Credit Card Guide

Bank of America Testing Out New Deals Program

Marcia Frellick — Wed, 08 Feb 2012 23:40:33 +0000

Bank of America, still smarting from the public backlash that torpedoed its proposed $5 monthly fee for debit cards last year, is rolling out a new idea to boost card activity — a program called BankAmeriDeals.

While the program hasn’t started yet, the idea is that customers will be offered discounts on future purchases based on what they’re buying with their Bank of America cards.

If a customer makes a purchase at an electronics store, for instance, the next time he logs onto his BofA account online, he may see a discount he could use the next time he buys something from that store. Customers who click on the deal to accept it and later make the purchase will pay full price for the items at the checkout counter — but will get reimbursed for the amount of the discount by Bank of America. The bank will total up the discounts a customer has coming each month and issue a credit to his or her account.

The act of getting something back from a bank is a far cry from the proposed fees for just using the cards. This plan also has convenience going for it. Unlike with other deals sites such as Groupon or LivingSocial, there are no coupons, promotional codes or email registrations and no separate website to check.

A company called Cardlytics acts as a middleman between BofA and retailers. The strategy is offering rewards linked to places where customers have already shopped instead of floating incentives for places they may or may not be interested in trying. Because the consumer has already shopped at their store, retailers have more confidence that they will return. The bank, meanwhile, has more confidence it can accumulate more swipe fees because customers must use their Bank of America cards to get the discounts.

Bank of America has started testing the rewards program on its own employees in Nevada, North Carolina and South Carolina, and it plans to roll it out to all associates in the next month.

The move comes as banks are looking for ways to build revenue lost to new financial reform regulations that curb debit card swipe fees.

Reuters reports that, with BankAmeriDeals, customers can choose to receive alerts about offers and how much money they have saved. They also can opt out of the service. The bank won’t say which retailers are participating, but said they include large discount department stores, fast food chains and local restaurants.

Americans May be Slipping Back Into Money-Wasting Habits

Kristin McGrath — Fri, 03 Feb 2012 20:59:16 +0000

I admit, I’ve been getting lazy when it comes to penny-pinching. Turns out, I’m not alone. Americans might be slipping back into old, expensive habits, according to a recent poll.

Since 2009, Harris Interactive has been asking Americans what they’ve done to save money in the past six months. This week, it released the results of its latest survey. For almost the first time since 2009, the number of Americans making small changes to save money has dropped. That could mean that saving money has become the norm (so fewer are reporting it as new behavior). Or, it could mean that Americans are upping their spending.

Surveyors asked more than 2,200 Americans about a variety of money-saving strategies, and I saw my own behaviors (and misbehaviors) in many of the results. For example, in June 2009, 48 percent of Americans said they were brown -bagging their lunches. Today, that percentage has fallen to 42 percent.

I am definitely one of those who fell off the brown-bag wagon. Just a year ago, it was my policy to eat lunch out once per week. I planned out my meals on weekends, cooked them on Sundays and brought leftovers to work. I was averaging about $2 to $3 per meal. Yet a busy schedule and weekends out of town have tripped me up, and I’m back at Panera and Wendy’s.

Buying coffee instead of brewing it? Falling for my hair stylist’s insistence that I must see her every eight weeks? Guilty. And so are many others, according to the poll. I am, however, proud to say that I am one of the 21 percent of Americans who has cut cable TV, and I don’t miss it (much).

With practicing good money habits in mind, here are some of the best personal finance blog posts of the week:

Wise Bread describes how to make the most out of February sales.

The Krazy Coupon Lady reveals a way to get used clothing online.

Bargain Babe warns about the dark side of coupon sites.

Money Crashers provides a roundup of smartphone shopping apps that can save you money.

$5 Dinners shares a recipe that can be stretched out for multiple meals.

The Simple Dollar warns that extended warranties might not be worth paying for.

Generation X Finance asks, "Is it really possible to live without money?"

MasterCard Announces Rollout of “Chip and PIN” Cards

Marcia Frellick — Wed, 01 Feb 2012 16:34:51 +0000

U.S. credit card holders just got one step closer to using cards with chips instead of magnetic stripes. MasterCard has announced a plan to transition to the "chip and PIN" technology that is already the norm in Europe.

By the end of April 2013, MasterCard plans to have replaced its existing magnetic stripe infrastructure with one ready for chip-based technology. That means every credit card will have a small silicon chip embedded in it, much like a cell phone’s SIM card.

Instead of swiping, customers can just wave the cards at the reader to make purchases.

Visa made a similar announcement in August and said, by April 1, 2013, it would require firms that handle credit card transactions for retailers to accept merchant chip transactions.

“We’re moving toward a world beyond plastic, where consumers will shop and pay in a way that best fits their needs and lifestyles with a simple tap, click or touch in-store, online or on a mobile device,” said Chris McWilton, president of U.S. markets for MasterCard, in a statement.

Europeans and consumers in other countries have been using the 12-year-old Europay, MasterCard and Visa (EMV) technology for years, but it has been slow to come to the U.S. Retailers haven’t wanted to spend the considerable cash on new payment systems until card companies adopt the new technology, and card companies haven’t wanted to use the chip cards until merchants agreed to accept them.

MasterCard’s plans include incentives for merchants, integrated customer loyalty programs and support for dynamic authentication technologies. The dynamic authorization is a huge step in eliminating fraud because each transaction is unique and uses encrypted information, whereas a signature can easily be faked repeatedly. The chips are also more difficult to clone than magnetic stripes.

Randy Vanderhoof, executive director of the Smart Card Alliance, said MasterCard’s announcement solidifies the path for next-generation payments that will be based on a global EMV standard – one that includes emerging technologies like mobile phones and more secure eCommerce payments.

“It is time for the four sides of the payments ecosystem — issuers, processors, merchants and consumers to collaborate on the opportunities for innovation that MasterCard’s announcement enables,” he says.

Banking Industry Worried About Mounting Student Loan Debt

Marcia Frellick — Mon, 30 Jan 2012 18:17:08 +0000

Students aren’t the only ones worried about their student loan debt, according to a recent Fair Isaac Corp. (FICO) survey.

In FICO’s latest quarterly survey of bank risk professionals, 67 percent of respondents said they are seriously concerned about the debt loads students in this country are carrying and that they expected delinquencies to rise. That number was up 19 percentage points from the previous quarter. Only 8 percent of respondents expected a decline in student loan delinquencies.

Trouble in the student loan area has implications far beyond students.

“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, in a statement. “A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults.”

Private lenders and the federal government are expecting this money back with interest, and it’s an increasingly sizable chunk of Americans’ debt. In 2011, student loans beat credit card debts, topping $1 trillion, according to Federal Reserve data.

At the same time, salaries are decreasing, and college costs — along with living expenses — are soaring.

Full-time undergraduate students borrowed an average $4,963 in 2010, up 63 percent from a decade earlier after adjusting for inflation, the College Board reports. That’s no surprise, with the climbing costs of higher education. An increasing number of colleges are charging more than what the average American earns in a year.

College Board data show the number of colleges and universities with tuition and fees totaling more than $50,000 for one year rose to 123 for the 2011-2012 school year — up from 100 in the previous year. The national average wage for an American worker is less than $42,000, according to the Social Security Administration.

Accumulating loan debt may keep students from wanting to make major purchases, such as a home or even a car, and may result in them putting off life stages such as marriage and building families — all of which have implications for the economy as a whole.

Worse yet, those debts follow a student through life. Unlike some other debts that can be discharged through bankruptcy, student loan debt can’t be wiped clean.

At least interest rates linked to those loans won’t be bumped up soon. The Federal Reserve has said it will keep its benchmark lending rate low through at least 2013, which means borrowing costs as a whole should stay reasonable.

Can You Buy Happiness? Depends on What You’re Buying

Kristin McGrath — Fri, 27 Jan 2012 20:32:35 +0000

"Retail therapy" can offer an instant mood boost. A new outfit, new furniture, a new TV — with the swipe of a credit card, you’ve just bought yourself a quick injection of optimism at the end of a rough week.

But will it bring you long-lasting happiness? A study published this week in the Journal of Positive Psychology tackled that very question. It found that, while hitting the mall won’t make you happier in the long run, you can, in fact, buy happiness — you just have to buy the right things.

Researchers at San Francisco State University found that those who spent money on experiences, rather than on material possessions, were able to reap lasting happiness from their purchases. So, instead of filling your closets and shelves, you’re better off getting concert tickets, taking dance lessons or splurging for a weekend getaway.

The researchers also looked at who was more likely to buy experiences. They found that study participants who were more extroverted and those who described themselves as "open to new experiences" were more likely to spend their money on adventures than on shopping sprees. This was no surprise, according to the researchers, because, when you buy an experience instead of a new pair of shoes, you have to be willing to do without the safety net of a refund.

With that in mind, here are some of the best personal finance posts from the last week that tackle the topic of saving for what really matters:

Frugal Dad illustrates the surprising costs of buying toys for your kids.

Man vs. Debt explains how keeping your family and friends close can help you fight debt.

Budgets are $exy shares the financial challenges of her latest adventure, living on the road.

Frugal Living NW proves you don’t have to go broke to eat delicious food.

Financial Samurai examines why it’s tough to justify quitting a well-paying job and living a life of leisure, even if you can afford to.

SavingAdvice recommends buying a few quality items rather than a lot of cheap ones when shopping for clothing.

20 Something Finance contemplates saving a bundle by quitting cable TV.

New Free ATMs Turn Users Into a Captive Audience

Marcia Frellick — Mon, 23 Jan 2012 15:16:23 +0000

A company in Brooklyn, N.Y., has developed a new model for ATMs that offers an alternative to highly unpopular ATM fees.

The concept for Free ATMs NYC is that there’s no fee for transactions. But there is a catch — you have to watch a series of ads to complete your transaction. At the end, you get a coupon on your receipt with more advertising. The third-party advertisers are charged a flat monthly fee and are essentially covering what it would have cost you to use the ATM.

The stakes are high in finding an alternative, as Americans spend about $7 billion in ATM fees each year. According to the Bankrate 2011 Checking Survey, the average cost for using an out-of-network ATM is $3.81, which includes charges from your bank and the outside institution.

Free ATMs NYC was founded by 25-year-old Clinton Townsend. In December, he began testing a no-fee machine at the Brooklyn Knitting Factory, a concert venue and bar, and he told CNNMoney that he hopes to have thousands of them operating throughout the U.S. by the end of 2012.

Townsend plans to place no-fee ATM machines in cafes, supermarkets, hotels, bars and malls and other spots where banks aren’t located. Every no-fee ATM will feature a slideshow of ads on a regular display screen while some will have an additional screen above the ATM for a 24-hour stream of video ads. The ads play while the transaction is being completed, so it won’t increase the time you’re standing in front of the ATM.

So far, Townsend is alone in this kind of venture. Its success will depend on whether customers are willing to make the tradeoff — being spared a fee in exchange for watching more advertising. And there is one problem with price control. The company can’t stop your bank from charging you for using an out-of-network ATM.

But the ATMs can offer assurances to advertisers that their product is being seen. While it’s hard to say who’s really viewing ads on billboards, in newspapers or on coffee sleeves, the Free ATMs NYC model can calculate exactly how many people are exposed to the ads by the number of transactions.

If it does catch on, it could be further bad news for big banks who may be looking to ATM fees to help make up for what they’re losing under financial reform. After big banks withdrew their attempts to charge debit card fees in 2011, they will surely look for other sources of revenue to stem the bleeding.

This Week in Personal Finance Blogging: Keep a Calculator Handy When You Shop

Kelly Dilworth — Fri, 20 Jan 2012 19:57:54 +0000

It happens every time. I live a few blocks down from a high-end grocer and every once in a while, I’ll spend a lazy weekend afternoon wandering the aisles ogling “deals” for swanky items like “single source organic cacao chocolate bars,” “olive oil tortas” and “black cherry all natural soda.”

Usually, I can stop myself from splurging. At this point in my life, it’s hard to justify paying $13.99 for a jar of pasta sauce. However, this particular grocer is also notorious for weekly specials – and I always fall for them.

The deals usually go something like this: Buy four Greek yogurts for $5. Or buy seven gourmet frozen dinners for $3.99 each. Often, the deals will also be paired with a sampler, making it even harder to pass up once you’ve tasted how delicious something like locally produced hatch chile jam really is (I once bought three jars of the stuff on special, then had to give two of the jars away).

At the time, I’ll convince myself that I’m getting a deal, especially since I’m only buying luxury goods that are “on sale.” But when I look at my receipt later on, it’s always clear I overspent – by a lot.

Apparently, this happens to a lot of shoppers. According to a new study due to be published in the Journal of Consumer Research this summer, shoppers are more likely to jump on a deal if the number of items is presented before the price. This is especially true, say researchers, if a large number of items are presented in a package, making it difficult to mentally calculate how much you’re actually going to have to pay.

Study authors Rajesh Bagchi and Derick F. Davis of Virginia Tech say that we fall for these deals, in part, because of a psychological phenomenon called “anchoring.” When we’re presented with two values for a deal (such as 20 boxes for $12), we tend to focus more heavily on the first value and think less about the price. If grocers presented the price first, in contrast, we’d be more likely to focus on how much we’d have to pay for the items rather than how much we’d like to take those items home.

“Consumers may encounter a large package where item quantity is presented first and believe they are receiving a great deal,” say the authors in a press release. “However, our research suggests that they should take a step back and make the relevant unit price comparisons to properly assess the package.”

With cautious spending in mind, here are some of the best personal finance posts from the last week:

1. Money Saving Mom discovers that buying healthier foods can actually save families money.

2. The Krazy Coupon Lady suggests a simple way to keep track of your rebate submissions.

3. Money Crashers explores the pros and cons of discount grocery stores.

4. The Simple Dollar shares how to overcome your addiction to your favorite brands.

5. Money Under 30 explains how to build a protective bank account buffer.

6. Mighty Bargain Hunter suggests that some extreme savers are going too far.

7. Frugal Dad regrets not planning ahead on a recent visit to the grocery store.

How Does Suze Orman’s ‘Approved’ Card Stack Up Against the Competition?

Marcia Frellick — Wed, 18 Jan 2012 17:39:20 +0000

Financial guru Suze Orman is the latest celebrity to brand her own prepaid debit card, following the likes of reality TV’s Kardashian sisters, hip-hop artist Russell Simmons and rapper Lil Wayne.

Orman’s is called the Approved Card, and it’s promoted as “better than cash” and “safer than cash.” But reviews are mixed.

Prepaid cards are billed as a way to control spending or avoid steep bank fees. The idea is that you can’t go into debt because you can only spend the money that’s loaded on the card. The competition is fierce in this space because about one in four American households is “unbanked” or “underbanked,” according to the Federal Deposit Insurance Corporation (FDIC), and prepaid cards offer a way to avoid carrying cash.

But you can still rack up fees with prepaid cards. Orman’s card is no exception, though she says the card costs just $3 a month “if you use it how I tell you to.” For instance, you get one free monthly call to the customer service department, and then it’s $2 per call. If you want a paper statement, it’s $2. You also may get hit with fees at the ATM. The Approved Card partners with the Allpoint ATM network, which has 35,000 machines nationwide in stores such as CVS and Walgreens. Allpoint still charges $2 per withdrawal, unless customers set up direct deposit or a recurring bank transfer of $20 or more. If you go out of network, you’re charged Allpoint’s $2 fee, plus the ATM operator’s fee.

You can view a list of Approved Card fees at: theapprovedcard.com/fees/.

However, the Approved Card does look better than some of its celebrity predecessors. For instance, Simmons’ Rush Card has a $10 monthly fee, among a slew of other fees. It also gleams next to the disastrous Kardashian Kard. The sisters bailed on the card one month after it debuted in 2010 after its high fees were slammed by consumer groups. The card cost $59.95 just to buy and use for six months, or $99.95 for 12 months. That didn’t include the fees for any money loaded onto the card.

By contrast, the American Express prepaid card doesn’t have a monthly fee. Other prepaid cards, including Green Dot, give users ways to avoid the monthly fee, either by setting up direct deposit or making a certain number of transactions monthly.

Orman is working with the credit reporting agency TransUnion so that, eventually, customers’ records with using the Approved Card would be added to their credit reports. Currently, prepaid card use is not monitored by the credit bureaus, meaning that such cards can’t be used to improve credit history. Orman has said this is part of a two-year experiment to help the unbanked get credit. Yet it’s unclear how that experiment will turn out, how the data would be used and whether it would end up helping or hurting these consumers.

Orman’s card offers users unlimited access to TransUnion credit reports and scores for one year. That score, however, is a VantageScore, and not the more widely used FICO score. Keep in mind that, no matter which card you have, you can get one free report from each of the three national credit bureaus once a year at AnnualCreditReport.com.

This Week in Personal Finance Blogging: Debt is Easier to Shed Than Keep Off for Good

Kelly Dilworth — Fri, 13 Jan 2012 20:47:31 +0000

Last fall, I finally paid off my credit card bill in full and kept the debt off for a record two months. It was exhilarating.

After months of financial dieting and careful tracking, I had finally achieved my zero debt goal. Then the holidays hit and my newfound financial discipline went AWOL.

Initially, I started out on the right track. I carefully set up a gift budget for my large and rapidly growing family, made a plan for hand-making at least some of my Christmas gifts and managed to save nearly all of my receipts.

But as the holidays inched closer, my stress levels skyrocketed and so did my spending. I started cutting corners and buying more meals out, stopped tracking my food spending and overspent on last-minute Christmas and birthday gifts.

By New Year’s Eve, I had somehow regained all the debt I shed last fall and I’m certain I’ll gain even more by February. My car needs a brake job, my 5-year-old computer is acting up and I’m still waiting on a bill from the emergency clinic I visited Christmas morning when I stepped on a piece of glass.

Like weight, debt is so much easier to shed than to keep off for good. It feels like I’ve been battling the last five pounds of this credit card debt for years, and I’m starting to wonder if I’ll ever be able to keep my balance at zero for more than a few months.

Unfortunately, I’m not the only one battling holiday debt regret. The Federal Reserve reported on Monday that credit card balances shot up more than 8 percent in November — the biggest jump since 2008. And overall debt, including student loan debt and auto loans, rose by nearly 10 percent – the largest increase since November 2001.

After years of careful post-recession spending, it looks like many U.S. consumers are finding you can’t put off the big purchases, like cars and computers, forever.

With post-holiday debt in mind, here our my picks for the best personal finance posts from the last week:

1. Financial Highway explains why you need to make painful changes to truly "live a debt-free life."

2. Get Rich Slowly offers tips on how to learn from and make the most of regret.

3. Careful Cents laments being treated like "an ATM machine."

4. Couple Money explores the "financial benefits of being married."

5. WorkSaveLive shares lessons learned from surviving a $70,000 a year pay cut.

6. So Over Debt ponders how to teach kids valuable financial lessons.

7. Wisebread shows it’s not impossible to live a "nearly cash-only life."

Verizon Drops Fees Amid Consumer Protest

Marcia Frellick — Wed, 04 Jan 2012 22:17:28 +0000

Customer outrage has shot down another proposed payment fee, this time just a day after it was proposed.

Verizon Wireless, the biggest U.S. wireless operator, announced December 29 that, as of Jan. 15, it would charge consumers $2 to make payments online or by phone.

That set off a firestorm of protest, including a petition at Change.org which logged 100,000 signatures within hours. That petition, which had more than 164,000 supporters as of January 4, was started by Molly Katchpole, the same woman behind the wildly popular petition to fight the $5 monthly fee that Bank of America proposed for debit card users in late September. Katchpole’s Bank of America petition, which attracted more than 300,000 supporters, was cited by industry insiders as one of the reasons the bank was forced to back down.

Before Verizon backed down from its proposal, the “convenience fee” had captured the attention of the Federal Communications Commission, which regulates telecommunications in the U.S. The FCC said Friday that it was “concerned” about the plan and that it would investigate.

In a press release, Verizon said it made the decision to cancel the fee in response to customer feedback. Verizon originally justified the new charge by saying it was necessary to cover the cost of processing payments. The company wanted to steer people to electronic check payments, which are cheaper, and automatic credit card payments, which are more likely to be paid on time.

“At Verizon, we take great care to listen to our customers. Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time,” Dan Mead, president and CEO of Verizon Wireless, said in a statement.

Twitter comments after that announcement included, “Can you hear us now? Good.” and “We 99 percenters are speaking up against corp greed.” Some tweets likened the proposal to the July move by Netflix to raise prices by 60 percent for customers who wanted to keep getting both online and mail-order movie rentals.

Verizon’s pullback came amid a spate of bad PR for the company, which on Dec. 28, experienced its third outage in a month of its new 4G wireless network. Verizon Wireless is a venture of Verizon Communications Inc. and Vodafone Group PLC.