers of bebe clothing stores. On Friday, the company confirmed what security blogger Brian Krebs had reported the day before: for ...
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New protections for prepaid credit cards proposed

Loss limitations and risk disclosure are part of the plan

New federal consumer protections for the prepaid credit card market, which include that an issuing company limit consumers’ losses when funds are stolen or cards are lost, are being proposed by the Consumer Financial Protection Bureau (CFPB).

In addition, the issuing companies would be required to investigate and resolve errors, provide easy and free access to account information, and adhere to credit card protections if a credit product is offered in connection with a prepaid account.

New “Know Before You Owe” prepaid disclosures that would provide consumers with clear information about the costs and risks of prepaid products upfront are also being proposed.

“Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” said CFPB Director Richard Cordray. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone, or sending a payment.”

Prepaid products: What are they?

Prepaid products are consumer accounts typically loaded with funds by a consumer or by a third party, such as an employer. Consumers can use these products to make payments, store funds, get cash at ATMs, receive direct deposits, and send funds to other consumers.

Prepaid products are often bought at retail stores or online and are among the fastest growing types of consumer financial products in the United States. For example, the amount of money consumers loaded onto “general purpose reloadable” prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. The total dollar value loaded onto general purpose reloadable cards is expected to continue to grow to nearly $100 billion through 2014.

This proposal would apply a number of specific federal consumer protections to broad swaths of the prepaid market for the first time. The proposal would cover traditional plastic prepaid cards, many of which are general purpose reloadable cards. In addition, the proposal would cover mobile and other electronic prepaid accounts that can store funds.

The prepaid products covered by the proposal also include: payroll cards; certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance, child support, and pension payments; student financial aid disbursement cards; tax refund cards; and peer-to-peer payment products.

Prepaid protections

Many consumers use prepaid products as an alternative to traditional checking accounts. Currently, however, there are limited federal consumer protections for most prepaid accounts. The proposal would ensure that most prepaid account consumers would have important protections under the Electronic Fund Transfer Act after registering their account.

The protections are generally similar to those checking account consumers already receive and include:

  • Easy and free access to account information: Under the CFPB proposal, financial institutions would be required to either provide periodic statements or make account information easily accessible online and for free. The proposal would ensure that consumers are able see their account balances and a history of their transactions and fees.
  • Error resolution rights: This proposal would require financial institutions to investigate errors that consumers report on registered accounts and to resolve those errors in a timely manner. If the financial institution cannot resolve an alleged error within a certain period of time, it would be required to temporarily credit the disputed amount to the consumer to use while the institution finishes its investigation.
  • Fraud and lost-card protection: The proposal would protect consumers against unauthorized, erroneous, or fraudulent withdrawals or purchases, including when registered cards are lost or stolen. If consumers lose their prepaid card or find erroneous or fraudulent charges on their prepaid account, the rule would limit their responsibility for transactions they did not authorize and create a timely method for them to get their money back. As long as the consumer promptly notifies his financial institution, the consumer’s responsibility for unauthorized charges would be limited to $50.

Know before you owe: prepaid fees

The proposal also includes new “Know Before You Owe” prepaid disclosures that would provide consumers with standard, easy-to-understand information about the prepaid account. Under the proposal, prepaid consumers would have access to:

  • Standard, easy-to-understand information upfront: The CFPB’s proposal includes two required forms, one short and one long, with easy-to-understand disclosures.
  • Publicly available card agreements: To facilitate comparison shopping, this proposal would require that prepaid account issuers post their account agreements on their websites. Additionally, issuers would be required to submit those agreements to the Bureau for posting on a public, Bureau-maintained website.

Credit protections

The proposal also includes strong protections in connection with credit products that allow consumers to pay to spend more money than they have deposited into the prepaid account. Under the proposed rule, if consumers choose to use a credit product related to their prepaid account, they would be entitled to the same protections that credit card consumers receive today. The protections that would also apply to prepaid credit products include:

  • Ability to pay: Like credit card issuers, prepaid companies would be required to first make sure consumers have the ability to repay the debt before offering credit. For consumers under 21, the companies would be required to assess these consumers’ independent ability to repay the credit.
  • Monthly credit billing statement: Prepaid companies would be required to give consumers the same monthly periodic statement that credit card consumers receive. This statement would detail consumers’ fees, and if applicable, interest rate, what they have borrowed, how much they owe, and other key information about repaying the debt.
  • Reasonable time to pay and limits on late fees: Prepaid companies, like credit card issuers, would be required to give consumers at least 21 days to repay their debt before they are charged a late fee. Additionally, late fees must be “reasonable and proportional” to the violation of the account terms in question.
  • Limited fee and interest charges: During the first year a credit account is open, the total fees for prepaid credit products would not be allowed to exceed 25% of the credit limit. Card issuers generally are prohibited from increasing the interest rate on an existing balance unless the cardholder has missed two consecutive payments. Card issuers may increase the interest rate prospectively on new purchases, but must generally give the consumer 45 days advance notice -- during which time the consumer may cancel the credit account.

The CFPB’s proposal also includes some additional protections to ensure that the prepaid account and the credit product are distinct, such as:

  • Thirty-day waiting period: The CFPB’s proposal would require companies to wait thirty days after a consumer registers the prepaid account before they could formally offer credit to the consumer.
  • Wall between prepaid funds and credit repayment: Prepaid companies could not automatically demand and take credit repayment whenever a prepaid account is next loaded with funds. Further, prepaid companies could not take funds loaded into the prepaid account to repay the credit when the bill is due unless the consumer has affirmatively opted in to allow such a repayment. Even then, companies cannot take funds more frequently than once per calendar month. Payment also cannot be required sooner than 21 days after the mailing of the periodic statement.
New federal consumer protections for the prepaid credit card market, which include that an issuing company limit consumers’ losses when funds are stolen or...
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Falling behind in credit card payments can cost a bundle

But it isn't as bad as it was a couple of years ago

There are many things you should not do with a credit card. Among them -- falling behind on payments.

Consider a cardholder who carries a $4,000 balance on a card charging 11.82%. That's the average rate for those carrying a balance, according to the Federal Reserve. At the 28.45% average penalty rate, the cardholder would have to pay an extra $665.20 in interest a year, according to CreditCards.com's survey of 100 U.S. credit cards. In 2012, it would have been worse. The average APR then was 28.60%.

Penalty rates are the often-stratospheric APRs that a bank charges a cardholder for making a major mistake, typically being 60 days or more late with a payment.

Staying current is a must

“This drives home, once again, just how incredibly important it is to pay your bills on time every time,” said Matt Schulz, CreditCards.com’s senior industry analyst. “Debt can grow quickly even with an average interest rate. But when you’re hit with a penalty rate, things can get out of control in a hurry.”

Fortunately for cardholders who carry a balance, the number of issuers using penalty interest rates has decreased dramatically since the passage of the 2009 Credit Card Accountability, Responsibility and Disclosure (CARD) Act. In 2010, 91% of issuers imposed penalty rates. By 2012, the number had fallen to 69%. This year, it was just 60%.

Among card issuers charging a penalty rate, the lowest -- 17.99% -- is assessed by Pentagon Federal Credit Union's Cash Rewards Visa Standard card. 

Survey highlights

  • Sixty of 100 surveyed cards have a penalty interest rate of some kind:28 have penalty APRs based on the prime rate plus a specified percent. Rates based on the prime rate can move up automatically when that index rises, as it is expected to in 2015; 32 calculate a cardholder's penalty APR based on creditworthiness.
  • Only 23 cards disclose penalty rate information in the card terms and conditions; 77 cards required follow-up phone calls or review of cardholder agreements to confirm penalty rate details.
  • The CARD Act required lenders to revoke the penalty rate if consumers make 6 consecutive on-time payments after the penalty rate is applied, but just 38 of the 60 cards make that clear in their publicly available documents.
There are many things you should not do with a credit card. Among them -- falling behind on payments. Consider a cardholder who carries a $4,000 balance o...
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Home Depot: Hackers stole 53 million email addresses in addition to credit card data

It was already the largest data theft on record; now that record will be even harder to break

It keeps getting worse. Two months ago, Home Depot revealed that hackers had stolen 56 million credit- and debit-card numbers. And now, the company says the thieves also made off with at least 53 million customer email addresses. 

It's been over two months now since the initial discovery that hackers had somehow managed to lift massive amounts of confidential customer data from Home Depot. Though Home Depot only announced it in mid-September, the hackers had actually been lifting data for several months by then (although it turned out nobody actually “hacked” into Home Depot's database; instead, somebody somehow managed to plant malware onto the checkout systems in various Home Depot stores).

So far as anyone knows, that malware has since been scrubbed from all Home Depot systems, and the months-long hacking is finally “over” — yet the full extent of the damage probably still isn't known.

Not until late September did the financial consequences of the breach start making themselves felt, as banks and credit unions across the U.S. and Canada starting receiving large numbers of fraudulent charges related to the breach. As of late October, American credit unions report combined losses of at least $60 million to replace all compromised cards, cover fraudulent charges or withdrawals and pay additional staff to oversee the whole mess.

Another shoe drops

And now the next installment. Late last night, Home Depot disclosed new information about the months-old hack: in addition to raw credit- and debit-card numbers, the thieves managed to steal at least 53 million customer email addresses.

The hacking shares many details in common with earlier mass hackings, especially the notorious Target hack from 2013: same type of malware used in both cases, and also, in both cases, the hackers managed to breach the stores' security by attacking a third-party vendor – in Target's case, an HVAC repairman; for Home Depot, a still-unidentified third-party vendor whose user name and password were presumably stolen sometime in April, just before the hackers first used those credentials to log on to Home Depot's network and start stealing data.

Home Depot is still offering free identity-theft protection services for any customer who used a payment card in any store since early April.

If you are such a customer, you have hopefully taken advantage of this free service already; this can help protect your financial data, but unfortunately won't do much to keep hackers from sending spam to your stolen email address.

It's over two months now since the initial discovery that hackers had somehow managed to lift massive amounts of confidential customer data from Home Depot...
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Bad week for mobile wallets: Apple Pay loses retailers and CurrentC gets hacked

Still some bugs to work out of non-cash electronic payment systems

It's far too early to predict who if anyone will be the eventual winner of the mobile-payment wars, especially since Apple Pay and its upcoming rival CurrentC both faced major setbacks this week.

Less than seven days after it was first made available, Apple Pay encountered its first roadblock when the pharmacy chains CVS and Rite-Aid stopped accepting it. Although neither chain officially explained why, most observers agree it's because they decided instead to work with a retailer-owned group called the Merchant Customer Exchange (MCX) to develop a competing mobile-payments app called CurrentC, scheduled to be widely released next year.

Mobile payment systems are being touted as far more secure than traditional credit and debit cards, which did not stop CurrentC from getting hacked this week (though full release won't be until next year, the app is currently being tested in a limited pilot program).

On Wednesday, participants in CurrentC's pilot program received a warning from the MCX: at some point in the previous 36 hours, hackers had managed to grab the email addresses of all participants.

Granted: by hacking-damage standards, hackers gaining access to a mere list of email addresses (without even getting the passwords to control them) is very mild indeed, and there's no evidence to suggest the hackers managed to get any other information MCX keeps on its users, such as their name, home address, phone number and actual physical location (or at least their phone's physical location). At least not this time.

It's far too early to predict who if anyone will be the eventual winner of the mobile-payment wars, especially since Apple Pay and its upcoming rival Curre...
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Home Depot security breach cost credit unions at least $60 million

Re-issuing a single stolen card number costs over $8

It's been less than two months since Home Depot first admitted (on Sept. 2) that it was “looking into some unusual activity” which everyone now knows was the largest retailer data theft to date, with at least 56 million debit and credit card numbers stolen. Home Depot formally admitted the breach on Sept. 18.

At the time, the Credit Union National Association (CUNA) urged its member credit unions to take part in a survey assessing the damages caused by the breach, including:

• Number of debit and credit cards affected;
• Costs incurred for card reissuance;
• Costs related to additional staffing, member notification, account monitoring, etc.;
• Changes in call volume;
• Changes in staffing; and
• Any specifically identifiable fraud-related losses.

By the end of September, two credit unions in Pennsylvania and New York had already filed federal lawsuits against Home Depot, seeking class action status on behalf of all financial institutions similarly affected by the breach.

And the financial fallout continues to be felt. Today CUNA released the results of its member survey and announced that Home Depot's security breach has cost U.S. credit unions nearly $60 million so far.

Still costs money

From the perspective of credit unions and other card issuers, one major problem with stolen credit card and similar account numbers is that even in a best-case scenario, where the theft is discovered and cards cancelled before the thief can make any fraudulent purchases with them, it still costs money just to issue new cards and set up new accounts. And of course, the Home Depot security breach was far from a best-case scenario for the credit unions and banks.

CUNA said that, according to a survey of member credit unions, 7.2 million of their debit and credit cards were affected, and had to be re-issued. The average cost per card was $8.02, which includes re-issuing the card itself, paying for fraudulent charges, and paying additional staff costs for account monitoring, member notification and similar costs.

CUNA economist Bill Hampel said that fraud accounted for 60% of the total cost, averaging $4.89 per card. But that means that even had this been a best-case security breach, with all 7.2 million of those cards cancelled before being put to any fraudulent use, it still would've cost roughly $3.13 to re-issue each card, and pay staff to notify members and monitor accounts to ensure no fraudulent activity; the best-case scenario still would've cost credit unions over $22.5 million.

Who pays?

How much of that cost is likely to be borne by Home Depot? Despite the pending lawsuits, chances are the credit unions and their members will be stuck with the bulk of it.

CUNA president and CEO Jim Nussle said “The cost to credit unions of data breaches — which seem to be occurring with increasing regularity — is rising, as the CUNA surveys clearly demonstrate …. The bottom line is that credit union members end up paying the costs — despite the fact that the credit unions they own had nothing to do with causing the breach in the first place.”

It's been less than two months since Home Depot first admitted (on Sept. 2) that it was “looking into some unusual activity” which everyone now knows was t...
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Do you know what payments impact your credit score?

Survey finds a lot of confusion

You probably have heard that being late in paying your bills can whittle away at your credit score. But which bills have the most impact?

When credit bureau TransUnion conducted a survey of consumers asking that very question, it found a lot of confusion. The fact is that not all of your monthly payments are routinely reported to credit agencies. But some are.

Nearly half of consumers who rent their homes mistakenly believe rental payments are automatically reported to credit bureaus and therefore affect their credit scores.

"Most consumers report paying rent on-time, but many don't realize that until now these payments are not boosting their credit histories," said Ken Chaplin, senior vice president of TransUnion.

Rental payments are starting to count

But that appears to be changing. Chaplin says more property managers are starting to report payments to credit bureaus and renters should be consistently monitoring what is being registered on their individual report.

More than 50% of consumers in the survey mistakenly believe payments for cable and Internet fees, utility bills and cell phone bills are regularly reported to credit bureaus. They aren't, unless of course you fall so far behind that it gets turned over to collections.

Paying your mortgage on time is regularly reported to credit agencies but fewer than 29% of consumers knew that.

The trend of property managers reporting rental payments to credit agencies is one TransUnion says will benefit renters in the long run. That's because, to build up a credit rating you need credit.

If rent is counted as reportable credit, then renters have the same opportunity to build their credit score as homeowners who pay a mortgage.

"Expanding the share of property managers who report rental payments will produce more accurate information that truly reflects how consistently consumers meet their financial obligations," said Chaplin. "It will benefit renters who want to help their credit scores and landlords who want to attract renters who pay rent on-time."

Renters appear to welcome the monitoring. More than half of renters in the survey said they would be more likely to choose a property to rent if they knew their landlord would report their rental payments to credit bureaus.

Check your credit report

There are other ways consumers can improve their credit scores. It starts with checking your credit report once a year, using www.annualcreditreport.com. Your credit report contains the data used to calculate your score and it may contain errors. Additionally consumers can hire a credit repair company - these companies provide consumers legal services to address credit report issues.

It's important to check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is accurate. If you find errors on any of your reports, dispute them with the credit bureau and reporting agency.

Be on time

The best way to improve you credit score is to pay all your bills on time, whether they are reported to credit agencies or not. Take advantage of your bank's payment reminders. They can send you a reminder by text or email when a payment is due.

You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account. However, this tool usually makes only the minimum payment on your credit cards and does not help instill a sense of money management.

If you are having trouble paying bills contact your creditors or see a legitimate credit counselor.

This won't rebuild your credit score over night but if you can begin to manage your credit and pay on time, your score should increase over time. Seeking assistance from a credit counseling service will not hurt your FICO score.

You probably have heard that being late in paying your bills can whittle away at your credit score. But which bills have the most impact?...
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Fallout continues from Home Depot data breach

Financial consequences starting to take their toll

It's been almost six months now since hackers first managed to breach Home Depot security in April, and started stealing its customers' confidential financial data.

The breach itself wasn't first discovered by independent security bloggers until Sept. 2, and not until Sept. 18 did Home Depot formally announce that yes, hackers had breached its security, and made off with 56 million debit- and credit-card numbers.

Home Depot also said that hackers did not steal anybody's personal identification numbers (PINs), which appears to be true yet might not matter since earlier reports suggested that, while the hackers didn't actually get anybody's PINs, they did get enough other data to change people's PINs without their knowledge.

Yet for all the time this security breach has existed, it appears that only now is the full financial damage starting to make itself felt.

Fraudulent transactions

The Wall Street Journal first reported yesterday that fraudulent transactions traceable to the breach were starting to surface, “rippling across fiancial institutions and, in some cases, draining cash from customer bank accounts.”

The customers who actually had money withdrawn from their accounts (as opposed to seeing fraudulent charges appear on their credit cards) presumably had this happen because the hackers were able to change their PINs by gaming the Voice Response Unit (VRU) banks use to deal with PIN changes; if you're worried your own bank account might be at risk, you might want to double-check your bank's PIN security measures against this hacking technque which security blogger Brian Krebs explained on Sept. 8.

In other news, related to the Home Depot breach, two credit unions (New York's Southern Chautauqua Federal Credit Union and Pennsylvania's First Choice Federal Credit Union) filed suit against Home Depot in Atlanta federal court last week, over financial damages the credit unions sustained as a result of Home Depot's data breach. An attorney says that the breach has already cost the financial industry “hundreds of millions” of dollars in damages.

The two credit unions are trying to have their lawsuit granted class action status. In Canada, an Ottawa man who says hackers charged $8,000 to his credit card after the breach is also suing Home Depot, and seeking similar class-action status for affected Canadians.

It's been almost six months now since hackers first managed to breach Home Depot security in April, and started stealing its customers' confidential financ...
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Report: Home Depot knew about security problems as far back as 2008

Company heard warnings years before hackers stole 56 million customer account numbers

Last week Home Depot officially confirmed what security experts had already suspected since Sept. 2: yes, hackers did indeed manage to steal confidential customer data from Home Depot shoppers: 56 million debit- and credit-card numbers in all, making it the largest such breach on record. Any payment card used at a Home Depot store between April and Sept. 2 of this year is potentially at risk.

The very next day, The New York Times reported that the company had repeatedly been warned of its weak, at-risk security practices as far back as 2008, yet did nothing about the news. Sources for the Times said that the company relied on outdated security software, even as some securty experts left the company after managers repeatedly dismissed their concerns.

Even when Home Depot finally started to listen and tried doing the right thing, it backfired badly: the Times also said that “in 2012, Home Depot hired a computer engineer to help oversee security at its 2,200 stores. But this year, as hacks struck other retailers, that engineer was sentenced to four years in prison for deliberately disabling computers at the company where he previously worked.”

Readers unsurprised

Consumers rate Home Depot
Our own readers were, for the most part, completely unsurprised by initial reports that Home Depot's data security might not be up to snuff: on Sept. 2, when we first reported the mere unconfirmed possibility of a Home Depot data breach, the people who commented on the story were downright blasé about the prospect.

“I can believe this,” comented S. Garcia posted, while another commenter, R. Watters, went into more detail:

This is nothing new. My bank account was debited over $1600 last year for two gift cards at two Home Depot stores in Texas. Apparently, someone got a hold of my debit card number at Home Depot. My bank credited my account, but Home Depot could not have cared less. One of the managers at the [redacted] store was even upset that someone gave me his name to contact. I no longer shop at Home Depot.

T. Hostetler pointed out another problem:

If you return an item to Home Depot that you charged on a credit card and you present a receipt, they will credit your credit card account for the return without you giving them your card again. Why in the hell are they allowed to store your credit card information on their computers? Just because you bought an item from them, should not give them the right to keep your credit card information as long as they see fit!

What to do

For what it's worth, Home Depot is offering free identity-theft protection services, including credit monitoring, to any customer who used a payment card during or after April 2014.

Interested customers should call 1-800-HOMEDEPOT (800-466-3337) in the United States, or 800-668-2266 in Canada.

Last week Home Depot officially confirmed what security experts had already suspected since Sept. 2: yes, hackers did indeed manage to steal confidential c...
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Best Buy, Walmart, other retailers won't accept Apple Pay

Other mobile payment options are expected next year

The problem with introducing any new form of currency or payment system is finding buyers and sellers willing to accept it.

This week, when Apple unveiled its new iPhone6 and iWatch, one of the new features it particularly highlighted was the mobile pay option: instead of paying for things with a credit card, you could use your mobile device instead.

Problem is, how many businesses are willing to accept Apple Pay? In addition to Apple itself, the list of merchants accepting this option includes CVS, Walgreens, McDonald's, Bloomingdale's, Macy's and Whole Foods, among others. And credit-card companies and other financial institutions are happy to work with Apple Pay, too. Now, how many other merchants will climb on board?

The Wall Street Journal reports that Walmart and Best Buy will not be accepting Apple Pay. Instead, those stores are working with “a retailer-owned mobile technology group called Merchant Customer Exchange, which also counts Target Corp. among its members.” Other stores working with MCE include 7-Eleven, Southwest Airlines, Shell and the Gap.

In 2015, Merchant Customer Exchange is expected to release its own mobile-phone payment option, in the form of a downloadable app called CurrentC. Unlike Apple Pay, it will be usable on any Android or iPhone, not just the newest Apple products. Nor will it require specialized checkout scanners, as Apple Pay does.

One thing seems certain: the era of widespread mobile payment options will soon be here. The only question is, which technology company will be the first to dominate the market? 

The problem with introducing any new form of currency or payment system is finding buyers and sellers willing to accept it....
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Credit-card industry promises better security in future cards

“Tokenization” expected to make customer data more secure

If you're a credit-card holder who's fed up with the regular weekly warnings to protect yourself if your information was on the database of the latest major retailer who got hacked, there might be good news on the horizon.

The Wall Street Journal reported yesterday that the “credit-card industry is accelerating efforts to keep sensitive customer information out of the hands of merchants, as a rash of data breaches at major U.S. retailers erodes confidence in electronic payment systems.”

Visa and MasterCard are both adopting a new technology called “tokenization” which, according to the Journal, “replaces cardholder information such as account numbers and expiration dates with a unique series of numbers that validates the customer's identity.”

With the current credit-card system, merchants store their customers' account numbers and related information on their own databases. With tokenization, however, a “merchant can conduct a normal transaction without seeing or storing the customer's account number, expiration date or other information contained on a card. The actual card data is stored by the card issuer or processor in a 'virtual vault.'”

Virtual vaults

Presumably, whoever runs those virtual vaults will still have to ensure nobody hacks into them and steals the valuable data therein. Still, from the perspective of (for example) the MasterCard company, making sure their one “virtual vault” is secure should be much easier than hoping every single merchant who accepts MasterCard keeps their customer information in a properly secured database.

Tokenization is not the only security improvement on the horizon. American credit card companies have already promised, at some future time, to switch from current magnetic-strip credit cards to cards with “EMV” chips.

EMV, which stands for "EuroPay, MasterCard and Visa," has been standard on European credit cards for over a decade already. The difference between magnetic-strip credit cards and EMV is that the latter stores information on an encrypted microchip, rather than on the non-encrypted (and relatively easy to counterfeit) magnetic strip found on most American credit cards.

EMV cards also require a personal identification number (PIN) at point of sale. The idea is that with EMV, a thief who knows your credit card account number can no longer make and use a fraudulent credit card with that alone.

On the other hand: while these new technologies might help protect credit-card shoppers in brick-and-mortar stores, security experts fear thieves will simply switch focus to online card purchases, as has already happened in countries where most credit cards have EMV chips. The arms race between merchants and thieves is unlikely to ever end.

If you're a credit-card holder who's fed up with the regular weekly warnings to protect yourself if your information was on the database of the latest majo...
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Identity theft, data breaches -- why are they your problem instead of your bank's?

Your identity or the assets of wealthy financial institutions: which needs the most protection?

As a consumer journalist I'm fed up with writing the same damned story over and over, and as a consumer-news reader you're sick of hearing it:

“Hackers broke into the customer database of yet another retailer, data broker, government agency or educational or financial institution. So beware, Reader: you must protect yourself from identity theft. Contact your credit or debit card company and change your account information as necessary. Update any and all automatic-payment plans connected to the affected accounts. Call your bank. Change your passwords. Keep an extra-sharp eye on your account activity. Take out a credit alert. Get a credit freeze. Call the following toll-free customer-service numbers and spend a couple hours waiting on hold until you're disconnected and have to call back. And don't forget to contact either TransUnion, Equifax or Experian to let them know about the breach! If you're lucky, maybe this time neither Experian nor the other two will screw up and sell your confidential data to an identity thief way the hell over in someplace like Vietnam — okay, you've done all this? Great! Now kick back and relax for a week or two until you have to do it all over again, the next time hackers break into the customer database of yet another retailer, data broker, government agency or ….”

Why is this still a problem? Why in hell's name do financial companies still operate according to the fiction “Hey, here's a form filled out with Jennifer's own Social Security number, date of birth and full name – by Zod, that must be her, because nobody else on the planet could possibly have this super-secret information. Let's lend thousands of dollars in high-interest, unsecured debt based on that! Then, if she calls to complain that this is not her debt and she is not responsible for repayment, she'll have to spend lots of time and effort jumping through hoops to prove her innocence, and of course she won't receive a single penny in compensation for her time, since it's worthless to us and what she thinks about it is irrelevant....”

Usual suspects

Who actually does have access to my name, SSN, DOB and other presumably “confidential” data about me? In addition to close family members, and various hackers through the years who broke their way into databases they had no business accessing in the first place, a partial listing of people who can access my private, top-secret, “nobody knows it except me” identifying information includes:

Various employees of every local, state or federal tax department I've ever paid money to.

DMV employees in the states where I've held driver's licenses.

Employees of the two state universities I attended.

Employees of every financial institution through which I've taken out a loan, or held a savings or investment account.

The HR/personnel staff at every job I've ever held.

The HR/personnel staff at every job my now-husband ever held with me listed as his health-insurance dependent or life-insurance beneficiary.

Employees of every insurance company I've dealt with: medical, dental, auto, life and renters' insurance.

The staff of every hospital, medical or dental center where I've sought treatment or had a checkup.

Every pharmacist who's ever filled a prescription (and dealt with the required insurance paperwork) for me.

Every landlord from whom I ever rented a place to live (I haven't bought a house yet, but when I do, add realty agents and mortgage brokers to this list).

Possibly the employees of the K-12 public school districts I attended back in the day; I have no idea how long they keep such records on file.

And maybe the federal workers with access to U.S. military personnel-budget files, since I spent my entire childhood as an active-duty-Navy dependent; again, I have no idea if records from my days as a legal minor would still be around.

I'm sure there's a few I forgot to mention here. And you, of course, have a similar list of all the many, many people whose jobs grant them access to your personal identifying information. That list is separate from, though occasionally overlaps with, the list of people and institutions who have or can get your bank, credit card or other financial account information.

Yet the bulk of our entire financial-services industry (at least the part you need to worry about, where identity theft is concerned) seems committed to the idea that either none of these people exist, or every last one of them is completely, 100% trustworthy and responsible.

What's at stake

The strange thing about identity theft is that, while you're supposed to “protect your identity,” ultimately it's the bank's money at stake here: if someone steals your identity and borrows money (or buys a cell phone) in your name, it will be a very annoying and time-consuming process for you to straighten out the mess, but at least you're not liable for whatever money and property the lender lost.

So how, exactly, did it become your responsibility and mine to protect the assets of lending institutions who we might never even have done a lick of business with, because they're too careless to verify a borrower's identity before lending out their own money?

Back in 2007, I tried finding the answer to that question. At the time, I lived in Connecticut, paid taxes to same and wrote for a (now-defunct) alt-weekly. Meanwhile, some twit at the state Department of Revenue Services decided to put information about 106,000 state taxpayers onto a laptop computer, which then got lost or stolen.

A couple weeks later, I got a letter from the DRS warning that my information was on the laptop. As part of the state's “We're sorry; our bad” make-good efforts, the letter advised me to contact Experian or one of the other credit-monitoring agencies, who would then be legally obligated to put a 90-day “credit alert” on my records.

What does that mean? Over the course of those 90 days until the credit alert expired, if anybody contacted Gigantobank, MegaCellPhone or any similar institution and said “Howdy, I'm Jennifer, here's my SSN and DOB to prove it, now gimme hundreds if not thousands of dollars' worth of unsecured high-interest debt,” Gigantobank, MegaCellPhone et al. were required to make a “good-faith effort” (exact quote from the DRS) to determine this genuinely was me, before saddling my financial record with the legal obligation to pay back this debt.

Determining you're really you, before making you liable for a debt – that's considered a rare and special high-alert privilege, not the default setting. And should you happen to discover the existence of one or more previously unknown credit cards or other loans in your name, it's up to you to prove they're not yours; no “innocent until proven guilty” assumptions apply.

Oh, that's simple

Why can't you just tell the company “I never borrowed this money, and if you think I did then prove it – show me some evidence, my signature, a security-camera image of me filling out the forms in a bank?” Why is the onus on you to prove your innocence, rather than them to prove your liability?

I asked Jay Foley, executive director of the Identity Theft Resource Center, who said, “That's simple -- the fact that your personal information was used to open the account.”

Except it's not really “my” personal information, is it? It's not just me, my mother and some laptop thief in Connecticut who knows all of my “personal information” -- it's everyone on that earlier list plus everyone I forgot to put on it, and hackers from all over the world. So that temporary, special-privilege “credit alert” – the radical idea that a credit-card company shouldn't issue a credit card in my name without first making a “good-faith effort” to ensure it's actually me – why isn't that standard procedure?

In 2007, Jay Foley said it's because proper identity verification would make it impossible for stores to offer instant, on-the-spot credit; instead, people who applied for a card might have to wait several days before they get it. “If it fell to credit card companies to prove the individual opened the account, [I couldn't get same-day credit] if I walked into a Kmart, or a Wal-Mart, or a Sears.”

Heaven forbid anybody wait a day or two before getting a shiny new store credit card; that would leave time enough for second thoughts, and consumers might even decide “You know, in light of my not-too-good financial situation, maybe I shouldn't buy these inflatable floating color-changing LED bathtub lights after all ... or at least wait until I can afford to pay cash, rather than buy on the installment plan.”

Brand-new accounts

And, of course, the problem of ID thieves opening brand-new credit accounts in your name is entirely different from the problem of ID thieves getting your legitimate credit-card or financial information out of some corporate or government database, and using it to fund an intense, short-lived spending spree.

Nowadays, you can barely go more than a week without hearing another hacked-customer-database story. In just the past month, such data-theft hackings were discovered at Home Depot, The UPS Store, Dairy Queen, SuperValu grocery and liquor stores, Community Health Systems (a for-profit hospital network you've never heard of although they operate in 29 states), JP Morgan Chase and other banks … and that list is almost certain to grow longer before the end of the month.

Remember: when thieves steal with credit cards in your name, you're not legally liable for all the money the credit card company lost – but you do have to spend time straightening out the mess, and take extra care to ensure the various data brokers who decide your credit score know about it, because a low credit score means you must pay higher interest on any loans or service plans you take out, and in certain instances you can even be denied a job if your credit rating is deemed “too low” … but if you're unjustly denied a mortgage or even rejected for a job because some lender or data broker screwed up and dragged down your credit score, too bad. You have no legal recourse at all.

As for how much longer banks and other lenders can continue eating the cost of the hackers' frequent spending sprees in lieu of changing their operating procedure to make them less frequent — your guess is as good as mine. Meanwhile, brace yourself for the next time hackers break into a customer database with your information on it, and you must take steps to protect yourself from identity theft, monitor your accounts, call all these numbers and ….

As a consumer journalist I'm fed up with writing the same damned story over and over, and as a consumer-news reader you're sick of hearing it: “Hackers br...
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Reasons you might be rejected for a credit card

A lender looks at a lot of information before sending you plastic

With all those credit card offers that come in the mail, you might think you can have your pick of credit cards.

Don't count on it. Just about anyone with a pulse is getting those notices that they have been “pre-qualified” for a credit card. The truth is, neither you nor anyone else has been pre-qualified.

You may be getting these offers for any number of reasons; the zip code in which you reside, the model car you drive, other credit or charge cards you might have.

But the credit card company can't offer you an actual credit card yet because it hasn't had a peek at your credit file. Once it has, it might not be returning your phone calls.

Consumers often take it personally when they apply for a “pre-qualified” credit card, only to be turned down. But something ugly in your credit report is not the only reason a credit card company declines your application.

What other reasons are there? We asked the National Foundation for Credit Counseling (NFCC) and they came up with 10.

Not enough credit

You need credit to get credit, it seems. It's like getting turned down for your first job because you don't have work experience. Credit card lenders believe in patterns.

They want to see how you've handled other credit. You can build your case by getting a retail store charge card, using it to make a small purchase, then paying the bill immediately.

Poor pay history

Been late on a few bills? Word has a way of getting around and ending up in your credit file, which lowers your credit score.

You can raise your score by paying all of your bills on time, every time. It's as simple as that.

Maxed out

If you have a credit card or two and they're maxed out, it looks like you're in over your head. It doesn't exactly inspire a credit card company to extend you more credit.

NFCC says your credit card debt should equal no more that 30% of your available credit.

Too much debt

Mortgage, car payment, credit card bills – it can add up to a lot of money. If it looks like too much money, relative to your income, it can raise a red flag. Do you really need to take on more debt? Maybe the credit card company is doing you a favor by declining your application.

Too many inquiries

Every time you apply for credit, the potential lender pings your credit file. The credit bureaus keep track of these inquiries, which themselves become part of the record.

What's a credit card lender to think if you've applied for 3 other cards in the last month? They probably think you may have a financial problem.

Serious nastiness

There could be something in your credit report that that's an instant turn off. And the trouble is, the worse the problem – unpaid tax lien or Chapter 7 bankruptcy – the longer it lingers in your file.

Other reasons

In some cases, a credit card company might not think you make enough money. The credit card you're applying for might have a $10,000 credit limit and the lender decides your income isn't high enough to risk it.

A very common reason for rejection is job status. If you've just switched jobs, a lender is likely to wait to see how it works out. If you've moved from job to job in a short time, it might also be a reason to say no.

You might be considered too young. That's often the case when teenagers apply for their first credit card. Being a signer on a parent's account might be a good first credit card, while helping to establish your creditworthiness.

Finally, there might simply be an error in your credit application. Maybe you gave the wrong information or left something out.

Filling out the form online might be a way to cut down on mistakes since online forms prompt you when you leave out important information.

Remember, if you are denied credit because of something in your credit report, the Fair Credit Reporting Act gives you the right to be notified of the reason. If the information is in error, you can then appeal to the three credit reporting agencies – Experian, Equifax and Trans Union, to remove the incorrect information.

With all those credit card offers that come in the mail, you might think you can have your pick of credit cards....
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Feds warn credit card companies against deceptive marketing

Consumers often hit with surprise charges after signing up for low-interest-rate promotions

If your mailbox is typical, it's full of attractive-sounding offers from credit card companies offering low- or no-interest deals on purchases and balance transfers. But the Consumer Financial Protection Bureau (CFPB) says some of those offers may not be quite as good as they sound.

It's warning card issuers to be careful they're not using deceptive tactics to lure consumers into signing up, and put them on notice that they must clearly disclose the costs and risks of these promotional offers so consumers understand what they are signing up for.

“Credit card offers that lure in consumers and then hit them with surprise charges are against the law,” said CFPB Director Richard Cordray. “Before they sign up, consumers need to understand the true cost of these promotions. Today, we are putting credit card companies on notice that we expect them to clearly disclose how these promotional offers apply to consumers so that they can make informed choices about their credit card use.”

The CFPB bulletin highlights concerns around the marketing of credit card interest-rate offers such as balance transfers, deferred-interest offers, and convenience checks.

Under these promotions, consumers are often charged a fee to transfer a balance or make a purchase with their credit card in order to receive a promotional interest rate on that amount for a set period of time. While consumers pay no interest or a low interest rate for balances subject to the promotion, any additional purchases consumers make with the credit card may incur interest charges right away.

Grace period

The Bureau believes some companies’ marketing materials do not clearly disclose that consumers must pay off the promotional balance by their due date to avoid racking up unexpected interest charges on routine purchases for which they were not charged interest previously. For some consumers, these surprise charges can make the cost of transferring a balance more expensive than revolving the same balance on their existing card.

These marketing tactics specifically impact consumers who enjoy an interest-free “grace period” on their credit card purchases. Consumers who pay off their total credit card balance each month receive a grace period during which they do not have to pay interest on purchases.

When consumers carry their promotional credit card balance past their payment due date, they lose their grace period and are charged interest on all new purchases. The only way for these consumers to avoid interest charges on new purchases made with the credit card is to pay off their whole statement balance, including the promotional balance and the new purchases, by their monthly billing due date.

Consumer tips

The CFPB is also publishing consumer tips today about credit card interest-rate promotions and how grace periods work. Tips for consumers who decide to accept a promotional offer include:

· Avoid the interest: Consumers that do not carry a balance can take advantage of promotional rates and avoid unexpected interest if they don’t make new purchases with the card until they pay off the entire balance. To avoid interest charges on new purchases, these consumers should consider paying with cash, debit, or another credit card that doesn’t have a balance.

· Make payments on time to avoid surprise charges: Consumers should be sure to make payments on time. For promotional and deferred-interest balances, consumers should pay off the entire balance before the end of the promotional period.

· Compare the interest rates among credit cards. Consumers that carry a balance on all their credit cards should compare the interest rates among their cards to decide which is the best deal for new purchases. These consumers should also consider paying for new purchases with cash or debit.

If your mailbox is typical, it's full of attractive-sounding offers from credit card companies offering low- or no-interest deals on purchases and balance...
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Home Depot customer database hacked?

Early reports indicate all U.S. stores might be affected, ever since last April or May

Home Depot may be the latest addition to the list of companies that suffered a security breach after hackers broke into their customer-information database.

Security blogger Brian Krebs reported the news on Tuesday morning. A Home Depot spokesperson, reading from a prepared statement, told him:

“I can confirm we are looking into some unusual activity and we are working with our banking partners and law enforcement to investigate. Protecting our customers’ information is something we take extremely, seriously and we are aggressively gathering facts at this point while working to protect customers. If we confirm that a breach has a occurred, we will make sure customers are notified immediately. Right now, for security reasons it would be inappropriate for us to speculate further but we will provide further information as soon as possible.”

Krebs' sources say that on Sept. 2, multiple banks noticed a new pile of stolen debit and credit card accounts offered for sale in the cybercrime underground that morning, account information apparently stolen from Home Depot's database.

Though no detailed information is currently available to explain just how this was discovered, presumably it's because the various banks noticed that all of the stolen credit- or debit-card numbers from the most recent batch had one thing in common: they'd all been used to buy something from Home Depot.

Connected to others

Consumers rate Home Depot

Based on the currently available evidence, the Home Depot hackers appear to be Russian or Ukrainian, and connected with other recent hackings at P.F. Chang's, Sally Beauty Supply, and Target:

In what can only be interpreted as intended retribution for U.S. and European sanctions against Russia for its aggressive actions in Ukraine, this crime shop has named its newest batch of cards “American Sanctions.” Stolen cards issued by European banks that were used in compromised US store locations are being sold under a new batch of cards labled “European Sanctions.”

(Actually, even if these hackers do indeed prove to be from or sympathetic to Russia, there is one other possible interpretation for their actions: They're greedy thieves who intended this for their own gain anyway, but decided to claim patriotic, love-of-country motivations because – hey, why not?)

According to Krebs, there's no information yet confirming how limited or widespread the breach is, but early reports indicate all 2,200 Home Depot locations in the United States were affected. At 1:50 on Monday afternoon (Eastern time), Krebs updated his initial report to say:

Several banks contacted by this reporter said they believe this breach may extend back to late April or early May 2014. If that is accurate — and if even a majority of Home Depot stores were compromised — this breach could be many times larger than Target, which had 40 million credit and debit cards stolen over a three-week period.

If you have made a credit- or debit-card Home Depot purchase at any time since last April, contact your bank or card issuer at once, and take all necessary identity-theft precautions.

Russian or Ukrainian hackers connected to earlier thefts believed responsible...
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Your FICO score might rise this fall

Revised FICO formula to discount medical debt, ignore paid-off bills

Fair Isaac is about to get a little less unfair, as the formula used to calculate people's FICO scores is being revamped to reduce the impact of medical debt and old bills which have been paid off.

FICO stands for Fair Isaac and Company, a financial/analytical company whose primary customers are banks, credit-card companies and other financial entities.

Your personal FICO score is supposed to help lenders know how likely you are to actually pay back any money you might borrow. The higher your FICO score, the greater your perceived creditworthiness and (in general) the lower the interest rate you'll be charged for any loans or financial services you take out, anything from credit cards to wireless-phone plans to your home mortgage.

It's not too much of an oversimplification to say “The way FICO works is, if you don't pay your bills your score goes down, especially if those unpaid bills make it to a collection agency.”

Glaring problems

In many cases this makes perfect sense. If, for example, someone has the regular habit of maxing out credit cards, buying things on store credit and rarely paying those bills on time, chances are that someone isn't very good at handling money, and is a poor risk to repay any funds you might lend them.

But, critics of FICO said, there were two glaring problems with this measurement scheme, with medical debt being the biggest one. The current FICO system makes no distinction between, for example, discretionary debt purchases versus medical emergencies not covered by insurance: it figures debt is debt, so where your personal creditworthiness (read: trustworthiness) is concerned, it doesn't matter if you're $50,000 over your head because you or your spouse had an expensive medical emergency, or $50,000 in the hole because you keep putting luxury vacations on your credit card — the same stigma of financial recklessness clings to you either way, and you'll still be charged higher interest rates as a result.

Under the new plan, medical debt still counts against your FICO score, but will have less weight – if unpaid medical debt is the only black mark against your credit rating, your FICO score could rise by as much as 25 points.

The second problem involves any sort of debt (medical or otherwise) that goes unpaid long enough to go to a collection agency, but is then paid off in full. Under the current FICO system, that debt still drags your credit score down for seven full years after it's been paid off, but once the new calculations come into play, those paid-off debts will no longer count against your score.

The new revised FICO scores are expected to come into use sometime this fall. If you're thinking of applying for a car loan or home mortgage, signing up for a new cell phone plan, or engaging in any other financial transaction where you must pay interest, and your FICO score currently has black marks due to already-paid-off debt or currently unpaid medical bills, try holding off on that loan for another couple of months, until the new FICO scores come into use: you might qualify for a higher score and a better interest rate then.

Fair Isaac is about to get a little less unfair to consumers, as the formula used to calculate people's FICO scores is being revamped...
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Hackers steal credit card numbers and other data from Goodwill stores

Early reports suggest stores in at least 21 states are affected

Bad news for thrift-store shoppers: though details remain sketchy, it appears certain that hackers have breached the customer credit-card database of Goodwill Industries.

Security blogger Brian Krebs first broke the news on Monday, after his sources reported that financial institutions have been tracking a new series of fraudulent credit-card purchases. Though the fraudulent charges have mostly been made in major supermarkets or big-box retail stores, the stolen card numbers' common point of purchase appears to be Goodwill stores in at least 21 different states: Arkansas, California, Colorado, Florida, Georgia, Iowa, Illinois, Louisiana, Maryland, Minnesota, Mississippi, Missouri, New Jersey, Ohio, Oklahoma, Pennsylvania, South Carolina, Texas, Virginia, Washington and Wisconsin.

It's not known exactly how long this breach has existed, but Krebs' sources said it might stretch as far back as the middle of 2013.

If you have, in the past year, bought anything at a Goodwill store (especially in one of those listed states) and paid with a credit, debit or money card, your account information might be in the hands of identity thieves. Even if you shopped at a store in one of the other states, you might still be at risk – it's too early to tell if the previous list is all-inclusive.

A Goodwill spokeswoman told Krebs that the company “was contacted last Friday afternoon [July 18] by a payment card industry fraud investigative unit and federal authorities informing us that select U.S. store locations may have been the victims of possible theft of payment card numbers. … Goodwill Industries International is working with industry contacts and the federal authorities on the investigation. We will remain appraised of the situation and will work proactively with any individual local Goodwill involved taking appropriate actions if a data compromise is uncovered.”

Bad news for thrift-store shoppers: though details remain sketchy, it appears certain that hackers have breached the customer credit-card database of Goodw...
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American Express antitrust trial gets underway

Merchants should be allowed to give discounts to consumers who use cheaper cards, government argues

A long-simmering antitrust case against American Express is getting underway this week in a New York federal district courtroom. It could result in merchants being free to offer discounts to consumers who use cards other than American Express.

The government is arguing that American Express unlawfully inhibits competition by insisting that its merchants not express a preference for one card over another.

Consumers rate American Express Platinum Card (amex)
Merchants pay about $50 billion a year to card companies -- usually about 2% to 3% of each transaction. American Express' fees are higher than many other cards. Critics say the higher fees are passed along to all consumers in the form of higher prices.

It's not just American Express, of course. Airline credit cards and other cards with high rewards attached charge merchants more to cover the cost of the premium programs. 

Many consumer advocates and merchants argue that consumers who use cards that carry cheaper fees deserve a discount.  

The Justice Department filed its case against Amex in 2010. In 2012,  Visa, MasterCharge and a number of big banks paid more than $6 billion to settle price-fixing claims and agreed to let merchants use discounts, rebates and other tactics to get customers to use cheaper, more generic cards. 

The trial, which is being conducted before a judge with no jury, is expected to last most of the summer. 

Held hostage

The government argues that American Express presents merchants with a "take-it-or-leave-it" attitude -- forcing them to accept American Express cards for all purchases or not accepting Amex cards at all.

AmEx argues that its customers prefer to use their American Express cards because the company offers superior service. It has a reputation of being more supportive of its cardmembers in so-called "chargeback" disputes and also offers generous perks on some of its more expensive cards.

American Express tells merchants that their cardmembers tend to make more big-dollar purchases than consumers who carry other credit cards.  It also argues that it isn't big enough to be an anticompetitive force in the marketplace. It has about 53 million members compared to the more than 400 MasterCharge and Visa cards in circulation.

A long-simmering antitrust case against American Express is getting underway this week in a New York federal district courtroom. It could result in merchan...
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How hackers profit: a look inside a professional “carding shop”

A security blogger visits a black market in the Internet underworld

You've seen the story countless times: “Keep an extra-sharp eye on your credit card activity! There's been another hacking.” The only difference is in the details: which particular retailer, service provider, financial entity, data broker or governmental institution got hacked? For how long? And how many customers got hurt this time?

You know why the hackers keep doing this: so they can use your personal information, such as credit card numbers, to fraudulently obtain money or other valuables for themselves. But have you ever wondered exactly how a criminal armed with nothing more than “your credit card number” uses that to steal things?

Security blogger Brian Krebs spent some time undercover (in the online sense of the word) at a professional “carding shop,” an online black market where unscrupulous people buy and sell stolen data to each other. As the name suggests, carding shops specifically focus on stolen credit card data.

Krebs investigated a particular carding shop called McDumpal's (“dump” is slang for the strings of data fraudulently lifted off the magnetic strips on the backs of most American credit cards).

Of course the thieves who operate McDumpal's have absolutely no affiliation with McDonald's hamburgers — despite McDumpal's using an obvious ripoff of the Golden Arches logo over the slogan “I'm swipin' it.”

Krebs made a slideshow of what he found at McDumpal's — in addition to providing a detailed written account of how the business works (other than the obvious “Try not to get caught, or even noticed by, the law-enforcement agencies of any country in the world, because you're a thief and what you're doing is rightfully illegal everywhere”).

Krebs' story and slideshow are definitely worth checking out if you have the time — although hopefully, in a couple of years words like “dumps” to refer to data stolen from magnetic credit-card strips will be completely obsolete, if and when all major American card providers make good on earlier promises to switch away from magnetic strips in lieu of adopting EMV chip technology.

You've seen the story countless times: "Keep an extra-sharp eye on your credit card activity! There's been another hacking." The only differenc...
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EMV security chips coming to Sam's Club credit cards

Expected to be standard for all American credit cards eventually

In April we reported an upcoming change to Walmart and Sam's Club credit cards: the old Discover logo changed to MasterCard. While investors in the companies involved reacted quickly to the news, it was too early yet to know if cardholders would see any real changes to their accounts.

On June 4 came news of a huge change which ultimately might affect not merely Sam's Club and Walmart customers, but all American credit card holders: the new Sam's Club credit card will feature EMV chip security technology. Sam's claims to be the first major American retailer to do this.

EMV stands for Europay, MasterCard and Visa. Last March we reported that MasterCard and Visa announced plans at some point to introduce EMV chips to American credit cards (they're already standard in much of the rest of the world, and have been for the past decade).

The difference between current cards and EMV is that the latter stores information on an encrypted microchip, rather than on the non-encrypted (and relatively easy to counterfeit) magnetic strip found on current American credit cards. EMV cards also require a personal identification number (PIN) at point of sale. The idea is that a thief who knows your credit card account number can no longer make and use a fraudulent credit card with that alone.

“MasterCard has taken a strong stance on the need for the U.S. market to make the transition to chip-enabled credit cards for the benefit of cardholders and merchants alike,” said Chris McWilton, president North America, MasterCard. “This move by Sam’s Club makes them a trailblazer in getting chip cards in the hands of businesses and consumers, and leading the push toward a safer and more secure customer experience. This will no doubt help drive chip-enabled technology forward here in the U.S. as it gains more traction.”

MasterCard and Visa have supposedly set an October 2015 deadline for retailers to more broadly adopt EMV technology.

In April we reported an upcoming change to Walmart and Sam's Club credit cards: the old Discover logo changed to MasterCard. While investors in the compani...
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