New Credit Card Rules Going Into Effect On August 22, 2010

If you've ever paid a really high late-payment fee, or if you've ever felt like a sucker after reading the terms and conditions associated with a new credit card and realized you accepted an unreasonable fee schedule, then you'll like today's news. On August 22, 2010, the nation's top banking regulator -- the Federal Reserve -- is set to put into place new rules that limit certain credit card fees. For example, credit card banks will no longer be able to charge more than $25 as a late payment fee, while a penalty fee can no longer exceed $20.

Here's a clip from yesterday's Federal Reserve press release:

• "... Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account's terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs it incurs as a result of violations.
  
• Prohibits credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer's violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
  
• Bans "inactivity" fees, such as fees based on the consumer's failure to use the account to make new purchases.
  
• Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
  
• Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The final rule represents the third stage of the Federal Reserve's implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009, which was enacted in May 2009. The provisions of the Act addressed in this rule will generally go into effect on August 22, 2010..."

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Bank of America Clarity Commitment Summary.

Yesterday, I got a letter from Bank of America (BofA). I have two business credit cards issued by BofA. The letter is a Clarity Commitment Summary, and it begins, "Bank of America values its Small Business customers..." To be perfectly honest, when I read something like that in a letter from a credit card bank, I readily dismiss it. But, based on my experience with BofA, I actually said to myself, "yes, I believe you" when I read this. Here's why:

• During the worst of the banking crisis and subsequent Great Depression, American banks cut back on all types of financial products, including credit cards. Accounts were closed, credit limits were slashed and interest rates were hiked. Citibank closed an inactive business card I had with them, then Chase forced me to close my Chase business card as I would not agree to a change in terms: a rate hike from 9.9% fixed to a variable rate of Prime + 11.99%. As for my Advanta card: that credit card bank closed all their small business credit card accounts about a year ago.
  
  Bank of America didn't cut the credit limit on either card I have from them. They didn't raise my APR or close either account, even though one account has been inactive since I got it back in 2007.
  
  
• A few months ago, I messed up. I missed a payment on my active BofA business card. I was hit with a $45 late payment fee, and my account was suspended (account was still open, I just couldn't make any new charges until I made a payment to cover 2 billing cycles.) I called the bank and explained that I had setup "scheduled payments" in advance, but one can only do this for up to a year into the future. I didn't realize that a year had passed since I setup the scheduled payments, and I needed to setup a whole new set. My mistake could have cost me dearly, but it didn't. After waiting on hold for 12 minutes, the BofA customer service rep' (CSR) removed the late fee and lifted the suspension. He thanked me for being a valuable Bank of America customer (my payment record was spotless up until my scheduling blunder) then told me that I should try setting up automatic payments instead of scheduling. With automatic payments, one can setup a certain amount to be paid each month on an account's due date, and not have to worry about scheduling anything else.
  
  I explained that had tried setting up automatic payments a long time ago, but was only able to do so with my personal Bank of America credit card. When I called for help back then, I was told that there was a glitch and that I should be able to setup automatic payment with my business cards within a few days. I should have stayed on top of BofA's progress with fixing the glitch, but I instead opted to use scheduled payments. Do I have automatic payments setup for my business credit cards now? Of course!
  
  How often do you read about a bank being so cool about a missed payment? No interest rate hike, no reporting to the credit bureaus. Absolutely no adverse action taken on the part of BofA. Kudos.

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 does not include any new protections for business credit cards. However, Bank of America has decided to apply some of the most significant protections from the CARD act to the business cards I have with them. Here's a list from my Clarity Commitment Summary letter:

• We will no longer increase your rate on existing balances for late payments or other risk reasons.
  
  
• We will always provide 45 days notice before we increase your rate for future balances.
  
  
• Any amount you pay over the minimum payment will now be used to pay down your balances with highest APR's first.
  
  
• We will no longer charge a fee for going over your credit limit.
  
  
• Your payment due date will now be at least 25 days from the statement closing date printed on your statement.

Again, Bank of America deserve a hearty pat on the back for adding a lot more value to their business cards. I'm sure that other credit-card banks will eventually follow suit, which is great. But BofA should be commended for taking the lead.

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Chase Sapphire: Living the Good Life (A Review)

It seems that many rewards cards today try to restrict the way you redeem your rewards, forcing you to choose between either cash back, merchandise, or miles. The Chase Sapphire card is strikingly different. Cardholders have the flexibility to redeem their rewards points on just about anything-hotel rooms, airfare, or simply cash back. Alluring sign-up incentives and decent card terms make the Chase Sapphire card a cut above the regular plastic.

Oscar Wilde once said, “I can resist everything except temptation,” and the Chase Sapphire card certainly is not lacking in that department. With 10,000 bonus points after your first purchase and no earnings cap or rewards expiration, the Sapphire makes it hard for even the most disciplined individual to say no. The Sapphire card boasts a low 12.24% APR on purchases and balance transfers, has no annual fee, and earning one point for every dollar spent gives you the ability to rack up points to choose a reward(s) that truly suits you.

The Ultimate Rewards program is one of the most generous rewards programs out there today. With no points expiration or black-out dates, if you can dream it, Chase will make it happen. Ever wanted to swim with dolphins? Treat that special someone to a VIP concert experience? How about a five-star dining experience to spoil your family? By using the Sapphire card, you can turn an ordinary day into an extraordinary one that won‘t soon be forgotten. Many of the events offered through Ultimate Rewards are exclusive to cardholders, making each excursion truly one-of-a-kind.

Racking up rewards points is as easy as swiping your card. Earning one point for every dollar is great, but when you shop within the Chase online mall portal that has over 300 merchants, you have the potential to earn up to ten points per dollar spent. You can even earn double points when you book your airline seats through the Travel Booking Tool. But worry not. If travel rewards aren’t quite your thing, you can redeem your points for gift cards to spend at your favorite stores. Rewards start at $25 for 2500 points. Or you can even choose to “pay yourself back” by using your points for a statement credit.

In addition to the Ultimate Rewards program, the Chase Sapphire card has all the attractive features people have come to expect from Chase. The features include Trip Cancellation and Travel Accident Insurance, Auto Rental Collision Damage Waiver, Zero Liability for fraudulent purchases, and a personal concierge. One of the best features included for wielding the Sapphire card is the ability to talk directly to a customer service person. By calling the number on the back of your card, you instantly are connected to a live person instead of “Pressing 3 to…” Chase also gives its cardholders extra peace of mind if their card is lost or stolen. They will expedite a replacement card to you and even arrange emergency cash for you until your new card arrives.

For those that like to keep a close eye on their finances, the Chase Sapphire also comes standard with Blueprint. By using Blueprint, you can decide how you’d like to pay down those larger purchases and watch your balance drop. Chase also sends you a year-end report, organized by purchase type. This easily helps you track your spending for the past year as well as making filing your tax return that much easier.

Unfortunately many of us will never have the opportunity to enjoy the luxuries this card has to offer; it is designed for those in the top 15% of household earnings. Even still, it is an excellent choice for those who do qualify, giving them the chance to make their every dream come true. As for the rest of us…well, we can still browse, right?

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No Rate Hikes On Existing Balances for Bank of America Business Cards

As a Bank of America business credit-card account holder (I actually have 2 business cards from BofA) I was very happy to read today's news: No rate hikes on existing credit-card balances. Here's a clip from a recent Charlotte Observer article:

"...Bank of America Corp. won't raise interest rates on existing balances held by its 2 million small-business credit-card accounts, the bank said Thursday.

The bank also said that those customers will get 45 days' notice before rates change on future balances. It won't charge fees when customers go over their credit limit.

Small-business credit-card customers will also receive a one-page "Clarity Commitment," which is a summary of their rates, fees and payment information. The bank has already sent such statements to customers with mortgages, home equity loans and consumer credit cards..."

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Treasury to Sell Citigroup Common Stock

Yesterday, the U.S. Treasury Department announced that it plans to sell all 7+ billion shares of Citigroup common stock during the rest of 2010. Here's a clip from the press release:

"...The U.S. Department of the Treasury today announced its intention to fully dispose of its approximately 7.7 billion shares of Citigroup, Inc. common stock over the course of 2010 subject to market conditions. Treasury received these shares of common stock pursuant to the June 2009 Exchange Agreement between Treasury and Citigroup, which provided for the exchange into common shares of the preferred stock that Treasury purchased in connection with Citigroup's participation in the Capital Purchase Program. Treasury has engaged Morgan Stanley as its capital markets advisor in connection with its Citigroup position.

Treasury intends to sell its Citigroup common shares into the market through various means in an orderly and measured fashion. Treasury intends to initiate its disposition of the common shares pursuant to a pre-arranged written trading plan. The manner, amount and timing of the sales under the plan is dependent upon a number of factors.

This disposition does not affect Treasury's holdings of Citigroup trust preferred securities or warrants for its common stock..."

This is certainly good news for the American taxpayer, as the government will reap a tidy profit as a result of its emergency investment in the bank.

Treasury is going take its sweet time selling these assets, so it'll be some time before we can know how Citi will fare without the government crutch.

Are we ready to start recommending Citi credit cards as a result of this news? Nah. Once the government has divested itself from Citigroup, we'll be engaging in at least another 12 months of watching before we make a decision on Citi cards.

For now, we are still very keen on the Discover More card, or any card issued by American Express.

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