How to avoid credit card fraud
It may seem odd that a small piece of plastic is more desired by thieves than a stack of cash, but your credit card offers them the possibility to spend significantly more money than if they just swipe a few twenty dollar bills out of your pocket. Unfortunately, credit cards are very susceptible to theft and fraudulent purchases, mainly because they are small, easy to lose, and you regularly enter your credit card information online. So what measures can you take to avoid credit card fraud?
Protect your credit cards – This may seem like an obvious tip, but many people are too cavalier with their credit cards, treating them like disposable pieces of plastic rather than actual money. Keep your cards inside your wallet or zipped up inside your purse at all times to protect them from sticky fingers, and never leave your credit card out in public, as thieves can easily take a picture of your card and use its information to make purchases under your name.
Invest in a shredder – Never throw away your bank statements before shredding them, as these documents contain your personal banking information that thieves can use to steal your money. To avoid someone rifling through your trash and finding your bank account number and other confidential information, shred each piece of paper before tossing it in the trash. This also applies to old credit cards: cut them up before discarding them so that your credit card number is illegible and won’t be of use to potential thieves.
Guard your credit card information – Scammers are rampant online, and guarding your credit card information while browsing the web is crucial. Be wary of online scams that ask you to enter your credit card information, such as shady online vendors or businesses that pretend to have your personal information. If you are ever suspicious of online communication with someone claiming to be from your bank or credit card company, call your company immediately to see if this is, in fact, a scam.
Keep track of your purchases – Some thieves choose to play a more coy game, where they steal small amounts of money each month in hopes that the card’s owner will overlook these small purchases (and most of them do). If you do not pay close attention to your monthly statements, you may fall victim to credit card fraud without ever knowing it. Even if a scammer only takes $20 a month out of your account, this still amounts to $240 a year that is being stolen from you. So keep track of your purchases by saving receipts or keeping a journal documenting your spending so that you can compare your purchases with your credit card statement at the end of the month.
Report lost or stolen cards immediately – As soon as you notice your credit card is missing, contact your bank or credit card issuer immediately and have them cancel the card. If you report a loss or theft immediately, you will decrease your chances of being charged for any fraudulent purchases. Similarly, if you begin to notice fraudulent activity on your bank statements, contact your bank immediately and notify them. The sooner you become aware of credit card theft, the less damage you will be responsible for.
If you do happen to be the victim of credit card theft, your first thought may be that it will damage your credit score. Fortunately, fraud alerts do not hurt your credit score, but it will make creditors more cautious when approving a credit application in your name. In order to make sure that a thief is not applying for credit under your name, they will go through a double-check process, which can slow down the process of getting a loan.
So if you are the victim of credit card fraud, report it immediately, as this will likely save you money and stress, and will not harm your credit score.
Why Students Should Start Building Good Credit Now
For many college students, the idea of establishing credit rarely crosses their minds; or if it does, they assume that credit is something that they won’t have to worry about until far after graduation. This isn’t the case, however, as building good credit during your years in school is crucial for preparing you financially for life after college.
Why Good Credit Matters to Recent College Grad
1) Employment Opportunities
Your credit score can start impacting your life immediately after college. Many employers conduct credit checks of potential employees, and a bad credit score could make you seem financially irresponsible, which could ultimately deter an employer from hiring you. If you choose to follow your dream of becoming an entrepreneur instead of finding a job right out of college, a good credit score is even more important. Most young entrepreneurs do not have the capital to successfully start their own businesses, and therefore must rely on receiving small business loans, which are difficult to obtain without good credit.
2) Living Situations
Aside from your career, your credit score also affects your day-to-day life. Unless you plan on moving back in with your parents, having a good credit score will help you find a place to live after graduation. Many landlords will conduct credit checks when you apply for a rental to ensure that you have a good history of paying off your debts, and a bad credit score could cause landlords to turn you away.
Finding a method of transportation can also be difficult when you have bad credit, as both leasing and buying a car is easiest and most affordable with a good credit score. Most recent grads do not have the cash to buy a car, which means that a loan is necessary. Not only does your credit score determine whether or not you qualify for a loan, but it also helps lenders decide on the interest rate of the loan. Establishing a good credit score while you are still a student can help you save money by avoiding high interest rates on car loans.
Ways College Students Can Build Good Credit
Many students are under the impression that they can only start building credit once they have a reliable source of income. Whether you work part-time at your school’s cafeteria or babysit occasionally on the weekends, you can (and should) start building credit immediately.
1) Ask your parents for help
Owning a credit card is a huge responsibility, as you must realize that every time you swipe the card, you are using real money that you are obligated to pay back. Because of the weight of this financial responsibility, students can ease into establishing credit by “piggybacking” on their parents’ account. The parents can monitor the student’s spending since the child is an authorized user of the account, and if the parents have good credit, the student’s credit score will also improve.
2) Apply for your own credit card
It is surprisingly easy for most college students to get a credit card, as many lenders assume that your parents will help you out if necessary. When deciding on which credit card to apply for, make sure to consider the card’s interest rate, credit limit, fees and penalties, and rewards program. Be extremely cautious when using your credit card, however, as many students tend to get carried away with spending when their credit limits are high. To avoid this, ask your credit card issuer to keep your credit limit low so that you can easily pay off any balances you incur.
3) Make small purchases
As a student trying to build good credit, it is important that you do not spend more money than you can afford to pay off. Try to keep your spending under 30% of your card’s limit, and use it mainly for occasional small purchases such as food, music, or movie tickets.
4) Pay off your balance every month
The most important step in building good credit is paying off your balance every month. When you are first trying to establish credit, it is a good idea to avoid carrying a balance on the card. To do this, though, you must be strict in your spending habits and only purchase things that you know you can afford.
College is not only a time to receive a good education and to learn how to live independently, but it is also a great time to start establishing yourself financially. Building and maintaining good credit in college can be easy and hassle-free if done correctly, and a good credit score can be invaluable after graduation.
Part 1 of 2
I’ve spoken a lot recently about what credit card issuers are doing before the Credit Card Reform Act goes into effect next February. They’re justifying their practices by saying that their revenues are suffering with the ever increasing unemployment and default rates. Sadly their solution is to penalize the paying customers. Here’s a list of specific things to watch out for in handy “10 things to watch out for” format.
• Increasing interest rates. The phrase of the day with the card issuers seems to be “any time any reason” price changes. This isn’t just happening to sub-prime customers either. One of the major banks just raised the interest rate on their low risk prime cards to 29.99%. Interest rates like this have been ridiculous in the past even on sub-prime cards. Rates for sub-prime cards are even worse.
• Penalty rates are going up. Those are the rates that are put in place if you’re late, go over your limit, etc.
• “Unprofitable” accounts are being shut down or getting their limits reduced. In other words, people that pay their cards off each month, denying the card issuers interest and penalty fees, are being closed down. The issuers want to keep the people that carry balances and are late here and there.
• Cash advance and balance transfer fees are skyrocketing to all time highs. The days of no cost, 0% interest balance transfers are long gone, and those “convenience” checks are going to significantly increase the real cost of your purchases.
• Annual fees are being added and increased. Last year less than 20% of credit cards had annual fees, but it’s predicted that by February nearly all credit cards from the big banks will have them. The cards that already had annual fees are seeing them doubled, tripled, even quadrupled.
• Fixed rates are being changed to variable rates. In the past with fixed rates meant that if the prime interest rate went up your rates remained the same, decreasing the profits of the banks, but now if the historically low prime interest rate goes up (which it will since it can’t really get any lower), your rate will go up. If prime is 3% and your rate is prime +24.99%, and prime goes to 6% your rate goes to 27.99% instead of staying at 24.99%. Oh, and the best part, there’s no provision for the rates to go back down. So if prime goes back to 3%, your interest rate doesn’t go back to 24.99%.
• The banks are changing the terms of their special fees to make them all inclusive. For example, banks charge a special fee for “international transactions” in other forms of currency, but they’re changing the terms so those fees apply even when the transaction is still in American greenbacks.
• They’re making rewards an endangered species. Cash back rewards are being lowered or eliminated while things like airline miles are getting tougher restrictions making it harder, if not impossible, for people to use them.
• The banks are getting creative and creating new fees in addition to the old ones. Not using your card? Here’s an inactivity fee. Not using it enough? Have a low activity fee.
• The banks are closing cards with no notice. That’s means you might not even know until you go to use the card and your transaction is embarrassingly declined.
I’ll follow this up tomorrow with some suggestions on how to protect yourself.
The House voted today to hasten the enactment of fresh rules for credit card companies after constituents complained of a drastic rise in interest rates and steep new fees.
The bill, approved 331-92, will force credit card companies to meet the terms of the new rules at once unless they agree to stop increasing interest rates and fees.
The bills chances in the Senate are weak; where several Senators worry that a short deadline would hurt the industry and limit the availability of already scare credit.
All the same, Wall Street seemed to take notice of the House’s vote, sending bank stocks tumbling in the last hour of trading today immediately following the House vote
Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, was quoting as saying “This is both real and a lesson to them”. Many feel this is a warning to the banks to back off their predatory practices.
The Credit Card Reform Act was signed into law earlier this year and was designed to protect consumers by regulating interest rate increases, the issuance of cards to people under 21, and the way information and what information is presented in communications from lenders. The downside was many in the Senate felt the rules were too harsh, so the banks were given 9 months to prepare for the changes. Instead they used the 9 months to wring consumers dry while it was still legal. Recent studies have shove that interest rates have risen by 20% in the past year on average. It seems odd that the banks argued that they needed months to enact the new rules, but have the business agility to enact rate increases and credit limit reductions almost instantaneously.
Reprinted from The Pew Charitable Trusts
Written by Kip Patrick
Washington, DC – 10/28/2009 – One hundred percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once legislation passed in May takes effect next year, according to a new report by the Pew Health Group’s Safe Credit Cards Project. The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined. With the Federal Reserve currently developing rules to ensure penalty charges are “reasonable and proportional” as required under the Credit CARD Act, the report also includes policy recommendations for regulators.
“Since passage of the Credit CARD Act, we found that credit card issuers have done little to remove practices deemed unfair or deceptive by the Federal Reserve,” said Shelley A. Hearne, managing director of the Pew Health Group, which oversees the project. “In fact, some of the most harmful practices have actually grown more widespread–not one of the bank cards reviewed would meet the legal requirements outlined in the Credit CARD Act, which is bad news for consumers.”
The new report, “Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect”, examines all consumer credit cards offered online by the largest 12 bank issuers in America. These banks control more than 90 percent of outstanding credit card debt nationwide. The report also reviewed cards offered by the largest credit unions. The Pew Safe Credit Cards Project gathered data from July of this year on nearly 400 cards, building on its previous research from December 2008.
Key findings of the report show that:
• 99.7 percent of bank cards allowed issuers to increase interest rates on outstanding balances – a jump from 93 percent in December;
• 95 percent of bank cards permitted issuers to apply payments in a way the Federal Reserve found likely to cause substantial financial injury to consumers; and
• 90 percent of bank cards had penalty rate hikes with the vast majority imposed by “hair triggers” of one or two late payments in a year.
“The Federal Reserve must ensure that the rules it is developing will prevent unreasonable or disproportionate penalties, including penalty rate increases, which our data show remain far too common,” said Nick Bourke, manager of Pew’s Safe Credit Cards Project.
In July, median advertised annual percentage rates (APRs) for purchases on bank issued cards were between 12.24 and 17.99 percent, compared to a range of 9.99 to 15.99 percent in December 2008 (issuers advertise a range of rates depending on applicant credit profiles). Compared to December of last year, lowest advertised bank rates grew by more than 20 percent, while highest advertised rates grew by 13 percent. Pew’s previous report identified that issuers raised rates on nearly one-quarter of existing accounts, costing consumers a minimum of $10 billion in a one-year period between 2007 and 2008.
“Still Waiting” also provides the first comprehensive comparison of bank cards to those issued by credit unions, based on advertised terms and conditions. The analysis showed that credit unions offered much lower APRs, less punitive penalty rates and engaged in far fewer unfair or deceptive practices than their commercial peers.
To ensure that the Credit CARD Act is implemented to meet its goal of safeguarding the consumer, the report outlines policy recommendations for the Federal Reserve and other regulators to ensure that the new rules under development will:
• Regulate penalty interest rate increases in its rules governing “reasonable and proportional” penalty fees and charges in accordance with the law;
• Scrutinize partially variable rates, which can increase when the index rises but cannot drop below a minimum set by the issuer; and
• Eliminate credit card penalties that are not aligned with achieving the Act’s primary goals of protecting consumers against risky practices.
“When the Credit CARD Act takes effect next year Americans can expect to see safer, more transparent cards,” said Bourke. “How well the new law works, however, will depend significantly on how the Federal Reserve creates new rules under the law to protect consumers. In the meantime, issuers have the opportunity to move as quickly as possible to ensure their products are clear of the unfair and deceptive practices that unfortunately remain part of every card we reviewed for our report.”
The Pew Safe Credit Cards Project (www.pewtrusts.org/creditcards), part of the Pew Health Group, develops and promotes standards for consumer-friendly credit cards to help ensure the financial security of all Americans. The Pew Health Group is the health and consumer product safety arm of The Pew Charitable Trusts, a nonprofit organization that applies a rigorous, analytical approach to improving public policy, informing the public and stimulating civic life.
The Democrats in Washington were busy patting each other on the back when they passed the credit card reform bill earlier this year. That quickly changed though when they realized that the reforms they passed were only inciting the credit card companies the raise interest rates, lower limits, and increase fees before the laws are enforced. Many of us in the industry had seen the reaction of the credit card companies coming like an overloaded freight train a mile away. The delay written into the credit card reforms were nothing more than Congressional leaders bowing to the pressure of the banking industry lobbyists. Now that they’ve realized what a colossal mistake they made by delaying the implementation of these new rules and regulations… well let’s just say they’re not as self congratulatory.
Reps. Carolyn Maloney (D-NY) and Barney Frank (D-MA), in the House, and Sen. Mark Udall (D-CO) in the Senate, are introducing legislation today on the Hill to minimize the damage the delay in the legislation caused. The back peddling they’re doing today would put the new rules and regulations into effect by December 1st, 2009. That’s 3 months sooner than required in the current law. It’s amazing that they didn’t realize this would happen when they wrote the legislation. If Congress passed legislation to outlaw soda, but said the law would not go into effect for another year, would Congress be surprised when the price of soda went up? The fact is, they knew what would happen, but the lobbyists hired by the banking industry made more of an impact on members of Congress than their constituents.
Democrats have been urging Ben Bernanke, the Federal Reserve Chairman, to put the reforms in place sooner, but he has been reticent to do so. He explains his apprehension by stating that an earlier start date for the legislation “could provide benefits for consumers, [but] the Fed continues to believe that, given the breadth of the changes required by the law, card issuers must be afforded sufficient time for implementation to allow for an orderly transition.” Suffice it to say many on Capitol Hill were not impressed by Bernanke’s response. Credit card companies, however, were. Let’s hope they don’t celebrate by raising interest rates even more.