Category: Credit Cards

Bank of America (BOA) may have promised not to raise its interest rates before the implementation of the Credit Card Accountability Responsibility and Disclosure (CARD) Act next February, but apparently implementing new fees is still fair game.

On Tuesday, Bank of America announced that itwould be sending notices out to 1 percent of its credit card customers stating they would be charged a fee ranging from $29 to $99 in February as part of what spokesperson Betty Reiss called the testing of an annual fee that had not yet been implemented

"We’re testing this to see what the feedback is. In terms of any plans going forward, we haven’t made any decisions," Reiss said.

According to MyBankTracker, the bank also added that the fees were being considered as “response to market changes, new federal laws and regulations, and the increasing costs of providing unsecured credit."

The announcement of the new fee comes one week after Bank of America became one of the first to announce they would not be imposing any "misleading" increases to their card holders’ interest rates in the months before new regulations went into effect in February as part of the Credit CARD act.

In the event of a potentially fraudulent purchase, consumers prefer to be notified directly via a call to their cell phones, according to a new survey released by fraud prevention agency Adeptra.

The extra mode of notification in the event of any type of account breach may be useful to consumers who are dealing with debt counseling and looking to keep a close eye on their finances.

According to the survey, which was conducted in September by polling 200 consumers on how they would like potentially fraudulent transactions to be dealt with, found 54 percent of respondents said that being contacted by a cell phone call was their top choice.

A notably fewer number of respondents, 20 percent, said that they would like to be contacted on their land line telephone. The same percentage of respondents said that they preferred to be notified by email.

Only 6 percent or respondents said that they preferred to be notified by SMS/text message.

"Today’s credit card fraudsters are armed with the combination of no scruples, an eye for opportunity, and cutting edge technologies," said Lou Venezia, the CEO of Adeptra. "It’s a never-ending race but issuers are embracing technologies and services which help them stay one step ahead to protect their brand reputation and, most importantly, let consumers know when there might be fraud so they can stop a small problem from turning into a larger one."

The desire to be contacted directly on a cell phone did not necessarily mean that consumers were overly interested in checking up on their accounts, as only 11 percent said they checked their account balances daily.

Consumers may get a helping hand with their credit card debt consolidation in the near future, as many credit card companies have unveiled new consumer-friendly card programs.

In response to a recent flurry of criticism from consumers and even policymakers about overdraft fees, slashed credit limits and hiked up interest rates, companies such as Bank of America and JP Morgan & Chase have introduced more transparent, basic card policies.

In addition to responding to the new legislation that restricts credit card companies’ ability to raise fees and rates, the trend is an attempt to win back some dissatisfied customers, including the one Bank of America customer that – very publicly, in a YouTube video – refused to pay her credit card bill until the bank reduced her suddenly inflated rate.

One of these customer-friendly cards, Bank of America’s Basic Visa card, offers one rate for all transactions as well as a $39 flat late charge, while the Blueprint Card from Chase allows customers to select which expenses they pay off each month without receiving a finance charge, even if they have a balance or interest in other categories.

Democratic Senator Chris Dodd of Connecticut is also working on legislation that will further help consumers with their credit card debt consolidation, making it so that consumers must opt-in for overdraft protection.

Many people who have fallen into credit card debt or have a debt consolidation loan believe that saving money will help them improve their credit score and get out of debt. However, according to at least one expert, closing cards and putting the money aside for a rainy day could actually do the opposite.

In a piece for the New York Post, Catherine Curan writes that a number of experts indicate that a consumer who has a decent credit score with few credit cards is likely to see a 30 to 40 point drop in their credit score if they close out an account they maintain a zero balance on.

Evan Hendricks, author of Credit Scores & Credit Reports, says that although consumers might think closing a card is their best option, they may want to continue making purchases on it – for the good of their credit score.

"If you close a card, you don’t have the credit limit in your calculation, so use the card a little bit and pay it off," he told the paper.

While some may think they don’t need to worry about credit scores, syndicated columnist Liz Pulliam Weston writes that even those with no plans of owning their own home should factor in credit scores as landlords and insurance companies are known to factor in the scores when deciding on tenants or giving prices on insurance coverage.

Many recent college graduates are saddled with credit card debt and are forced into consumer credit counseling to bring down what they owe, and while new legislation is aimed at protecting college students from credit card companies, these firms are actively targeting those customers before the laws take effect.

According to ABC News, card companies are attempting to sign up college students for cards before laws which will limit how businesses target these students go into effect early next year.

In February, the second portion of the Credit Card Act will prohibit those under the age of 21 from getting a credit card unless a parent or guardian co-signs. And while many believe this will help protect young adults, others think it’s over-kill.

Olivia Worley, a 20-year-old early childhood education major at Northern Arizona University in Flagstaff, told the news provider that having a credit card is necessary.

"You have to have credit established to buy a car, buy a house and even to set up your bills," she said. "Otherwise, your monthly payments are more expensive. If we can be ‘legal’ adults at 18 and start our own lives, then we need that credit because a lot of young people don’t have a lot of money to shell out of pocket."

Still, many recent grads start out with a large amount of debt before starting their career. A study from the College Board found that for the 2007-2008 school year, graduates at public institutions had a median debt level of $17,700 while those at private colleges had a median level of $22,375.

With credit card problems forcing many people into getting debt consolidation loans or looking into credit card counseling, new proposals from the Federal Reserve are aimed at helping people avoid those solutions by placing limits on interest rate hikes.

The proposal announced today from the Fed would amend Regulation Z – the so-called Truth In Lending Act – and would protect consumers from a number of credit card practices.

The provisions – which are scheduled to go into place in February – are the second stage of the Fed’s implementation of the Credit Card Act which was signed into law in May. Among other things, the new rules would generally protect consumers from interest rate increases during the first year of an account. The plan would also limit companies from raising rates that apply to existing balances.

Elizabeth A. Duke, Federal Reserve Governor, says the proposals would be another step toward limiting the practices of credit card firms which negatively affect consumers.

"This proposal is another step forward in the Federal Reserve’s efforts to ensure that consumers who rely on credit cards are treated fairly," she said. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts."

While it may not be as advisable as other credit card debt solutions like a credit counseling service, one woman’s YouTube rant aimed at Bank of America has resulted in having her interest rate reduced.

Earlier this month, California resident Ann Minch posted a video on YouTube after she said Bank of America had raised her interest rate to 30 percent despite making payments on time and staying below her credit limit.

After being a customer of Bank of America for 14 years, Minch said she was withdrawing all her money from her Bank of America accounts and refused to make payments to her credit card unless the company returned her interest rate to its previous amount and presented her with a "too-good-to-turn-down payment offer."

It turns out that the video actually worked. Less than two weeks later, Minch went back to YouTube to report that Bank of America contacted her and agreed to return her interest rate to its previous level of 12.99 percent. However, she also noted that her most recent balance shows an interest rate of 23.99 percent.

As many suffer from credit card debt and are forced into bill consolidation to help make ends meet, Americans are looking for as many ways to make money as possible, and in North Carolina, getting a $10 gift card to Wal-Mart is as easy as taking a trip to the doctor.

MSNBC reports that health workers in Forsyth County, North Carolina are offering a $10 gift card to Wal-Mart for residents who get tested for HIV and syphilis. The plan came about as the region has been suffering through an outbreak in STDs this year where cases of venereal diseases had tripled over 2008 numbers with still three months to go.

Of the 603 people tested during the recent campaign, MSNBC reports that about half say they were motivated because of the card. Evelyn Foust, director of the communicable diseases branch of the North Carolina Department of Public Health, told the news provider that money is definitely a factor for many of those who get tested.

"I was in Rocky Mount [N.C.] where we screened 500 people in one weekend when a woman came up to me and said, ‘you know, with their dollar menu, I can get five meals out of this,’" she told MSNBC.

North Carolina isn’t the only state paying people to better their health. Some Medicare patients in Illinois are receiving money on a prepaid card if they visit their primary physician.

Although plans in place through the Credit Card Act which passed through Congress earlier this year were aimed at making it harder for credit card companies to target students, one California college appears to be making it easier, which could lead to the need for credit card counseling for some students.

The Stanford Daily, the student newspaper for Stanford University, reports that students at the school are now able to make purchases at a number of places on campus with their ID card. Although the card only allows students to purchase up to $1,000, it eliminates the previous plan which worked as a debit card of sorts.

Now, students who make purchases on their ID card at campus eateries, the bookstore and a number of other locations, will see the charges add up on their university bill which must be paid at the end of each quarter.

Although many students appear to be in favor of the plan, not everyone is on board. Leslie Johnson, a freshman at the school, called it "dangerous."

"More often than not, parents aren’t able to approve this spending and are sometimes paying for it," she told the paper.

Many recent college graduates start their careers already in the hole because of debt. A recent study from the College Board found that grads at public institutions for the 2007-2008 school year had a median debt level of $17,700 while their private college counterparts had a median level of $22,375.

Two Democrats from the House of Representatives are planning to announce a proposal to move up the implementation of a new consumer protection law regarding credit cards by two months.

The proposal, from Representatives Barney Frank and Carolyn Maloney, would move up the application of the Credit Card Act of 2009 from February 1, 2010 to December 1, 2009. According to the lawmakers, the move is being proposed because of questionable tactics they feel were used by creditors before the new laws, which will restrict their traditional ways of moneymaking, went into effect.

"Since the signing of my bill by the President on May 22, too many credit card companies have used the period to raise rates and fees in a way that would be banned come February," said Maloney, who was involved in the act’s creation, said in a statement, according to the Wall Street Journal. "I believe they’re taking advantage and using the time before the effective date badly. Changing the effective date to December 1 is both warranted and wise."

Parts of the Credit Card Act have already been implemented, such as the requirement for creditors to notify customer 45 days in advance – as opposed to only 30 days previously – before changes are made to their contract. Among the new provisions that are currently set to go into effect in 2010 will be the elimination of creditors’ ability to offer free gifts on college campuses in exchange for opening lines of credit.

Representatives Maloney and Frank are planning on holding a press conference today to formally propose that the implementations be pushed forward.