Credit Cards

Tips, news, reviews, caveats, trends, updates and analysis related to consumer and business credit cards, and prepaid debit cards. From the interest rate specialists @ FedPrimeRate.com

Saturday, September 24, 2005

Some Sage Advise About the Prepaid Credit and Debit Cards You Give To Your High School or College Bound Kids

Prepaid credit and debit cards can be a great way to introduce high school and college bound teens about managing finances. Prepaid cards are really the perfect training tool: kids get to feel good about managing their own school-related spending (I know I would have loved to do my own shopping when I was a teen), etc. while parents get a great tool that can go a long way toward teaching kids the value of money. Parents also get to have complete control over spending limits which takes a whole lot of stress out of the equation.

Alan Safahi, President and CEO of Card Express, Inc. (CardEx) in Irvine, California, offers a few pointers for parents who give prepaid cards to their kids:

  • Explain the purpose of the card with your child and create a workable budget

  • Advance the card with enough funds for everyday, school-related items and discretionary items

  • Reload the card at regular intervals (up to the dollar maximum) to gauge average spending/saving

  • Review the card usage with the kids and offer periodic encouragement and advice as needed

  • Allow funds to "rollover" as a reward, if your son or daughter doesn't entirely use the original loaded amount

The above bullet points are part of a Card Express press release.


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Wednesday, September 21, 2005

Mitsubishi Motors Offers Prepaid Debit Card to Pay for 12,000 Miles Worth of Gas On Any 2005 Model Year Vehicle Purchase

Auto manufacturers have been using creative tactics to get their sales up. We've all seen the "employee discount" incentives going around--and they've done a great job at boosting car sales. Now Mitsubishi Motors has come up with a new incentive idea: The new "Gas Comes Standard" incentive gives anyone who buys a 2005 model year Mitsubishi car a prepaid debit card that they can use to purchase gas at any gas station for a year (a year = 12,000 miles.) Each prepaid debit card is worth $1,500 - $2,500; the amount set for each customer is based on the estimated gas the purchased car will consume within 12,000 miles of driving. With gas prices continuing to rise as powerful hurricanes batter the Gulf region, this deal may be very attractive for anyone currently in the market for a new vehicle, especially anyone looking to buy a vehicle made by Mitsubishi.

Interested? Well then stop by a Mitsubishi dealer for more details.


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Monday, September 19, 2005

New Service Combines Cell Phone with Prepaid Credit Card

A new payment system combines the safety and convenience of a prepaid credit card with your cell phone. The new MobileLime system works with any cell phone. You basically register @ the MobileLime website, then you fill your account with cash (for prepaid use) or you can link your account to an existing standard credit card. At this point you are ready to shop. When you are ready to pay for whatever you're buying, you call up MobileLime and enter your 4 digit PIN number. You then enter the store's location code to complete the cell phone part of the transaction. Your payment is complete only after you give the cashier the last 4 digits of your cell phone number.

Will MobileLime take off? Well, it seems a bit cumbersome to me, but the system has some clear advantage that include security (you don't have to give anyone your credit card number) and MobileLime constantly has coupons/discounts available that you can use to save money on your shopping sprees. But some have been reporting bugs in the system like dropped calls and store employees who don't know exactly how the system works (pay with your cell phone? Excuse me?) Hopefully the kinks will get ironed out soon, as this system could help to reduce the crimes associated with credit card use and employee theft. Best wishes to MobileLime!

For more information, point your web browser to www.MobileLime.com.


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Saturday, September 17, 2005

What Is Going On with Bank of America's Credit Cards?

People are starting to wonder about Bank of America, specifically Bank of America's credit card offerings. For some time now, I've been reading lots of posts about MBNA's poor customer support and questionable tactics, and I wasn't a bit surprised to eventually find that thousands of MBNA credit card holders had started paying off their entire credit card balances and closing their accounts in order to permanently sever their relationship with MBNA. MBNA's profits were hit hard by the exodus, leaving MBNA primed for a takeover, and that's exactly what happened: Bank of America purchased MBNA a few months ago; Bank of America (BofA) obviously looking to capitalize on the millions of credit card accounts owned by MBNA.

But now many are saying that Bank of America has adopted some of the worst behaviors that were the cause of much anguish for MBNA's credit card account holders.

One particular complaint really caught my attention. A mature lady with a very good personal credit rating decided to take advantage of a Bank of America 0% balance transfer offer. The lady described herself as person who always pays her bills on time and who never carries a revolving balance on her credit cards. This lady soon found that she was being charged some hefty over-the-limit fees on her BofA account, even though she did not have a balance on her credit card (and she was making regular and timely installment payments related to the balance transfer deal.) When she called BofA to find out why she was being charged over-the-limit fees even though she was making her payments on time, the BofA explained that:

...even though [she was making] payments during the month to keep the balance within the credit limit, there could be a day within the cycle that the card was officially “over the limit.”
To further exacerbate the situation, she was charged $451 in interest charges, even though it was supposed to be a 0% balance transfer deal. Why was she paying interest on a 0% deal? Because her interest rate had gone from 0% to 31% as a result of a violation of the BofA credit card agreement. And this is the part of this story where you really need to pay attention; here are the terms that caused the interest rate to skyrocket:

"During the introductory period, if we do not receive at least the Minimum Payment Due during any billing cycle, you exceed your Credit Limit or you close your account, any introductory rate on Purchases and Balance Transfers will terminate and will be adjusted to the Standard Rates."
Do you see what is going on here? If you don't, allow me to explain.

It is perfectly legal for BofA to charge over-the-limit fees and interest on the above-described account. You see, this is one way of playing the 0% balance transfer game that can result in huge profits for the credit card company involved. Is it wrong for credit card companies to engage in such tactics? You decide.

Allow me to present a hypothetical 0% credit card balance transfer offer from the fictitious Balance Transfer Bank of Anytown, USA. The 0% balance transfer offer is very competitive, offering an introductory interest-free period for 18 months, with a balance transfer fee equal to 3% of the transferred balance, or $75 (whichever is lower.) The terms for this credit card offer are quite ordinary, and include the following clause:

"During the introductory period, if we do not receive at least the Minimum Payment Due during any billing cycle, you exceed your Credit Limit or you close your account, any introductory rate on Purchases and Balance Transfers will terminate and will be adjusted to the Standard Rates."


OK. So you decide that it's a great deal and you are going to go for it. After all, you have some high balances on some of your other credit cards, and the interest charges are really starting to hurt! You call the toll-free number provided to apply. You tell the representative on the phone that you would like to take advantage of the 0% balance transfer facility, and that you want to transfer $5,000 from one of your other credit card accounts to your new Balance Transfer Bank credit card--assuming that you get approved for the card, of course. The representative on the phone informs you that you have been approved for the new credit card and that you've also been approved for the $5,000 balance transfer. Cool! Everything seems to be going your way. The representative doesn't tell you what the credit limit on your new card is going to be, so you decide to ask. The representative tells you that he doesn't know what your credit limit will be, but you will receive a letter in the mail with all those details within 2-3 weeks.

A week later you get a letter from The Balance Transfer Bank of Anytown, USA. The purpose of the letter is to congratulate you on your approval status, and to let you know that your credit limit is $5,000. OK, no problem. You're transferring $5,000, and your limit is $5,000. All the math works out fine!

Two months later, you get a credit card statement from The Balance Transfer Bank, and you see that you've been charged an over-the-limit fee of $29. You also notice that the interest rate on the $5,000 you transferred has gone from 0% to 29%, and you are already accruing interest charges on the balance you transferred. All this and you have never used the card to make any purchases or cash withdrawals. Why did this happen?

It happened because The Balance Transfer Bank decided to set your credit limit to exactly $5,000--which is the exact amount you transferred with the 0% balance transfer offer. And here's the best part: the $75 balance transfer fee caused your balance to jump from $5,000 to $5,075, thus giving The Balance Transfer Bank every right to charge you for being over your credit limit. More bad news: because you violated the credit card agreement by going over your credit limit, your interest rate on the $5,000 your transferred has gone from 0% to 29%.

The scenario I've just described above is happening to folks around the country every day. MBNA was doing it, and it most likely contributed to their downfall. But Bank of America? Why would they adopt such tactics? It doesn't make sense! Surely they must know that they are going to scare away customers. Sure, it makes them some great profits in the short term, but what about the long term? Doesn't it make more sense to focus on retaining their customer base for the long haul by treating their customers fairly? Hmmm...

Just last week, I signed-up for a new Citibank credit card and took advantage of an associated 0% balance transfer offer. I asked about my credit limit, and even though the Citibank representative wasn't able to tell me what my limit would be right away, he did assure me--in fact he guaranteed--that my limit would be set to a level that is higher than the balances I was transferring, so that there would be some room to accommodate any fees that might be assessed. And that's the way it should be. A Chase representative I spoke to a few months ago said basically the same thing.

I feel that it is very important for me to note here that I've had a Bank of America Gold credit card for over 2 years now and I've had no problems with it. To be perfectly honest, it's one of the best credit cards in my wallet. I took advantage of a Bank of America 0% balance transfer offer in order to obtain the card and it was a very good deal. Flawless. No problems. It's the only credit card I own that has a picture of my baby girl on it. Over the past two years the good folks @ Bank of America have not only lowered my interest rate, but they've also given me a generous credit limit increase (both actions look great on a credit report.) So I can write here with complete sincerity that I am really confused about the latest buzz about BofA credit card offers.

The Bank of America grew from a small Italian bank into the American icon that it is today by providing their customers with superior support and service. Let's hope that the acquired MBNA tactics related to their credit card offerings are just a hiccup, and that in the very near future they'll be back to providing some of the best credit card deals around.

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Monday, September 12, 2005

NetSpend Corporation To Sell New Prepaid Visa Debit Cards At Safeway Stores

You will very soon be able to buy a Visa branded prepaid debit card at your local Safeway store. Safeway, one of America's largest and well-known supermarket chains, will sell 2 types of the All-Access prepaid Visa cards: a typical re-loadable prepaid card and a prepaid gift card that will be available preloaded with $25, $50 or $100. The new card will cost $9.95 to purchase, will not require the purchaser to have a bank account and no credit checks will be performed. The fact that this new card is co-branded with Visa means that purchasers of the card will enjoy worldwide acceptance for purchasing all manner of goods and services wherever the Visa logo is displayed.

The most unique and interesting feature of this new prepaid Visa card is the All Access National Savings Program which gives the purchaser the option of linking the prepaid card to a federally insured, interest-bearing savings account. Click here to read more about this new prepaid card...


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Friday, September 09, 2005

Read Those Balance Transfer Details Carefully: Not All Balance Transfer Deals Are The Same...

Over the past year or so, I've been coming across consumer complaints about the customer service provided by MBNA for their credit card account holders. Yesterday, I found a complaint on the complaints.com website, posted by a gentleman in Wyoming, about an MBNA credit card balance transfer deal that didn't go well. Basically, MBNA imposed a balance transfer fee of $75 on this gentleman's transferred balance, but, instead of posting the transfer fee after the interest-free period ends, MBNA posted the $75 charge to his account right away! I can understand why this gentleman was angry: charging a balance transfer fee to an account right away is not standard practice, and it can translate to some nasty fees being charged each and every month.

The situation described above can be particularly vexing because, as you might already know, many credit card companies will apply your monthly installment payments to your transferred balance(s) first. This means that any new purchases (which sometimes includes fees) will be subject to interest charges (unless you were able to secure a superior balance transfer offer that charges no interest on balance transfers, cash advances and new purchases.) So if, for example, you were to transfer $5,000 to a new credit card via a balance transfer deal, and the deal included a balance transfer fee of $75, then you may find yourself paying interest on that $75 right "off the bat." And because installment payments are applied to transferred balances first, the only way to stop those monthly interest charges from being charged as a result of that $75 fee would be to payoff the entire credit card balance in full--including the $5,000 you transferred! Credit card companies know that most folks can't afford to pay off their entire account balance whenever they please, so this is just another way for them to profit off of your debt.

I personally learned a hard lesson early in 2004, when I transferred a balance to a credit card account that had already been open for some time, but was offering an attractive 0% balance transfer deal (at that time, I owed nothing on that credit card, and the "go to" rate for this deal was a very reasonable 7.9%.) I transferred a relatively large balance, and everything was going great for the first 2 months, until I noticed that I was suddenly and unexpectedly being charged $1.50 in interest. You may be thinking that $1.50 is no big deal, but to me, a 0% deal should be just that: 0%! When I called my credit card company to find out why I was being charged interest, they told me that I had made a $35 purchase on my credit card that month, and that new purchases were subject to interest charges. This didn't make any sense to me, as I had avoided using this particular credit card for new purchases, knowing full well that I would get slammed with interest charges if I did. Well, I was in fact "in the wrong," as I later discovered that the $35 purchase was an automatic payment made to EZ Pass (EZ Pass is a system that gets you through highway tolls very quickly; instead of waiting in long lines to pay highway tolls by cash, you get to zip through tolls, paying with a EZ Pass electronic tag.) I had totally forgotten that I had used this particular credit card for automatic billing, and got snagged!

So, you balance transfer surfers: read those details thoroughly! Credit card companies are starting to get tired of losing profits with all the zero percent balance transfer offers they've been "forced" to offer ("forced" in order to remain competitive within the market.) Many are starting to charge balance transfer fees of around 2-3% with a ceiling of $75. Of course, even with a $75 fee, a balance transfer can still be a great deal for anyone carrying large credit card balances, but make sure you find out when and how those fees will be charged.

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Wednesday, September 07, 2005

Morgan Beaumont Now Rolling Out New Prepaid Payroll Debit Card

Morgan Beaumont Inc, the Florida-based provider of prepaid debt and stored value cards, has announced the rollout of their new prepaid payroll card which gives employers the option of paying their employees with a PIN based, prepaid debit card instead of the typical payroll check.

Personally, I really don't understand the concept. Sure, it's great for employees because there's no check to cash and their hard-earned funds would be available to them immediately. But what about paying the rent? In my opinion, paying rent with cash is never a good idea because there's no document trail that can be easily referenced when necessary (as there is when business is transacted by bank draft.) Given the choice of getting paid by check or by prepaid debit/credit card, I would certainly choose the check option.

Please feel free to post a comment if you have any insight as I'm interested to know more about the benefits--for both the employer and the employee--of paying employees with a prepaid debit card. Thanks.


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Sunday, September 04, 2005

UK: Virgin Credit Cards Takes Action Against Balance Transfer Stoozers

Some bad news for you British 0% balance transfer stoozers: Virgin credit cards has announced that they'll be imposing a 2% fee on balances transferred away from Virgin. This new tactic by Virgin may become standard practice in the industry if it works out well for them (I know you stoozing addicts across the pond are hoping that this new initiative blows up in Virgin's face!)

Why now you ask? Well, apparently, credit card balance transfer stoozing has become very popular in the UK, and a large chunk of Virgin credit card account holders who took advantage of a 0% balance transfer offer 9 months ago may be getting ready to stooze, i.e. transfer their Virgin credit card balance to another credit card that has a favorable 0% balance transfer deal attached to it. Virgin is hoping to keep these customers by imposing this new "transfer away" fee. This move by Virgin also comes at a time when competitor Capital One is offering a new credit card with a 0% introductory annual percentage rate (Intro APR) on balances transferred until January of 2007! Virgin certainly doesn't want to see a massive exodus of customers to this new Capital One offer, no doubt.

If you asked me, this move is a bit silly on the part of Virgin because it's not very difficult to get around. A UK stoozer could just take a 0% balance transfer check from a new credit card and deposit the interest free loan into a checking account. Once the check (or cheque) clears, the stoozer could simply pay off the Virgin credit card balance, and the stoozing continues! Using this method, Virgin should have no right to charge the 2% "transfer away" fee since, from their perspective, the stoozer is simply paying off his/her credit card balance. A bit of a pain, but doable.

UK rate tarts should also be glad to know that there are still some decent fee-free 0% balance transfer deals available to them (e.g. Marbles and Co-op still offer fee-free 0% credit card balance transfers.)

Best wishes to you English rate tarts--and please think good thoughts for us as well! We in the U.S. certainly don't want this new Virgin idea to infect the American credit card marketplace!


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