Should You Add Accounts to Your Credit Card Bank?

Most people do not have other accounts with the bank that holds their credit cards. The reason is that they already have established checking and savings accounts with local banks and this option does not present itself when applying for a credit card. And, most banks do not promote this opportunity, either.
But, there are some good reasons for considering doing this. They make sense and can help you manage your money better.

Auto Deposit

The most important of these reasons is the option to auto deposit money from your paycheck into a secondary account. This means that when you get a paycheck, you can automatically assign an amount to go to an account that you have established with your credit card bank. Using this helps you to manage cash flow.

Easy Payments

Making payments to your credit card account becomes an easy transfer from your secondary account into your credit card account. You might even have an automatic payment option which means that you will never have a late payment again which avoids those fees that can accumulate on your credit card account.

Special Use Accounts

Use these accounts to set aside money for special items like building up money for a new car, or down payment for a house. Or, just keep money separate from the rest of your accounts for management purposes. Intermingling money that is specified for particular reasons makes it difficult to maintain control over.

Better Rates

Some banks might offer better rates and lower fees with the opening of an additional account with them. The reason for this is because studies have shown that when customers have more than one account they stay with a bank or financial institution for a longer period of time. Also, banks are more inclined to make offers to customers who are preferred with more than one account.

Good Money Management

Solid money management techniques include using all available tools to help watch cash flow to make sure that payments are made when they need to be and money is saved automatically. And, it does not have to be major money amounts that drive this activity. Just a few dollars per paycheck can help in this whole process.

Budgeting Assistance

Need help allocating money to certain expenses? Opening additional accounts can help with this task, too. You can then take money that is in a specific account and pay designated expenses. When money is auto-allocated it helps prevent spending it on things that it is not intended.

Using credit cards in a responsible way means that you have to get creative and work harder than ever to “win” at the game and make the cards and accounts work for you and not against you. Most people are content to sit idly by and allow fees and charges to accumulate while they struggle to just pay the minimums. And, some are not even able to accomplish that feat.
But, taking control of your credit cards is hard work and involves a total strategy of working a financial plan that will improve your finances, even if it is just a little at a time. That is why this suggestion to add accounts to your existing credit card bank makes sense: it fits the strategy and helps you get be a better money manager.

Ultimately, you have to make better decisions based on sound advice. That advice has to fit your situation and be applicable in ways that propel you ahead towards solid financial footing. Taking the time to check all suggestions out is wise and solid advice. Keep yourself open to new and better ways to reach your financial goals. You’ll be glad that you did.

Why the CARD Act Is Actually REALLY BAD for Students

While many people have written about how the CARD Act may affect the availability and cost of credit in general, little criticism has been raised about the student/under 21 provisions. Here are four ways the CARD Act hurts students or young adults:

1. The CARD Act Is Discriminatory
Sec. 201.B of Reg B issued by the Governors of The Federal Reserve states, “The purpose of this regulation is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant’s income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The regulation prohibits creditor practices that discriminate on the basis of any of these factors.” Emphasis added.

The Equal Credit Opportunity Act was a major step forward in the advancement of rights for all adults. There was a time, not so long ago, when wives were denied credit because it was taken for granted that their husbands could handle finances for them. How is requiring the parent of someone under 21 (a legal adult in the United States) not the same? The CARD Act completely negates this principal and should be considered contradictory to Reg B. The “test” for discrimination in lending is “disparate impact”, meaning that ANY policy that resulted in one of the protected groups being adversely affected (including under-represented) was de facto discrimination. That’s why banks can’t get around these explicit provisions in marketing by using zip code (commonly known as redlining–it’s illegal), telephone listing (historically many households had the phone listing in the husband’s name), and other such less-than-savory tactics.

When I was a credit analyst at a credit card company, we were always taught that Reg B could easily be remembered by the idea “be fair.” The government regulates that banks CANNOT discriminate on many factors, including age. By requiring “independent means” of paying back the debt (namely, bank statements), students effectively will not receive credit because the system investment required to manage deposit verification simply is not worth the hassle. There’s a reason mortgages have upfront fees to cover that sort of data gathering. Would this part of the act have passed if we said that senior citizens had to have their children sign on their financial obligations? Once we attack this principle, what’s next–an IQ test to enter into a credit agreement?

2. The Card Act Is Too Limited in Scope
So let’s be clear, someone under the age of 21 cannot be trusted with a credit card but can be trusted to go to war for this country, vote and participate in the democratic process, and can TAKE OUT A STAFFORD LOAN from the Department of Education? The average credit card debt for graduating students is said to be about $8,500. If a student takes all of the Stafford loans available to a dependent student, he/she has $27,000 in debt. It could be argued that this debt load is far more damaging than a credit card. After all, default on some student loans and your wages could be garnished. To limit the student marketing restriction for lending products only to credit cards seems to be woefully inadequate–if we do indeed believe that students can’t manage their finances. Students should feel safe now that Congress is watching out for them (sic).

3. The CARD Act Will Stifle Innovation
Bill Gates was a Harvard drop out when he founded Microsoft. Facebook was founded in a dorm room. What other brilliant ideas will be stifled because a young entrepreneur does not have a credit card to cover his or her expenses? Ever tried to buy an interview suit with a debit card when there’s only $45 in your checking account and your tips from bartending Saturday night haven’t come through? Credit cards are a great float tool for students.

Also, they allow students the means to explore the world. Many students use their credit cards to travel for Study Abroad, knowing full well that they will need to pay for it later. Credit cards made it possible for me to travel all over Europe in a way that I will never have the freedom to do as a working adult. This experience has made me a better citizen of the country and the world. This experience was worth having a little bit a revolving debt when I graduated. The ideas that I developed during my study abroad year made all the difference in my ability to relate ideas and experiences to my work life. I would have a much narrower perspective without it and would be a less creative and innovative employee and citizen.

4. The CARD Act Will Hurt an Entire Generation’s Access to Credit
Since FICO and length of credit history are key drivers of lenders’ decisions when making AND pricing auto and mortgage loans, a lack of credit history will make lenders less likely to grant credit to these students later in life. Imagine being offered a car note 200 basis points higher than someone ten years older than you because Congress made it illegal for you to have a credit card. Don’t forget, car insurance companies use credit scores to quote rates. Scary isn’t it?

In short, in their rush to pass a bill that would institute new reforms to the credit card industry, Congress forgot to ask themselves about the unintended consequences. Students are an easy target because they have fewer lobbyists screaming on their behalf. Once this law is enacted, a student who is denied credit based on this law should launch a test case for discrimination. Lawyers, start your engines.

Should You Cancel Your Credit Card?

People cancel credit cards for lots of reasons. Maybe your cards now come with an annual fee that wasn’t required before. Or maybe your credit limit has been slashed while your interest rate has increased. Whatever your reason, it’s sometimes tempting to get rid of old credit cards by closing your accounts. But is this really the best approach? Here are some factors to consider before you cancel your credit cards.

Reasons to Cancel

As mentioned above, lots of cardholders have been shocked to find that the terms of their credit cards are significantly worse now than they were just a year or two ago. That’s because of the credit crunch and the new credit card legislation. If you have cards with high interest rates and stiff annual fees, it might be a good idea to cancel them.

Some cardholders are realistic about their spending habits. Knowing that they have trouble avoiding the temptation to spend, they get rid of any unnecessary cards in their collection. If you have trouble controlling your spending, it might be a good idea to reduce the number of cards you have.

If you open a new account, you might want to cancel one of your old accounts to keep it from being targeted by identity thieves. By closing the account, you protect yourself and your credit score from crooks who want to use and abuse your good name.

Reasons to Keep the Card

There are several good reasons to keep your card accounts open, too. For one thing, the more available credit you have, the better you look to lenders. If you’re thinking of making a major purchase like a house or vehicle, you want to have as much available credit as possible. Keep your cards, but make sure the balances are low.

If you have a limited number of cards, think twice before you cancel one. Older lines of credit improve your credit rating more than newer ones. If you have an established line of credit with no negative items such as late or missed payments, you should consider keeping it open.

How to Cancel the Right Way

If you do decide to cancel a credit card, pay off the balance first. Call your credit card company and confirm that the balance has been paid in full. Then let them know you want to close the account and cancel the card. Send them a certified letter as well so that you have written proof of the cancellation. Request confirmation, and pull a copy of your credit report after a month. If the account is marked as ‘closed’, you’ve successfully canceled the credit card. If the account is still open after two months, repeat the cancellation process.

Credit card for people with bad credit

If you have bad credit get a credit card more difficult. Most companies credit card will simply refuse your request. Most companies credit card will simply refuse your request. This allows then to find a bad credit record, credit card extremely important. This makes finding a bad credit rating, credit card is very important. Now when you apply for bad credit, credit card, there are several important factors to consider. Well, if you opt for bad credit credit card, there are some important factors to consider.

First, if you have a bad credit record and are now in a better financial situation does not make the mistake of applying to all offers of credit cards is here. First, if you do not have a bad credit record and are in a better financial position for the failure of the application to all offers of credit cards available. Wants to lower your credit score with each application for a credit card. Your credit score is less than demand every credit card. To eliminate excessive inquiries, reduce your selection to one or two companies that specialize in bad credit credit cards. To eliminate excessive demands, you reduce your selection up one or two companies that specialize in bad credit credit cards. The reason for this is the likely hood of being accepted is much better than it would be with a company credit card regular. The reason is probably the cover is accepted much better than it would with a normal company credit card. This is an excellent first step in bringing your credit rating and its history goes back to an acceptable level. It is the first major step on the path of your credit rating and history once again reduced to an acceptable level.

Before applying or accepting an offer of bad credit card company credit, it is wise to research the company and other various offers. Before applying or accepting an offer of poor credit, corporate credit cards, it is desirable that the company and others of various tenders for research. Most companies try to help you change your situation, but there are companies who use this as a time to enjoy your situation to their advantage. Most companies try to help you change your situation, but there are companies who use this as a time to your situation to their advantage. Unfortunately, generally you will not be able to obtain low interest rates initially, but some are still better than others when it comes to bad credit credit cards. Unfortunately, in general, you will not be able to interest rates low at first, but some are better than others when it comes to bad credit get a credit card.

You want to make sure to read all information and other information regarding user fees, penalties, and any other hidden costs. They want to be sure all information and additional information are available in respect of all taxes, fines and other possible hidden costs. For example, if you are applying for a secured credit card, you must open a savings account with that bank in particular as an example: If you opt for a secured credit card is required to open a savings account with the bank. This amount is variable and will guarantee card. This amount varies and is the warranty card. How your credit limit will be the same amount as your savings account and if you do not pay the bank and the claims. Thus, your credit limit is the same amount as your savings account and if you do not pay, the bank then makes its request. In addition to filing fee for most have startup costs, an annual fee and a monthly service. In addition to the payment, most are start-up costs, an annual fee and monthly service charges are. Many companies want to charge your credit card if you have a balance before you actually receive the card. Many companies, the cost will be charged to your credit card if you have a balance before you actually receive the card.

You will probably not be able to do away with all additional costs, as above, which are associated with bad credit, credit cards. They will probably not be able to jump with any additional costs, as above, that with bad credit are credit cards. But if you read all the information from several companies, you should be able to find two with the lowest interest rates and fewer fees. But if you read the information with others, you should be able to find two with interest rates lower and lower prices.

New Credit Laws for Young People

Many adults who find themselves in financial troubles as they get older generally have some capital, or at the very least, financial experience to fall back on. This isn’t to say that dealing with debt problems is any easier when you’re older, it certainly isn’t, but growing up with debt problems is a serious problem facing the modern youth.

The weight of debt is a noose that is extremely difficult to shake off and if you fall foul with your finances at a young age the effects can be devastating. A recent study by Sallie Mae, a student loan company, found that 84% of undergraduates now owned at least one credit card, which is an 8% rise since 2004. The average spends for an undergrad has also increased since 2004, from $942 to $2,200. The most striking figure unearthed by the study was that 82% of the students fail to meet their full payments each month. These statistics haven’t gone unnoticed and with the government having major concerns over the borrowing potential of students in the future they have decided to implement some major changes.

Stricter Guidelines on Youth Credit Cards

Currently credit card companies have bombard student campuses, wafting the scent of “free” money under the noses of cash strapped students desperate for food and alcohol. Free pizzas, hats, t-shirts, basically any gimmick the financial institutions can use to lure the impressionable youngsters are fair game. Not for much longer though as the government has taken steps to restrict the ability of persons under the age of 21 obtaining a credit card. From February 22nd gaining easy access to a credit card (and free pizzas) will end as three motions are set to take affect:

• Anyone under 21 wishing to have a credit card must have proof that they can comfortably pay off any potential debts or have at least two adult co-signers to vouch for them. Sending pre-screen credit card offers to anyone under 21 will also be outlawed.
• Universities, colleges and alumni associations will have to disclose any contractual agreements they have with credit card companies which allows them to access student and alumni contact info.
• Students who share their account with an adult will have to obtain permission from parents or guardians to have the credit limits increased. Campus promotions by credit card companies will also be banned.

Building a Solid Financial Foundation

Bearing the burden of debt early in life can severely hamper your chances of owning your own home, applying for loans or simply just be able to save for later life. While the new laws will sour the candy coated temptations of credit cards they won’t eliminate them. That’s why it pays to develop good financial habits early and avoid any unnecessary stress in the future. Here are three tips to help you build a solid financial base for the future:

• Discipline Yourself – Don’t learn the hard way that too much debt is dangerous. Learn some self control and don’t be sucked into impulse buying. It is far better to save your money and buy the killer pair of sneakers or iPod with cash rather than credit. Racking up debt on unnecessary items will only serve to plunge you deeper into the abyss when you need your credit card for something urgent. You’ll also end up paying interest if you continually delay your payment which means that must-have dress won’t be quite the bargain you initially thought it was.
• Keep on Track – Noting down your expenditure, however basically, will not only be good practice for when you have to manage large payments, such as mortgages, but allow you to know your limits. The biggest problem young people face, especially when they have the luxury of a credit card, is not knowing where to draw the line. Not knowing your boundaries will leave you clueless as to where your income starts and where your expenditure stops. Make sure you always keep track of what’s coming in and, importantly, what’s going out.
• Emergency Back-up – Having a savings pot on hand to help you out in a crisis is invaluable. Imagine what the country would be like if we didn’t have the police, the fire department, paramedics etc etc on standby when something goes wrong. Putting some money aside each month, no matter how small, will be a blessing when you find yourself in desperate need of some funds.

Making sure you understand how to manage your money is essential if you’re going to survive in today’s economic climate. By not falling prey to the temptations of the credit card companies you and sticking to good financial practices should be all you need to enjoy a prosperous life.

More restrictions for Airline Credit Cards

If you’ve flown recently, you’ve probably run into some sales associates hawking airline reward credit cards. Air miles cards might seem like a good value, especially if you’d like to use some reward miles to cover the cost of an upcoming trip. However, I can think of at least four strong reasons why you should be wary of frequent flyer credit cards beneficial only to true road warriors (many of whom probably prefer to stay home when they’re taking time off).

2. Redemption Fees Clip the Wings from Frequent Flyer Airline Programs

Even if your purchasing patterns suggest that you could earn enough frequent flyer miles to make a reward credit card worthwhile, check the fine print. Some credit cards may charge a redemption fee to transfer your reward points into actual frequent flyer miles. Moreover, most generic airline reward cards that are not branded with a particular airline won’t even allow you to transfer your points to your existing frequent flyer mile accounts. You could also even be “double-dipped” by an airline that charges a ticketing fee when you want to exchange your miles for a flight!

3. Steep Costs Ground the Added Value of Airline Credit Cards

Airline reward cards feature some of the highest annual fees and highest interest rates of all credit cards. Although marketers at the airport might try to tempt you with “added value” features, like upgrades to elite status or no blackout dates, annual card fees as high as $100 can make a typical traveler feel less than valuable. You may be among the minority of Americans who charge enough to justify the cost of all those perks, but definitely do the math.

Here’s a quick scenario to consider. If you are only spending a $1,000 a month on an airline miles card that has an annual fee of $80, it will take you over 2 years to earn a free ticket (assuming that you have to earn 25,000 points for a roundtrip ticket). During that time, you will be out $160 in fees (2 years X $80). If the cost of your flight is $250, the true value of your $250 ticket is only 90 bucks ($250 less $160). Obviously, not exactly a way to get rich quick or slowly for that matter.
4. Cash Back Credit Cards Will Likely Get You There Sooner

Fortunately, there’s a less expensive alternative that can still help you cover the costs of that dream vacation. A few cash reward credit cards, like cards offered by Charles Schwab and Fidelity Investments, offer 2% cash back on all purchases. In the scenario just described above, you would have earned a generous cash rebate of $500 ($25,000 X 2%) had you used a cash reward card.

Considering the additional fact that very few cashback cards have annual fees, it’s easier and quicker to take that dream vacation to Hawaii using a cashback card. Not only will your card rebate likely be higher, you have more choice. For example, you can use your cash rebate to pay for discounted fares on any airline you choose to any destination you prefer. Or you could use your cash reward for any other purpose under the sun.

The bottom line is that if you want to get to your destination quickly and inexpensively, paying with a cash rewards card is the best way to go. You control your itinerary, not the airline, and you avoid a lot of fees in the process. Simply put, “cash is king” my friend (particularly in this environment)!

Credit Card with Fee Helps Consumers

Credit card merchant fees (also called interchange fees) are the latest target of politicians, consumer groups and some retailers. I for one, though, don’t really mind these “under the radar” fees for several reasons.

Lawmakers have decided to take their campaign against the credit card industry beyond the sweeping new provisions of the new credit card law known as the Credit CARD Act of 2009. Congress has also started investigating restrictions involving credit card merchant fees. These fees are paid by merchants every time you swipe your card and many merchants are crying foul. However, I feel like Washington should exercise caution when it comes to targeting interchange fees, for a few reasons:

1. Interchange fees power our payment grid.

Credit card interchange fees cover the costs of maintaining the invisible network that connects the swipe pad at your favorite stores to the database at your bank. Think of an interchange platform as a series of interstate highways that gets the money from your credit card or checking account into your merchant’s cash register. Those credit card merchant fees amount to about 2-3%, depending on the relationship your vendor has with credit card issuers. If you’ve written a check at a retail store in the last few years, you’ll appreciate the time saving value of a reliable, secure payment platform.

2. For rebate cardholders, credit card interchange fees boomerang back.

If you enjoy frequent flyer mile cards, or other credit card rewards like I do, you’re really just getting back a chunk of the interchange fees that you already pay for goods and services when you use plastic at the checkout counter. Personally, I don’t mind if other consumers cover the costs of some of the bigger rewards in the industry, like the 5% rebates I get on gasoline using my rebate credit card! Should I feel bad if consumers that pay by cash or check help subsidize my rewards? I think not. Credit card merchant fees also help to cover the costs of various free credit card benefits, such as extended warranty and insurance programs.

3. Clamping down on interchange fees won’t reduce prices.

Payment processing costs have been absorbed by retailers’ markups for years and I doubt if prices for goods and services will be lowered much, if any, if another law passes. On a related note, many retailers spend far more money on their cash handling systems than they do on merchant fees.

I know a manager of a major retail store who drops thousands of dollars into her safe each night, while processing four times as much revenue through her merchant credit card account. Yet, the amount she pays in interchange fees wouldn’t cover the cost of her daily armored car service or the salary of the cashier that spends two hours each day making change.

Smaller stores that prefer not to accept credit cards may feel like they’re improving their bottom line, but studies indicate that consumers buy more on credit cards than they ever do with cash or checks.

4. Our time and attention should be focused on more important things

Instead of worrying about credit card interchange fees that merchants pay for valuable services, let’s encourage our lawmakers to revisit the watchdog spirit that brought us the CARD Act in the first place. Payday loans, shady debt collectors, and fraudulent credit repair operators damage the financial lives of Americans every day. Rather than squeeze money from legitimate businesses, Washington should clamp down on companies that prey on fear, mistrust, and financial desperation. On a related note, more emphasis should be put on financial education.

Lawmakers struck a chord with consumers when they limited some of the credit card industry’s worst practices. Now it’s time for them to help our economic recovery by supporting the growth of our electronic payments network. I’m all for merchants being able to negotiate fees and a level playing field (which is what proponents of legislation curtailing credit card merchant fees claim they want). And, I think if fees are indeed not negotiable as proponents claim, then the government should step in.

But, at the end of the day, if a merchant is upset about paying fees, then why don’t they just stop taking plastic all together? Call me crazy, but I’m going to go “out on a limb” here and speculate that it just might be because it would hurt their business quite a bit more than help. I would certainly welcome your thoughts!

New Credit Card Laws and Your Rights

Recent changes in US credit law are set to loosen the stranglehold many credit card companies have over their customers and wrestle some of the power back in favour of the consumer. The law (passed on the 20th August) is the first step in what is being seen as the biggest overhaul of the credit card industry in two decades.

Credit card companies will now have to allow clients at least 21 days to pay off their monthly bills, in addition to providing 45 days warning before any major changes in their credit conditions. The new timescales, up from 14 days and 15 respectively, will give those struggling to pay their debts much greater breathing room and prevent any extra charges occurring through late payments.

Although the pendulum of power is still firmly in the grasp of the major credit card issuers, the new rules will be a welcome sign for those struggling to effectively manage their credit debt in the recession. The terms of the law also make it possible for customers to reject the terms of their new conditions (issued at least 45 days in advance) and take steps to cancel the debt and close the credit account. The good news for consumers doesn’t end there because set for implementation in February is a law which will restrict the ability of credit companies to freely impose fees, raise interest rates or sell credit cards to students. Such major shake-ups will inevitably have a stabilizing affect on the economy and ease the financial pressures on the consumer.

Credit Card Companies Fight Back

What’s good for us is rarely good for the companies though and there has been much talk recently about credit card companies charging annual fees as a way to bolster their profits, while they still have the freedom to do so. In June, Fifth Third Bank implemented a $19 on customers who had inactive accounts for 12 months, while Chase has recently introduced a $30 annual charge to some customers of the Freedom credit card. In a time when money is tight for everyone it seems that credit institutions are still hell-bent on continuing to increase their profits by any means necessary. Some experts argue that things such as annual charges are necessary step for credit card companies to take. By never having a balance on your card you are effectively getting a service for free; in this instance the automated payment system operated by the likes of Visa, MasterCard and American Express. Charing items to your card will incur a cost to the company (i.e. processing the transaction) and if they can’t rely on the interest to offset these then some other means must be sought.

Therefore, in reality, being a “model” borrower and paying off your debts on time isn’t what the company wants because ultimately their profits suffer. Introducing annual charges is a way for credit card companies to compensate for the disciplinarians who never make a late payment. While the new laws will help struggling borrowers in the short term it seems that they’re simply another stumbling block the credit industry has to negotiate on the road to huge profits. This begs the questions, should you be a “model” customer and face paying a plethora of stealth charges, or is it better to forgo any sense of timeliness when paying your debits? Either way it seems that the power to dictate the future of our credit card activity still lies firmly with the companies and no matter how much the government intervenes the consumer will continue to get the short straw.

Credit Checks

Before the world was introduced to a glorified fish tank full of egotistical housemates, George Orwell described a rather more disturbing phenomenon in his book Nineteen Eighty-Four. The now ominous term “Big Brother” was used to describe an omnipotent being that watched, analysed and controlled every aspect of Oceania.

Indeed, while the producers of the popular TV show might not have the same tyrannical motives as the Original Big Brother, the concept of a controlled environment is still very much alive today. Many people would agree that surveillance and an increased interest in the everyday activities of the population is a good thing for our national security. But, how about when credit card companies start to play the role of Big Brother?

The results of a new study into the psychographic profiling techniques used by the major credit companies will be revealed on May 22nd, 2010. Rightly or wrongly it is believed by many experts that credit card companies are closely monitoring their customers’ spending habits and adjusting certain customer’s terms in light of their results. Credit companies are not only tracking the amounts you spend on your cards but where and how you are using them to determine how credit worthy you are. Plastic spending at a casino/ betting establishment, a second-hand clothes store or using a credit card for bail bond services are all likely to draw negative attention to your account.

Is Credit Monitoring OK? Pros and Cons

While the state of modern society isn’t quite the totalitarian dystopia that Orwell described there is undoubtedly the feeling that our privacy is under constant attack. Surprisingly it is the government who have stepped into to protect our privacy. The new study, due in 2010, will assess whether credit companies have indeed been tracking our spending habits and basing your credit status based on the data collected. Credit is a business though and all industries need to protect themselves which is why there is some justification to this kind of practice. Indeed, how would the companies catch the high risk clients if not?

Are they taking it too far though and should these institutions not be able to have so much control over our personal lives?

Pros of Closer Surveillance

High risk consumers = higher interest rates and fees. As with many things in life it is often the minority that have the power to spoil it for the majority and the credit industry is no different. A small percentage of suicidal spenders are a financial liability to credit companies and the only way to offset the risk they generate is to increases prices. By closely monitoring each client and building up a detailed profile based on that person is one of the most effective ways to protect the companies and the majority of their clients who are responsible borrowers.

Cons of Closer Surveillance

By tracking every transaction you make the credit card companies effectively have a complete personality profile of you on record. Every transaction, whether it’s buying a coffee every morning or spending money at the convenience store, says something about you and by tallying all this information together the companies can potentially draw up a pretty accurate portrait of your life. This might be acceptable for government organisations wishing to protect our liberty but for a private company intending to sell us a product for profit it is slightly more concerning. This type of tracking can lead to some people being unfairly discriminated against just because of where they regularly shop or worse the information could be used to pressure/ persuade vulnerable clients into taking certain offers which they can’t immediately afford.

There are obviously positives and negatives on both sides and coming to a realistic compromise will be difficult. For many customers who have good borrowing habits none of this should be a problem but it pays to be wary about how and where you chose to use your credit card. One too many “inappropriate” or “questionable” transactions could send your credit rating downwards and affect your long-term credit future. Ultimately though, if you can show you’re a reliable customer who respects their spending, you shouldn’t have to worry whether Big Brother is watching you or not.

A Triple Whammy for Credit Card Balance Transfers

Many Americans are in for a shock. The era of bouncing our balances to new credit cards to take advantage of low interest rates on large purchases is over. Consumers took advantage of the low, 3% balance transfer fees of the past by shouldering their debts over to lower rate cards. It was a convenient way to get out from under an existing higher rate.

But now, consumers are going to face a “triple whammy” under changes made by lenders that will alter the credit card industry and end whatever benefits consumers thought they received by leapfrogging their balances. Small business owners have already felt the heat as new federal capital regulations burst the easy pipeline to credit lines. Under federal laws that go into effect next February, lenders will be forced to apply your payments to the account portions that are attached to the highest rate of interest. In reaction, many lenders may extend longer deals on “no interest” offers. Ultimately, it can reduce finance charges.

Here are three trends that may materialize under the new regulatory provisions:

Balance Transfer Offers Will Bear Higher Interest Fees

In reaction to lower interest rates, some lenders will increase the percentage on balance transfer fees when consumers come looking. The practice is already underway. While fee limits are cut, banks are already raising transfer charges to recoup their losses. Bank of America saw it coming and boosted its balance transfer fee to 4%. Other lenders, including HSBC, Chase, and Discover have taken offers with 5% fees to the marketplace to test the waters. If you’re paying upwards of 20% on an expired offer for financing electronics or furniture, the up-front 5% transfer fee may look attractive. But the increased fees come with limitations on benefits you might receive for other transfers. It can be tricky.

New, Shorter Introductory Periods Will Spark Faster Repayments on Balances

Previous promotions granted consumers as much as a year before they accrued finance charges. But with the new realities, account managers are looking to earn interest as quickly as possible. That means shorter introductory periods that automatically apply finance charges over the promotion period of your balance. Ouch. The CEO of Discover Financial let loose in a conference call his expectations for dramatic cutbacks on the durations for balance transfer promotions. This is probably a harbinger of how other lenders will react.

Balance Transfer Offers for Zero Percent Will Evaporate

Credit card companies still think that balance transfer offers are great bait for attracting customers from their competitors, but they’ll need to turn a profit under the new conditions. Hence, you’ll find more transfer promotions in the 2.99% to 4.99% range than the zero percent rate consumers have come to love. The net result is that you may have to take the hit of paying small finance charges in lieu of paying higher interest rates that you assumed with prior promotions.

The “triple whammy” reflects the credit card industry’s drastic need to stop the bleeding on its own debt, which means that consumers–as always–will bear the brunt. That may mean the game of credit card musical chairs is over.

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