Second step: make sure that you have an acceptable credit rating. This can usually be done by checking with the credit rating bureaus in your area; they will tell you your credit history and your credit score. Ways to ensure that you always have a good credit rating are such things as paying your bills on time, and never being late. It helps your credit rating, also, to pay more than just the minimum payment due. Third step: Verify that all the information in your credit file is actually yours — there are many times that stray information can make it into your credit file.  This can happen for many reasons, whether it’s the slip of a finger when someone is putting in a file number, or your name, or any other details. These are easily straightened out — as long as you find them to even know that they’re there. Fourth step: Apply for a credit card. This is probably the most time-consuming step of them all — it takes a long time to sift through the myriad credit card offers you are likely to get once you start looking for them. Be sure to read the fine print and make sure that you know what you’re getting into. Also, don’t forget to search the internet for credit card offers — there are more than you could know, and then spend some quality time comparing all the offers and making sure you have found the best one for you. Fifth step: Wait, and receive the determination from the card issuer that you have applied from. Waiting can be the hardest part, since you’re filled with anticipation — all ready to get your new credit card and go shopping!  But remember, that once you get the credit card, you’re the person responsible for making all the payments, so be sure to shop wisely. Make sure that your projected monthly payments will fir into your budget, because now that you have a credit card, you don’t want to lose it!

Five easy steps, some time, patience, and determination, and you’ll be the proud owner of a credit card!

View the original article here

Don’t succumb to temptation, says Cate Williams, vice president of financial literacy for Money Management International in Chicago.

“The first thing consumers need to do is walk from their mailbox to their shredder,” says Williams. “A new credit card might give you that sparkling feeling for about 24 hours, but as a way to clean up your finances, borrowing money to pay back other money is not a solution.”

Experts’ advice can steer you away from the top 10 credit card mistakes.

1. Getting too many
Bypass the shredder and you could make one of the most common credit card blunders by collecting too many credit cards.

“Ask yourself,” says Williams, “ ‘Do I need another credit card?’ Probably 95 percent of us don’t need another one to keep in the sock drawer or in the little metal box in the kitchen.”

Howard S. Dvorkin, founder and president of Consolidated Credit Counseling Services, a nonprofit debt management company in Fort Lauderdale, Fla., agrees. “The worst mistake is that people don’t know when to stop. Too many credit cards is not a good thing.”

Even if the cards have zero balances, multiple open accounts could cause a lender to question what could happen if the account holder gives in to temptation and maxes out on all that plastic.

2. Misunderstanding introductory rates
But, you argue, that new card will help you manage your money better because you can transfer other balances to a no-interest account. Welcome to credit card mistake No. 2: being misled by introductory rates.

“People don’t look at what the rate’s going to be once the teaser is over,” says Daniel Wishnatsky, certified financial planner and owner of Special Kids Financial in Phoenix. “The assumption is that it’s going to be a reasonable rate. But with these particular loans, it’s not unusual for it to go up to 18 to 20 percent. They’re surprised six months later when it expires. But if they’d done their homework, they wouldn’t be.”

3. Not reading the fine print
That homework is reading the offer’s fine print. Not doing so is credit card blunder No. 3.

That tiny text insert is where you’ll discover when the zero-percent or very low interest rate expires. It’s also how you can find out about any balance transfer fees, as well as any offer limitations. In most cases, the introductory rate applies only to balance transfer amounts or new purchases for a certain period of time, says June A. Schroeder, a CFP with Liberty Financial Group Inc. in Elm Grove, Wisc., a private financial planning and advisory firm.

4. Choosing a card for the wrong reasons
You might be tempted to ignore the fine print because the card has other attractions, such as a rebate or rewards program. Don’t, or you’ll make credit card mistake No. 4: choosing a card for the wrong reasons.

“Credit card granters are not a consumer’s’ friend. It is a business,” says Dvorkin. “They don’t know what’s right for you. Their job is to extract as much money from you as they can. Your job is to not let that happen. People need to go through and find a card that’s right for them. There’s every sort of card out there — points, cash back, donations to your college.”

5. Not rate shopping
Look for the best possible interest rate. Not shopping around is credit card mistake No. 5.

It’s especially important to note the rate on unsolicited offers. If you’re struggling financially, you’re not likely to get the most favorable rates or terms. You’ll be paying higher interest rates. So comparison shop for a credit card.

6. Making minimum payments
OK. You do need another card. You read the fine print, you completely understand the terms and you got a competitive rate. But even after choosing the perfect credit card, people still make mistakes, such as No. 6 on our list, making minimum-only payments.

“Credit cards are not a form of supplemental income,” says Dvorkin. “They’re for convenience, and should be paid off at the end of every month. Paying the minimum is not going to get you anywhere. It’s going to get you in trouble, that’s where it’s going to get you.”

And it’s going to get you into trouble for a long, long time. “People don’t realize how difficult it is to pay off loans at a high rate,” says Wishnatsky. “You’re going to be paying it for your next three lifetimes.”

CreditCards.com’s calculator can show how long it will take to pay off a bill if you send only the minimum each month.

7. Paying your bill late
Making late payments, blunder No. 7, is better than not paying at all, but not by much. Not only will you face a late-payment charge, which could be higher than your minimum payment, your tardiness will show up on your credit report, making it harder to get better terms for future loans and accounts.

Check your account statement for the due date and make sure you send your check in plenty of time. But the date alone isn’t enough, says Liberty Financial’s Schroeder. Some companies have cutoff times. If your check arrives on the 22nd as required, but in the afternoon mail, your payment is counted as late because your account terms called for payment by 9 a.m. that day.

If you’ve set up an automatic payment via your bank, make sure the time and date are taken into account, says Schroeder. And find out your bank’s payment policy when the due date falls on a weekend or holiday.

8. Ignoring your monthly statement
You can avoid late payments by checking your credit card statement. Not doing so is mistake No. 8. Checking your statement will help you pay your bill promptly, as well as allow you to make sure that the charges on it are correct. “In these days of ID theft, you need to check your bills religiously,” says Schroeder. And you need to do so as soon as the statement arrives. If you wait too long to dispute a charge, says Schroeder, “you’re essentially accepting it.”

9. Exceeding your credit limit
Checking your statements also can keep you from exceeding your credit limit, mistake No. 9. “If you’re near the top of your credit limit, try really hard to pay in cash for subsequent purchases or get an increased credit line,” says Schroeder. “If you don’t, you’ll get over-the-limit charges, which are costly and look bad on your credit report.”

10. Buying things you don’t need
Careful statement examination also could prevent the 10th credit card blunder, using plastic to purchase things you don’t need.”Go over your credit card bills every month and you’ll be amazed at the number of items that, upon reflection, you could have done without,” says Wishnatsky. “It’s surprising how many purchases we make that we think are needs, but are impulse buys.”

The Phoenix financial planner tells his clients who are considering a significant purchase to wait 48 hours, if at all possible. “If you still want it, wait another 48 hours,” Wishnatsky says. “Then if you have to get it, then get it.”

Also use your statements to help you create a budget. Wishnatsky realizes many people cringe at the “B” word, but he says control of your spending and your credit card usage doesn’t have to be a way to deprive yourself. Instead, it can be a way to make things happen in financially positive ways.

“Once you get control, even to a degree, it frees you from this constant money worry,” says Wishnatsky. “You might find there are things that you can actually end up having if you just have a plan, if you get your financial desires in tune with your financial resources.”

source: creditcards

It’s the single most common question these days in the Answer Desk Inbox: I’m drowning in debt! What can I do?

What should you do if the accounts are already delinquent, past due, charged-off, and not necessarily due to neglect? Paying these accounts will still show negligence, so what can we do, those already drowning in bad credit?

Here’s our seven-step plan for getting the credit card monkey off your back:

Step 1: Reality check
Over the years, with the blessing of Congress and federal regulators, the credit card industry has created a repayment system that was skillfully engineered to put its customers deeper and deeper into hock. By keeping credit limits high and monthly payments artificially low, the financial services industry created a dangerous sense of well-being among borrowers.

Billions of marketing dollars have been spent to create this false reality. The first step to getting control of credit card debt is to remove yourself from the fantasy mindset that as long as you can make the minimum monthly payment, your debt is under control.

For example, that $18,000 balance — at a fairly generous 18 percent interest rate — would require a $360 monthly payment, based on 2 percent of the outstanding balance. At that rate, you’ll pay roughly $52,000 in interest before the balance is finally paid off. And it will take you 56 years.

Step 2: Make a plan
If you haven’t already done so, make a budget. You really have no idea if you’re truly broke until you understand where your money is going. Gather three months’ worth of bills and make a list of where it goes. If you’re a heavy ATM user, keep a “cash journal” for a month or make your best guess about where you spend. Include all family members to make sure they get the same reality check.

If your monthly expenses are bigger than your income, you have to make some tough choices. There are no right or wrong choices as long as you can get your budget to balance. Try to classify as many budget items as you can as “non-essential.” Consider a list of things you can sell.

You may not have to make all these cuts, but look for as many as you can. Your goal is to find enough savings to make a meaningful dent in your credit card and other debts, not just the minimum payment.

Depending on the outcome of this exercise, you have (roughly) two courses of action.

Step 3: Pay it down
You’ll have to come up with more than the minimum to make a serious dent in your debt pile. But let’s look at the impact of increasing your monthly payment.

If you added $300 to the monthly payment on that $18,000 balance, you’d save $47,600 in interest. And you’d be debt-free in just three years. If you can’t afford that much, a $460 monthly payment (just $100 more than your minimum) would save you $42,400 in interest and get you out from under in five years. (Our numbers are based on the Federal Reserve’s Web calculator. Try it out for your debt.)

You‘ve got to stick with the plan month in, month out. Put your new monthly payment at the top of your pile of bills, along with rent, utilities, food and other “essentials.” Your credit card is now a “first of the month” bill and not something you try to chip away at when you have “spare” cash.

Have your paycheck direct deposited to your bank account and then set up an automatic bill payment for your credit card. These automatic payments will help impose a discipline to your plan: the money’s gone before you can find other “discretionary” ways to spend it. If you’re trying to go on a diet, it’s easier if you don’t stock the freezer with ice cream.

Step 4: Get help — carefully
If your budget won’t balance no matter how much you sharpen your pencil, you need to move to Plan B. The sooner you acknowledge the problem and get help, the sooner you’ll be able to resolve it.

If you’re falling behind, you have a fairly limited window to act. Most card companies will move an unpaid debt to “delinquent” status after 90 days. That doesn’t mean you should wait that long if you know you have a problem. But your lender may not want to discuss other options before then.

Once you’re delinquent, you need to work out a plan as quickly as possible. After 180 days of non-payment, lenders typically “charge off” the loan from their books. They may sell your unpaid debt to another company at a big loss. Once your lender has decided to take the hit and move on, it’s a lot harder to work out a solution.

So don’t wait to ask for help. Call your lender (more on this in a minute). If that doesn’t work, contact one of the many legitimate, non-profit, nationally accredited credit counseling agencies that are available in most areas of the country. If you can’t get to a counselor’s office, you may be able to work with them by phone. (To find a counselor, check out the Web site for the National Foundation for Credit Counseling.)

Step 5: Don’t get scammed
With so many people in credit trouble these days, there is no shortage of people offering solutions. Unfortunately, many of them will only get you deeper into trouble. Start by ignoring all the e-mail and Internet pitches for “debt consolidation,” “credit repair” and any other “get out of debt free” schemes. Most of these are scams.

One of the most common pitches these days comes from swindlers who offer to get your lender to settle for less than you owe. (You maybe able to do this on your own: more on that in a minute.)

The scam works like this: for a big upfront fee, your “settlement counselor” collects your information, tells you they’ll contact your lender and then claims they’ve reached an agreement on your behalf with your lender. They’ll insist on collecting payments from you to forward to the lender, cutting off all communication between you and your lender.

By the time you find out you’ve been scammed, your debt has been charged off or sent to collection agencies, you still owe the debt, your credit is ruined and the “settlement counselor” has pocketed your upfront fee and any payments you made.

Step 6: Consider alternate payment plans
Contrary to the claims made by the credit repair scammers, there’s no magic to taming a large pile of debt. When you meet with your legitimate, nationally accredited counselor, they’ll need to review your budget to determine what your options are. If you haven’t made a budget, gather up all the bills, bank statements, cash spending diary and other documents you’ll need to work out a budget.

If you and your counselor can’t figure out budget items to free up cash to increase your monthly payments, the next step may be to consider approaching the credit card company to try to negotiate an alternative payment plan.

Negotiating a plan isn’t easy, and it’s not without consequences. You can do this on your own, but you may do a lot better with the help of a professional who does this for a living and knows who to contact and what to ask for. The credit counselor can also advise you on the impact various plans will have on your finances and credit down the road.

Step 7: Choose your best option
Debt Management Program: If your budget can afford it, your credit counselor will work out a five-year plan to consolidate all your credit cards and other debts and roll them up into a single monthly payment, using guidelines established by the lending industry for approved credit counselors. You’ll have to show you can come up with a workable budget.

As part of the plan, your lenders may agree to waive late or over-limit fees and cut your interest rate. You won’t be able to use your cards, and your credit score may get dinged a bit, but the impact on your future credit will be better than your other options.

If the plan is approved by your lenders, you’ll be debt free in five years, as long as you keep up with the new monthly payment. You’ll pay a small fee to the counseling agency (typically $15 a month), and your counselor can help you stay on track.

If your counselor determines that a Debt Management Plan won’t work for you, they can help you discuss alternatives. But you’re going to have to deal directly with your lender to try to negotiate another option.

That means finding the right person in the right department who has the authority to change the terms of your debt. This is not something handled by the front-line customer service agent. Ask for the department that handles settlements, workouts or “loss mitigation.” Expect to make more than one call.

Forbearance: With this option, your lender essentially agrees to stop the clock, but you’ll still owe the full balance and, usually, any outstanding interest and fees. Lenders will typically only offer this under very specific circumstances. You’ve lost your job but you’ve just found another one, or you lost income due a short-term setback like an illness. When the clock starts up again, you’ll have to make up missed payments, so unless your financial setback was truly temporary, and now behind you, this option probably won’t work.

Workout: This is similar to a Debt Management Program, but may not follow the same guidelines used by credit counselors. The bank may eliminate fees and cut your interest rate (temporarily or permanently) to help you get your finances back under control. You’ll probably also end up with a lower credit limit; you may have to agree to stop using the card.

Settlement: Short of bankruptcy, this will have the most drastic effect on cutting your debt, but it will ruin your credit. With this option, your lender agrees to take less that your full balance to settle your debt. You’ll typically make three lump-sum payments.

But this option comes with a price. Your credit score takes the same hit as you’d get from filing for bankruptcy. And you may owe taxes on the debt balance you didn’t pay off.

If you choose this option, make sure to get the settlement terms in writing. Read them and make sure you understand them before agreeing to move forward. Your credit counselor can help.

Bankruptcy: This is a last resort, but if you’ve gotten this far you probably need to seriously consider it. It’s a terrible process to go through, it’s expensive, and it will leave your credit impaired for years. (Don’t believe any of the claims you may hear about “repairing” your credit score after a bankruptcy. It’s another scam.)

Though it’s the worst option, bankruptcy court is there for a reason. The law acknowledges that life is full of uncertainty. Perfectly responsible people can and do suffer financial setbacks through no fault of their own. The bankruptcy process is designed to give those people a fresh start.

If you’ve explored every other option and come up empty, seek a good bankruptcy lawyer and find out what your options are. The first visit should be free.

source: msnbc.msn

And although you may take steps to protect yourself against identity theft, an Associated Press investigation has found the banks and other companies that handle your information are not being nearly as cautious as they could.

The government leaves it to card companies to design security rules that protect the nation’s 50 billion annual transactions. Yet an examination of those industry requirements explains why so many breaches occur. The rules are cursory at best and all but meaningless at worst, according to the AP’s analysis of data breaches dating to 2005.

It means every time you pay with plastic, companies are gambling with your personal data. If hackers intercept your numbers, you’ll spend weeks straightening your mangled credit, though you can’t be held liable for unauthorized charges. Even if your transaction isn’t hacked, you still lose. Merchants pass to all their customers the costs they incur from fraud.

More than 70 retailers and payment processors have disclosed breaches since 2006, involving tens of millions of credit and debit card numbers, according to the Privacy Rights Clearinghouse. Many others probably have been breached and didn’t detect it. Even the companies that had the payment

industry’s top rating for computer security, a seal of approval known as PCI compliance, have fallen victim to huge heists.

Companies that are not compliant — including one in 10 of U.S. medium-sized and large retailers — face fines but are left free to process credit and debit card payments. Most retailers don’t have to endure security audits, but can evaluate themselves.

Credit card providers don’t appear to be in a rush to tighten the rules. They see fraud as a cost of doing business and say stricter security would throw sand into the gears of the payment system, which is built on speed, convenience and low cost.

That is of little consolation to consumers who bet on the industry’s payment security and lost.

It took four months for Pamela LaMotte, 46, of Colchester, Vt., to fix the damage after two of her credit card accounts were tapped by hackers in a breach traced to a Hannaford Bros. grocery store.

LaMotte, who was unemployed at the time, says she had to borrow money from her mother and boyfriend to pay $500 in overdraft and late fees — which were eventually refunded — while the banks investigated.

“Maybe somebody who doesn’t live paycheck to paycheck, it wouldn’t matter to them too much, but for me it screwed me up in a major way,” she said. LaMotte says she pays more by cash and check now.

It all happened at a supermarket chain that met the PCI standards. Someone installed malicious software on Hannaford’s servers that snatched customer data while it was being sent to the banks for approval.

Since then, hackers plundered two companies that process payments and had PCI certification. Heartland Payment Systems lost card numbers, expiration dates and other data for potentially hundreds of millions of shoppers. RBS WorldPay Inc. got taken for more than 1 million Social Security numbers — a golden ticket to hackers that enables all kinds of fraud.

In the past, each credit card company had its own security rules, a system that was chaotic for stores.

In 2006, the big card brands — Visa, MasterCard, American Express, Discover and JCB International — formed the Payment Card Industry Security Standards Council and created uniform security rules for merchants.

Avivah Litan, a Gartner Inc. analyst, says retailers and payment processors have spent more than $2 billion on security upgrades to comply with PCI. And the payment industry touts the fact that 93 percent of big retailers in the U.S., and 88 percent of medium-sized ones, are compliant with the PCI rules.

That leaves plenty of merchants out, of course, but the main threat against them is a fine — $25,000 for big retailers for each month they are not compliant, $5,000 for medium-sized ones.

Computer security experts say the PCI guidelines are superficial, including requirements that stores run antivirus software and install computer firewalls. Those steps are designed to keep hackers out and customer data protected. Yet tests that simulate hacker attacks are required just once a year, and businesses can run the tests themselves.

Merchants that decide to hire an outside auditor to check for compliance with the PCI rules need not spend much. “PCI compliance can cost just a couple hundred bucks,” said Jeremiah Grossman, founder of WhiteHat Security Inc., a Web security firm.

At the same time, the card companies are increasingly hands-off. Two years ago, Visa scaled back its review of inspection records for the payment processors it works with. It now examines records only for payment processors with computer networks directly connected to Visa’s.

In the U.S., that means fewer than 100 payment processors out of the 700 that Visa works with are PCI-compliant.

Visa’s head of global data security, Eduardo Perez, said the company scaled back its records review because it took too much work and because the PCI standards have improved the industry’s security “considerably.”

Representatives for MasterCard, American Express, Discover and JCB — which, along with Visa, steer PCI policy — either didn’t return messages from the AP or directed questions to the PCI security council.

The AP contacted eight of the biggest “acquiring banks” — the banks that retailers use as middlemen between the stores and consumers’ banks. Those banks are responsible for ensuring that retailers are PCI compliant. Most didn’t return calls or wouldn’t comment for this story.

Mike Herman, compliance managing director for Chase Paymentech, a division of JPMorgan Chase, said his bank has five workers reviewing compliance reports from retailers. Most of the work is done by phone or e-mail.

Supporters of PCI point out nearly all big and medium-sized retailers governed by the standard now say they no longer store sensitive cardholder data. Just a few years ago they did — leaving credit card numbers in databases that were vulnerable to hackers.

The U.S. might also try a system such as Europe’s, where shoppers need a secret PIN code and card with a chip inside to complete purchases. The system, called Chip and PIN, has cut down on fraud there (because it’s harder to use counterfeit cards), but transferred it elsewhere — to places such as the U.S. that don’t have as many safeguards.

A key reason PCI exists is that the banks and card brands don’t want the government regulating credit card security. These companies also want to be sure transactions keep easily humming through the system — which is why banks and card companies are willing to put up with some fraud.

By Jordan Robertson
The Associated Press
www.sltrib.com/business

They throw all norms to the winds while issuing the cards and also while sending them to the card-holders. Little do they realize that if the card falls into wrong hands, the unsuspecting card-holder would be put to great loss.

Unfortunately, even the record about the delivery of the card to the right person is not maintained by the banks and the present case is an example in this respect,” UT consumer forum said on Saturday as it directed ICICI Bank to pay Rs 25,000 as compensation and Rs 5,000 as litigation cost to consumer Raju Rana.

Holding the bank guilty of harassing Rana by not delivering his credit card and for levelling false charges, the forum, headed by Jagroop Singh Mahal, added, “In their zeal to spread the facility, banks even forget the consequent loss being caused by them to innocent customers, many of whom may not even be able to approach consumer forums.”

According to the complaint, Rana, while putting up at Sector-15, had availed a personal loan from the bank in 2008. He later shifted from that house and meanwhile, a credit card was issued by the bank in Rana’s name.

The card was allegedly delivered to someone else, residing at Rana’s previous address. The credit card was then allegedly misused by the person to whom it was delivered, its credit limit being Rs 60,000. The complainant got to know about this when he received a bill of Rs 67,334 along with card details at his official address.

Following this, Rana discussed the matter with the bank to clear the situation. Instead of admitting their deficiency, the bank kept on demanding the amount, the complaint added.

A notice was issued and ICICI Bank, in its reply, stated that the credit card in question was duly delivered to Rana and it was he who used it. They denied that anybody else used the credit card.

indiatimes.com

For Americans who carry a balance, which is about 40 percent of people who use a credit card, some of the protections will be welcome news.

The bill does away with a prevalent credit card practice called the Universal Default Clause. This practice allowed credit card companies to increase interest rates to consumers based on credit report activity on other debt held by the consumer. When this part of the law goes into effect, August 2010, your credit card issuer will be able to raise your interest rate only if the account in question is past due by 60 days or more.

Once you get the account back on track and make six timely payments, your interest rate must go back to the lower normal rate for your account. There are some nuances, including rules about promotional rates and new debt, so do read all updates and inserts sent to you by your credit card company.

Other features of the new legislation include a requirement of advance notice of rate increases of 45 days compared to the current notice timeline of only 15 days. Over limit fees will be restricted to only once per billing cycle and only if the cardholder chooses to allow the creditor to approve an over-the-limit transaction.

An egregious previous practice of some credit card companies was a sub-prime credit card with a small credit limit of $300 to $500 that had a short window for payment with high late and over-the-limit fees. Consumers with these types of credit lines often quickly found themselves past due and over the limit,

which basically caused them to use up the card limit with numerous late fees. When the new law goes into effect, late and over-the-limit fees can never exceed 25 percent of the initial credit limit.

Another feature of the new law will restrict credit card approval rates to people 18- to 21-years-old. In the past, this age group has been solicited with small credit card limits and high interest rates. For some young people who are just getting a foothold in the financial decision-making world, the predatory tactics of these cards caused great heartache and difficulty. Now people in this age group will need to prove adequate stable income to support credit card debt repayment or have a co-signer.

Interest billing on credit balances soon will be restricted to only the interest accrued on balances from the current month, and all payments must pay the highest interest rate balances first if there are several different rate structures (special offer rates) on the same account. Gift cards will not expire for five years, and inactivity fees won’t occur until the card has not been used for 12 months.

Consumers will get more time to pay with a required 21-day window from the statement date until the payment is due.

There also are some valid concerns that credit card users who do indeed pay off their balances each month will see some of their credit card benefits decrease. This unintended consequence will be watched closely as the new law takes effect. It will be interesting to see how the credit card industry restructures its pricing structure and if there will be a backlash from consumers who do not carry a balance from month to month.

It is hoped that the industry finds a fair way to reasonably charge for its services so that consumer personal responsibility is rewarded for all credit card users.

Finally, if you are concerned about paying off credit card debt and feel that you never make progress on reducing the amount you owe, the nonprofit Consumer Credit Counseling Service of Northern Colorado offers a debt management program to give structured repayment options so that credit card balances can be paid off over time.

After a recent “Call to Action” by the National Foundation for Credit Counseling to the credit card industry, 10 of the largest national credit grantors have agreed to further lower interest rates to allow consumers a better opportunity to create a plan to pay off all unsecured debt and avoid bankruptcy.

Sara Allen Gilbert is executive director of the local Consumer Credit Counseling Service, 1247 Riverside Ave., Fort Collins. Call her at 229-0695.

coloradoan

The measure, called the Credit Card Fair Fee Act, focuses on the so-called interchange fee that restaurants, service stations and other stores pay banks for credit card-related purchases.

Merchants and some lawmakers have complained that merchants and retailers have been blocked from being able to negotiate a fee structure with credit card networks Visa Inc and MasterCard Inc, whose members are banks.

Visa and MasterCard set the fee structure and control almost three-fourths of the volume of transactions on general purpose cards. American Express Co and Discover Financial Services have their own systems.

Store owners and retailers have also complained that banks collude to set the fee structure and block them from being able to negotiate lower fees, even going as far as calling the practice anti-competitive.

Critics have said those fees are passed on to consumers.

Visa and MasterCard have said merchants and retailers do have the opportunity to negotiate lower fees.

“This legislation will give merchants a seat at the table in the determination of these fees,” said House Judiciary Committee Chairman John Conyers in a statement.

“It is not an attempt at regulating the industry and does not mandate any particular outcome. This bill simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees.”

Conyers and co-sponsor Representative Bill Shuster, a Pennsylvania Republican who is not a committee member, introduced the bill.

When Congress passed the sweeping credit card reform bill last month, which is expected to squeeze profits, banks breathed a sigh of relief that the interchange fee structure at least would be left alone.

If the new bill were enacted, it would be another setback for banks and credit unions seeking to restore profits and shore up balance sheets weighed down by toxic assets.

“Any time you cut out interchange fees, it’s really detrimental to credit unions because we have smaller economies of scale, unlike the larger issuers,” said Eddie Ambrose, associate director of legislative affairs for the National Association of Federal Credit Unions. “It’ll adversely affect us more.”

Last year interchange fees rose to about $48 billion, up from $42 billion in 2007. Fees in 2006 were about $36 billion. Interchange fees averaged about 1.75 percent of total purchases. Estimates range from 1.6 percent to more than 2 percent.

Under the bill, merchants and retailers would be allowed greater access to negotiations with banks to establish rates and terms, while an antitrust attorney from the Department of Justice would be present at the talks.

Unlike last year’s bill, it wound not set up a three-judge panel whose mission would be to arbitrate arguments between merchants and banks.

A provision in last year’s bill to require merchants to pass the savings along to consumers was also not in this year’s version.

The Electronic Payments Coalition, which represents payment card networks and financial services companies, expressed opposition to the bill and criticized the motivation of merchants.

“This legislation is an attempt by giant retailers to make consumers pay for one of their business expenses — the cost of accepting credit and debit,” the group said in a statement.

(Editing by Gerald E. McCormick)

reuters

U.S. households are receiving far fewer credit card offers, which could be a good thing for those who might easily fall into the debt trap. But for those receiving offers, the cards increasingly come with annual fees.

In the first quarter, U.S. households received 372.4 million offers, a 67 percent drop from the same time period last year, according to Mail Monitor, the direct mail tracking service from market research firm Synovate. Twenty-seven percent of the cards carried an annual fee, up from 18 percent one year ago. The mean annual fee is $74, Direct Mail found.

Credit card companies have been reeling from a record number of write-offs, or debts they have to give up on, making them leery of lending to riskier borrowers. Last month, President Obama signed a law that would ban many consumer-unfriendly industry practices, such as arbitrarily raising interest rates, beginning in February. Card issuers have said the new law could force them to raise interest rates and charge annual fees on all future credit cards, regardless of the risk a customer poses.

“As issuers continue to cut back offers and the mailbox becomes more superprime we are seeing a proportionately higher number of card offers with an annual fee,” said Andrew Davidson, vice president of Competitive Tracking Services for Synovate’s Financial Services Group.

Now, more than ever, people have to be vigilant when they get credit card bills.

“Consumers must pay attention to the offers they receive to see if the card has an annual fee,” said Bill Hardekopf, chief executive of LowCards.com and co-author of The Credit Card Guidebook. “In addition, consumers need to look at the notices you receive in the mail or in your bill to see if your issuer has added, or even increased, an annual fee.”

– Nancy Trejos

Merchants who accept credit cards must pay an interchange fee of 1 percent to 5 percent plus a transaction fee of 50 cents or more. These costs are passed onto the consumer as part of the purchase price. As a result, someone like me who charges over $25,000 per year, pays $600 to $1,000 per year that goes to the banks and credit card companies.

I’m sure this is far in excess of what it cost to handle these transactions. The credit card companies may be greedy but they’re not stupid.

I’m sure they would cancel my card in an instant if they were losing money on me. Instead they are using news of the legislation concerning credit card fees to spread the myth that they will have to charge annual fees so that those card holders who pay their balances in full will now have to pay “their fair share.”

Marc R. Saucier
Littleton
boston