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AmEx & Discover Getting Rid of Over Limit Fees

I just read an interesting article on American Banker called "Law Hits Home as Cards Opt Out of Overlimit Fees." It highlights the move of American Express and Discover to eliminate the practice of assessing over limit fees on their consumer credit cards early.

This may be good news for consumers. Maybe...

This fee ditching move comes in response to the The Credit CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) signed into law by President Obama earlier this year in May.

The law requires that by February, 2010 (among several other requirements), credit card companies must have consumers "opt-in" to over-the-limit transactions if they are going to assess over limit fees.

As credit card companies claim over limit fees don't generate as much profit for them as other fees or areas of their business, complying with the new opt-in requirement to assess over limit fees may be more of a burden than a profit center.

So in response, we see credit card companies like American Express and Discover as the first to just eliminate the fee, and the hassle that comes with being able to charge it, all together.

But in exchange, we also see them raising interest rates and other fees to make up for the loss, and to compensate for the stricter requirements coming down the pipeline as a result of The Credit CARD Act of 2009.

And I bet you 10-to-1, that if credit card companies can't easily charge you an over-the-limit fee, you will not be able to charge over your credit limit as easily as before either (not that it was ever that easy in the first place).

American Express will eliminate the over limit fee on their consumer credit cards beginning October 1, 2009.

Discover hasn't announced a definite date when they will eliminate the fee, but said it will be "soon."

Well soon enough, all credit card companies will be required to have us opt-in to over-the-limit transactions and thus, over limit fees; or, they'll end up eliminating the fee all together just as American Express and Discover has done.

And although it's never a good practice to spend over your credit limit, at least this is one less "fee" consumers will have to worry about being hit with...for now.

Credit Card Reform is FINALLY Here! President Obama Signs New Credit CARD Act!

President Obama signed into law today the new Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.

This is really good news for consumers, and perhaps not so good news for the credit card industry.

This new law eliminates a lot of the abusive practices credit card companies have been getting away with for years. Things like confusing contracts, miscellaneous and mysterious fees, shifting payment deadlines, changing terms, and interest rates rising out of the blue.

Thank goodness and about time!

During the press conference, President Obama made it clear that irresponsible credit behavior is not excused or condoned; and discussed how this legislation will help those who try to be responsible with credit, but may end up trapped by the increased used of their credit cards as the the result of a job loss, health insurance not covering expensive medical bills, a mortgage payment that jumped sky high, or a small business financed on credit cards that's suffering from the poor economy.

As it stands now, even as a responsible credit card user, you can be charged interest even if you pay your bill on time; your interest rate can be increased on outstanding balances even if you aren't late with a payment; and you can be forced to pay down your debt with the lowest interest rate first instead of the highest, which just makes it harder to get out of the hole.

President Obama also points out the fact that although credit card companies provide a valuable service, they should do so while upholding certain standards of fairness, transparency and accountability. Hmmm... ya think?

He states, "Just as we demand credit card users to act responsibly, we demand credit card companies to act responsibly, too."

Some of the changes taking place include:

• credit card statements disclosing to cardholders how long it will take to pay off a balance, and how much it will cost in interest if only minimum monthly payments are made
• no more retroactive interest rate increases that go into effect with no explanation or warning
• every credit card company will have to post their credit card agreements online
• credit card companies will have to mail credit card statements 21 days before payment is due, as opposed to only 14 days
• no more arbitrarily changing payment due dates
• at least a 45 days notice is to be provided of a change in terms and conditions

The President states that over the past decade credit card debt in the US is up 25%; nearly 50% of all Americans carry a balance on their credit cards, with an average balance of more than $7,000; and 1 in 5 people have a credit card balance that's charged over 20% interest.

With statistics like these, this legislation comes not a moment too soon.

You can catch the video (11:17) of President Obama's announcement of this sweeping credit card reform below:

American Express Will Pay YOU $300 to Close Your Account

Yup, this is for real.

As recently reported by The Wall Street Journal and the Credit Matters blog, American Express is offering select customers a $300 incentive to close their account, provided of course, they pay off any remaining balance first.

Those who received an offer letter and wish to take advantage of the cancellation program have until the end of April to pay off their credit card balance in full at their normal interest rate, and must redeem any rewards points prior to even enrolling in the program, or else lose them.

Molly Faust, an American Express spokesperson is quoted as saying, "The intention is to help cardholders lower their debt and encourage responsible management of their credit."

Ummm... yeah right! Who are they trying to fool? We all know that AmEx is just trying to head some delinquencies off at the pass.

I mean, we all see it. It's more than evident that lots of Americans in today's economy are struggling to pay their bills. And when that happens, credit card debt usually drops to the bottom of the priority pile, behind much higher ranked financial obligations such as rent or the mortgage, food, car payments, insurance, etc.

They don't really care about cardholders lowering their debt... that's how they make their money! Off of cardholder debt!

And do they really want to encourage people to manage their credit responsibly? Or just responsibly pay them off in full and then kick rocks?!

The way I see it, AmEx figures they can give cardholders a $300 prepaid gift card after they get all of their money, and after the account is officially closed and can't be charged back up, all in an effort to sleep better at night without worrying if cardholders will pay or not. They just want to get the folks giving them bubble-guts off of their books altogether!

Oh, and never mind that they'll make money each time those gift cards are swiped in the form of merchant processing fees, which will of course, offset some of their expense of the cards.

Couldn't they have just reduced the outstanding balance cardholders owed by $300 instead of issuing $300 gift cards? But then again, that offer may not have been as sexy. I'm just saying...

Credit Cards Initially Used to Build Loyalty, Not Make Money

Credit cards, born out of the economic boom of the late 1940's, were originally used by stores to build customer loyalty, not to make money. But nowadays on the other hand, well, we all know how that story goes...

Identity Theft Fraud Ring Bust All Over the News!

Since the indictment of 11 people yesterday in what is being called the largest identity theft case in US history, the story has been ALL over the news!

Unless you're somewhere hiding under a rock, there is no way you can miss the coverage of this story. I mean, it's all over national news channels, local news broadcasts, the radio, front pages of newspapers and the internet.

And as frightening as the story is, I'm relieved it's getting so much coverage.

Not only should consumers be made aware that outrageous things like this could happen, but it also serves as an important reminder to thoroughly check your bank and credit card statements every month, and to thoroughly review your credit reports at least once per year.

By keeping a close eye on your financial records, you stand a better chance of heading fraud off at the pass, and minimizing any financial damage or loss.

This international identity theft scheme targeted the financial information of US consumers, which resulted in over 40 million stolen credit and debit card numbers. The financial information was either used by the hackers themselves for their own personal gain, or sold off to other cyber-criminals all over the world.

The sophisticated fraud ring hijacked the credit card and debit card numbers, PIN numbers, passwords, and whatever else they could, from consumers who shopped at stores with vulnerable security networks: TJ Maxx, Marshalls, BJ's Wholesale Club, Office Max, Boston Market, Barnes & Noble, Sports Authority, Forever 21, DSW, and Dave & Busters.

I, for one, have shopped on numerous occasions at several of these stores, and it's not a good feeling to know that my personal financial information could potentially be out there being bought and sold all over the world.

Truth of the matter is, there's really no telling who's hands the breached information really ended up in, what they'll do with it, or when - if they do anything with it at all. And that's just not a very pleasant thought.

It truly amazes me how cyber criminals with so much intelligence and skill can put forth the effort and time to mastermind such an elaborate, fraudulent scheme, but couldn't do the same for something that was legal with the potential to make them just as much money, if not more.

In case you didn't already get enough of the story, you can check out the press release from the US Department of Justice, CNNMoney.com, the story in the International Herald Tribune, or just Google it!

Can't make rental payments on sunken dozer. How bad will this affect my credit?

This question comes by way of Longview, Texas...

"I have good credit now and I am 25 years old, I co-signed on a rental note for a dozer and basically the dozer got sunk in a pond, the insurance while it was being repaired did not cover down time, it's rental bill is $28,000. I do not have the money to make monthly payments or pay this. Do you know how bad this will effect my credit? Will they take my credit card back that I already have? I know it will screw me in the long run just wondering how bad... If u have a answer to my problem please help me understand better."

Well, how bad this may affect your credit is really going to depend on how it all plays out and the policies and practices of your lender.

First of all, I'd brainstorm with the person you are on the note with to figure out a game plan. After all, this is not your debt alone. They say two heads are better than one, so you just may be able to come up with a way to make the payments after all.

Second, I'd thoroughly review your insurance policy to make sure they were not liable to help cover your payments while the dozer was being repaired. Insurance companies are infamous for not wanting to pay out on claims and sometimes you have to kick them in the butt and STAY on their butt to make them do so.

If you find the insurance company is not liable to pay, then definitely consider making an adjustment to your policy to prevent this type of thing from happening in the future.

Third, I'd call AND write your lender to explain the situation. For maximum impact, both you AND your co-debtor should call (repeatedly if you have to), and the letter should be signed by you both (write repeatedly if you have to).

In your phone calls and letter(s), ask the lender for a work-out plan or payment arrangement plan. Express and stress to them your willingness and intent to pay, but because of your current incapacity to pay, you need their help right now to make good on your agreement with them.

Also, tell them that this is only a TEMPORARY bad financial situation that you are in and that you are working diligently and vigorously to correct the financial problem.

If the insurance company will end up having to pay, make sure the lender is aware of that, and stay on top of coordinating the payment from the insurance company to the lender so that it gets processed ASAP.

Hopefully they will be helpful to you and willing to work something out with you.

Be sure to stay in constant communication with them (think stalker taken down a notch), and don't be afraid to escalate your case to a supervisor, manager, or even the President to get some results.

But keep in mind that in the meantime, if the rental payments continue to go unpaid, the lender could repossess the dozer. And a repossession would be horrible for your credit.

And... if you have a credit card with the same lender that financed your dozer, they could easily close your credit card account, reduce your credit limit, or raise your interest rate.

Hell, even a different credit card company could do the same things if they were aware of your late payments on the dozer (i.e., universal default).

If your credit card gets closed and you still have a balance on it, or if your credit limit gets reduced and your balance is higher than the reduced credit limit, that will negatively affect your credit. The credit scoring model does NOT like outstanding balances that are higher than the credit limit.

Hope this bit of info helps, and best of luck to you!

Cartoon... Last Wish? :)