Regulators adopt new credit card rules

A sweeping reform of credit card rules aimed at helping consumers hit by confusing, and sometimes deceptive, practices by creditors is on the path to regulator approval.

The Office of Thrift Supervision and The Federal Reserve said Thursday they approved of the new rules.

"The revised rules represent the most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts," said Federal Reserve Chairman Ben S. Bernanke. "These protections will allow consumers to access credit on terms that are fair and more easily understood."

Creditors will have to disclose interest rates when accounts are opened, and will be prohibited from hiking rates unless they are "expressly permitted," according to a release by The Office of Thrift Supervision. They will, however, be allowed to adjust rates after the account has been open with 45-day notice.

Industry participants say the new regulations could dramatically alter the credit card market.

The new regulations "are unprecedented in their scope and signal the beginning of a new market structure for credit cards," said American Banker Association President Edward Yingling.

Yinging, however, notes these changes can potentially increase borrowing costs for consumers, and even cut credit availability.

Creditors are also permitted to charge introductory rates that change after a certain period provided such stipulations are disclosed when the account is opened. Interest rates can also be increased on accounts that are over 30 days delinquent, the release said. These new disclosure rules will give consumers "the ability to easily compare the terms of different credit cards and make more informed decisions about their personal finances," according to Yingling.

The rules, which are expected to go into effect on July 1, 2010, will also require customers to receive a “reasonable amount of time to make their credit card payments,” The Office of Thrift Supervision said. Although exact figures aren't provided, The Office of Thrift Supervision says 21-days would be considered a reasonable amount of time. Excessive lump-sum-fees on high-risk clients will also be curbed.

Billing regulations, such as banning so-called double-cycle billing and increased requirements clients' payment allocation will also initiated.

Article source : http://www.foxbusiness.com/story/markets/economy/regulators-adopt-new-credit-card-rules/

Fake credit card ring smashed after year-long probe ends in raids: police

Police say they have smashed a significant criminal syndicate that produced false identities and fake credit cards to buy more than $1 million worth of goods.
After a year-long investigation, more than 70 police officers yesterday raided homes in NSW and South Australia, arresting five men linked to the nationwide syndicate.
The men have been charged with a variety of offences and face up to 10 years in jail.

Officers from the multi-agency Identity Security Strike Team (ISST) seized 3000 blank cards, computer equipment, a card printing machine and a range of goods during the raids, as well as an unregistered and unlicensed firearm.
The goods, believed to have been bought with the fake cards, included exclusive designer handbags, watches and high-end electronic goods.
Detective Superintendent Colin Dyson from the NSW Police Fraud Squad said many criminal groups operated solely to steal identification documents, and urged people to take care of their personal information.
"The public has to realise the value of their identification information, and the fact that it's absolutely crucial that they safeguard their personal and financial information," Detective Superintendent Dyson told reporters today.
The syndicate allegedly "fished" for the information via telephone calls, false emails and skimming devices placed on the front of ATM and EFTPOS machines.
Australia is one of the last countries in the world to fully implement new pin and chip technologies for credit cards, Mr Dyson said, making us a likely target for criminal groups.
"The level of technology we have currently is old, and obviously criminals will attack the weakest point, and at the moment the magnetic stripe technology is a likely target," Mr Dyson said.
Figures from the Australian Payments Clearing Association showed that in the last financial year, $60.5 million of credit and debit card fraud took place in Australia with cards issued nationally, Detective Superintendent Ben McQuillan from the Australian Federal Police said.
Detective Superintendent McQuillan said people should never use suspicious looking ATM machines or make purchases online from non-reputable websites, and should always check bank statements and frequently change pin numbers.
Two of the NSW men arrested during the raid were due to appear in Sydney's Central Local Court today, while another was granted bail and will face court at another date.
The two arrested in South Australia will be the subject of an extradition request at Adelaide Magistrates Court.


Article source : http://www.smh.com.au/technology/security/fake-credit-card-ring-smashed-after-yearlong-probe-ends-in-raids-police-20101209-18qgc.html

Senate Passes Credit Card Bill

By Kimberly Palmer

The Senate approved the credit card bill today, which means President Obama will likely sign it into law as soon as the House and Senate reconcile their two versions of the legislation. Almost immediately, the American Bankers Association expressed its dismay:

Credit cards are a strong economic driver and are relied upon by consumers and small businesses to make payments and to bridge short-term financial gaps. The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses. Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.
Most importantly, this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk. What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky. It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate. While the recent Federal Reserve rule also contained restrictions on pricing card credit for risk, this bill goes much further in this and other areas. We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards.

Will card companies start restricting credit even more than they already have? Will consumers stop taking on debt they can't afford? The predictions are as varied as kinds of things you can charge to a credit card.

Article source : http://money.usnews.com/money/blogs/alpha-consumer/2009/05/19/senate-passes-credit-card-bill

Obama: Stamp out credit card 'abuses'

President meets with execs to press his case for consumer protections - a day after House panel OKs bill limiting increases on rates and fees.

By Jennifer Liberto, CNNMoney.com senior writer

WASHINGTON (CNNMoney.com) -- Ramping up his campaign to crack down on credit cards, President Obama met Thursday with more than a dozen executives of card-issuing companies to press his case for new consumer protections.

Obama, Treasury Secretary Tim Geithner and others met with executives of leading financial institutions like Visa (V, Fortune 500), American Express (AXP, Fortune 500), Mastercard (MA, Fortune 500), Capital One (COF, Fortune 500), and several big banks like Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).

The White House meeting came a day after credit card legislation opposed by the financial services industry moved forward on Capitol Hill. The House Financial Services Committee voted 48-19 to approve a bill to clamp down on rates and fees; nine Republicans joined the panel's Democrats in voting for it.

The House bill would, among other things, ban "arbitrary" interest rate increases, prohibit excessive fees and order more disclosure. It could go to the full House for a vote as soon as next week.

0:00 /1:01Ending credit card debt

Prior to his meeting, Obama outlined several principles that he urged Congress to pass, including a ban of unfair rate increases and penalties, clarity in terms and conditions, requiring all companies to make contract terms accessible and more oversight of the industry.

"Credit cards are an important convenience and a major source of unsecured debt for consumers," said Obama. "We want to preserve the credit card market, but we also want to do so in a way that eliminates abuses and problems that a lot of people are familiar with."

Obama advocated for a credit card holder bill of rights during last year's presidential campaign. But the administration had lately been mostly silent on the congressional proposals until last Sunday, when Obama economic adviser Larry Summers spoke publicly about the administration getting tough on credit card companies.

The House bill - and a similar one in the Senate - is a cornerstone of efforts by consumer groups and mostly congressional Democrats to rewrite rules governing lending practices by card companies, banks and others. The House bill, championed by Rep. Carolyn Maloney, D-N.Y., is similar to one passed by the House last year.

"This bill cracks down on some of the most outrageous abuses," Maloney said Wednesday. "My bill levels the playing field so consumers have more control over their credit."

In the Senate, which did not advance credit card proposals last year, a committee has passed a version of the House bill, with one Democrat voting against it.

The House bill mirrors tougher rules that the Federal Reserve passed last December but that don't go into effect until July 2010.

Move to implement emergency rate freeze

Two Senate Democrats, Charles Schumer, D-N.Y. and Senate Banking Chairman Christopher Dodd, D-Conn., on Thursday called on the Fed to freeze credit card interest rates tied to existing balances until the stricter rules take effect. Both senators said they have heard complaints from constituents who have seen their rates double or even triple almost overnight and without explanation.

"Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part," the senators wrote. "This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal."

The Fed changes would stop higher interest rates from being imposed when consumers are late paying unrelated bills. The changes also stop companies from averaging finance charges from two previous cycles, a practice that dings consumers who carry a balance and pay it off.

Several House Republicans said the pending Fed rule changes make congressional action unnecessary.

But Rep. Barney Frank, chairman of the House Financial Services panel, disagreed.

"What the Federal Reserve giveth, the Federal Reserve can taketh away," he said. Frank pointed out that the Fed could later undo the rules if Congress doesn't pass a law.

Meanwhile, industry lobbyists are fighting both the House and Senate bills for many reasons. But they especially don't like how the proposals would prevent card issuers from raising interest rates and fees based on risky behavior.

"I haven't heard any evidence that the competitive market isn't working," said Rep. Jeb Hensarling, R-Texas. "In the absence of that, why are you attacking risk-based pricing?"

Article source : http://money.cnn.com/2009/04/23/news/economy/obama_credit_cards/index.htm

New Credit Card Rules Effective Feb.22

The Federal Reserve's new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010:

What your credit card company has to tell you

• When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can
  • increase your interest rate;
  • change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or
  • make other significant changes to the terms of your card.
  If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations.
  For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).
  The company does not have to send you a 45-day advance notice if
  • you have a variable interest rate tied to an index; if the index goes up, the company does not have to provide notice before your rate goes up;
  • your introductory rate expires and reverts to the previously disclosed "go-to" rate;
  • your rate increases because you are in a workout agreement and you haven’t made your payments as agreed.
• How long it will take to pay off your balance. Your monthly credit card bill will include information on how long it will take you to pay off your balance if you only make minimum payments. It will also tell you how much you would need to pay each month in order to pay off your balance in three years. For example, suppose you owe $3,000 and your interest rate is 14.4%--your bill might look like this:

  New balance	$3,000.00
  Minimum payment due	$90.00
  Payment due date	4/20/12

  Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.
  Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

  If you make no additional charges using this card and each month you pay. . .	You will pay off the balance shown on this statement in about. . .	And you will end up paying an estimated total of. . .
  Only the minimum payment	11 years	$4,745
  $103	3 years	$3,712 (Savings = $1,033)

New rules regarding rates, fees, and limits

• No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
  • If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
  • If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the "go-to" rate the company disclosed when you got the card.
  • If you are more than 60 days late in paying your bill, your rate can go up.
  • If you are in a workout agreement and you don't make your payments as agreed, your rate can go up.
• Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
• Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
  • If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
• Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.
• Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account.
  • If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

Changes to billing and payments

• Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition:
  • Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
  • The payment cut-off time cannot be earlier than 5 p.m. on the due date.
  • If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
• Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:
  • If you made a purchase under a deferred interest plan (for example, "no interest if paid in full by March 2012"), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.
• No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.

For information on protections under the Federal Reserve's other credit card rules, read What You Need to Know: New Credit Card Rules Effective Aug. 22.
Disclaimer:
Credit cards issued primarily for business or commercial purposes generally are not governed by the consumer protections in the Truth in Lending Act or the amendments to that act in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.

Article source : http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules.htm

Credit Score

What factors determine the credit score?

Ever wonder why the credit score is so important and/or what factors cause the credit score to increase or decrease? Below is everything you need to be aware of!
1. What is a Credit Score?
A credit score is a 3 digit number that will dictate what interest rate you will receive on a mortgage, car loan, credit card and most other types of loans. It gauges your financial success. The higher the credit score, the better!
2. How many credit scores do I have?
You have three credit scores – one from each of the three credit bureaus: Experian, Equifax and TransUnion. The scores from each may differ slightly!
3. Is a credit score different from a credit report?
A credit report is a summary of your recent financial/credit transactions – all of this information makes up your credit score. You are entitled to one free credit report each year by going to www.annualcreditreport.com. You do not get a free credit score annually and you’ll have to pay to see your credit score. Go to www.myfico.com to view your credit scores.
4. Does my credit score decrease each time I check it?
If you personally check your credit score, the score does not decrease. There will, however, be a fee associated with your inquiry. If you are applying for new credit, such as a mortgage or a car loan, then this may result in a 5 point decrease in the score.
4. What factors determine my credit score?
1. Payment History = 35% – Payment history takes into account if you are late on paying bills (that’s why it’s so important to pay your bills on time!). It also takes into account your mortgage debt, credit cards and if you have any liens or judgments against you.
2. Amounts Owed = 30% – This takes into account the amount of debt you owe. Credit scores do not like credit card debt. 30% of your credit score is what’s known as your debt-to-credit limit ratio (what you owe over what your available credit line is), which increases with more debt and a high debt-to-credit ratio lowers your credit score. More savings can help you to pay down that debt, which will lower the debt-to-credit limit ratio, which will raise your credit score. This part of the credit score also includes the amount of credit card accounts currently open and what the balances are on each.
3. Length of Credit History = 15% – This is why it isn’t a good idea to close down credit card accounts – even if there is no balance on them. When you close down a credit card account, you are erasing credit history, which is 15% of your score. Closing down credit cards also lowers the available credit you have and if you’re planning on applying for a mortgage any time soon, lenders like to see an abundance of available credit. If you have credit cards that have no balances on them, yet you feel tempted to use them to buy things to don’t need, then simply cut up the credit card!!
4. New Credit = 10% – You’ve probably heard that opening up too many credit cards in a short period of time will hurt your credit score – and that’s right! Like we said above, it’s good to have plenty of available credit, but too much credit too fast can negatively affect your score.
5. The Types of Credit You’re Using = 10% – What kind of credit do you have and from where? Do you have department/retail store credit cards; do you have a traditional credit card from a major credit card company? Do you have a mortgage or a car loan?
5. How can I improve my credit score?
1. Pay your bills on time
2. Pay off all credit card debt
3. Refrain from closing down credit card accounts

Article source : http://helpsavemydollars.com/credit-scores/

How to properly use a credit card and save money!

I hear it all to often from people that credit cards are “bad“. “Credit cards are so expensive to use!” say some, and the the most common one is “The banks just charges way to much interest on credit cards.“. The funny thing is that a credit card is the best financial product offered by banks, in the world. There is no other banking product that allows you to keep your money for 55 days, gives you substantial interest on a credit balance and charges you no transaction fees!
The only reason people are scared of using credit cards is that they are misinformed. You just see people flashing their credit cards all over the show, and you think to yourself, “shame, that person can’t manage their debt.” But the truth is, that using a credit card properly, actually can save and make you money! So listen up, and adhere to my tips on credit card usage, and you will save money!

Choosing the right credit card

Every single banking institution, and lately, large corporate companies offer some sort of credit card. All have different interest rates, annual fees, rewards schemes, etc. So finding the credit card that is right for you is very important. Once you have all the facts, you can make the right decision on which card to choose.

Virgin Money

If you have never owned a credit card before, or are new to the whole credit card thing, go straight to Virgin Money and sign up. As long as you are earning a living, you should qualify. The reason I choose Virgin, are two simple factors. No annual fees, which in essence makes owning a credit card free, and their 5% credit interest rate. But you might be on Discovery Medical, and their credit card might appeal to you more because of their rewards scheme etc. Choose wisely, but don’t not choose a credit card!

How to use a credit card wisely

This is the step where a lot of people get caught, and get stuck in the never ending spiral of debt and interest-on-debt repayment. Your credit card will have a limit that you are allowed to spend. Remember, this doesn’t mean you must spend that amount every month! Draw up a budget, and the amount of money you spend a month on your credit card must be on that budget, so that at the end of the month, you haven’t spent more money than you earn.
The rules of a credit card are so, that if you buy a pair of shoes on your credit card today, you only have to pay the bank back for those shoes in 55 days time. 55 days! That is almost two months! This is where you can make money from the bank. Using this rule means that the money that you owe for those shoes should be sitting in an interest-bearing account so that for 55 days you can earn interest on the money that the bank just lent you for 55 days, interest free! Confusing you hey? Look at this example…

• I have R1000 in my savings account, and I want to buy a pair of shoes.
• Puma sneakers: R1000 (Some bling man!)
• Pay for these sneakers using your Credit Card.
• Transaction fees buying sneakers: R0
• For 55 days that R1000 is earning interest sitting in your savings account.
• After 55 days, you transfer that R1000 into your credit card – in order to pay the bank back for your funky shoes.
• You get charged not 1 cent from the bank, but you have just earned interest on the bank’s money for 55 days!

Stick to these 3 rules, and make money with your credit card!

1. Do not spend on your credit card what you cannot buy with hard cash. Buy that pair of sneakers on your credit card, but if you do not have the hard cash in the bank, do not charge it!
2. Pay back the full amount you owe on your credit card every single month. By missing just one payment, all your hard work saving, can be lost, because of the high rate at which you get charged for late, or not paying up in full. Sometimes up to 25% on your outstanding amount!
3. If you do not have a savings account to utilise, put all your monthly spending budget into your credit card, and earn interest that way! That means you can earn up to 5% on your spare cash lying around!

Article source : http://www.jasonbagley.com/2006/11/23/how-to-properly-use-a-credit-card-and-save-money/