Chase has begun to raise credit card balance transfer fees to as much as five percent on some of its credit cards, according to Bloomberg.
The move is the result of increased regulations and supposed costs related to new credit card rules recently signed by President Obama, set to go into effect in August.
Among the changes are the abolishment of universal default and negative payment hierarchy.
At that time, Chase will make a number of changes, including raising the fee for cash advances and making some fixed rates variable, likely anticipating a rise in the prime rate as the economy begins to repair itself.
The five percent balance transfer fee will be the highest in the industry, beating out Bank of America’s four percent fee, which was imposed in June to reflect higher costs.
Of course some card issuers, including Chase, don’t have ceilings on balance transfer fees, so a lower percentage with no ceiling could turn out to be more expensive than a higher set percentage.
For example, if you transfer a balance of $7,500 on a credit card with a three percent balance transfer fee and no ceiling, the cost would be $225.
Conversely, a balance transfer fee of five percent with a ceiling of $150 would limit your fees on a high balance transfer.
Unfortunately, many credit card issuers have eliminated balance transfer fee ceilings, so fees will likely be higher industry-wide (Check out existing no fee balance transfer credit cards).
Back in February, Chase raised minimum payments amounts and imposed a monthly service fee for cardholders who carry large balances without paying them off.
That fee was subsequently returned to most Chase customers after New York Attorney General Andrew Cuomo argued that the standard balance transfer fee should be the only fee related to the accounts.
Look for all the credit card issuers to become increasingly harsh as the new rules are implemented later this summer.
This post was written on June 24, 2009
A frequently asked question in the credit realm seems to be “what credit score do you need to get a credit card?”
Unfortunately, the answer to this question isn’t one simple three-digit number, but rather a variable answer dependent on a number of factors.
Let’s put it this way; you could have a higher credit score than another consumer, but subsequently be denied for a credit card that the other consumer gets approved for.
How would that work? Well, in one scenario, you could have a stronger credit score than others, but too many recent credit inquiries.
As a result, a certain card issuer may deny your credit card application, even though a consumer with a lower credit score gets approved.
That other consumer may have had a late payment at some point in their credit history, but no recent requests for new credit until said application.
That’s just one example, but the main take away is that credit card issuers may take a hard look at your credit score, instead of just saying all credit scores above X amount get approved, and all credit scores below X amount will be declined.
At the same time, it’s generally safe to say you’ll be approved for most credit cards if your credit score is above 700 (assuming you don’t apply for too much credit all at once), as it’s considered a good credit score.
You may need a credit score of 720 or greater to qualify for certain platinum cards or others that require so-called excellent credit.
If you’re credit score is below 620, there’s a good chance you won’t be approved for most credit cards, though you may be able to get your hands on a credit card for bad credit.
If your credit score falls between 620 and 700, it’s a bit of a crapshoot whether you’ll be approved for a certain credit card.
Approval could be determined by the card issuer’s risk appetite, which of late has certainly become less favorable for consumers, and also what’s contributing to your lower than average credit score.
This post was written on June 15, 2009
Cut credit lines aren’t impacting credit scores as much as some seem to think, according to a study by Fico.
The creator of the Fico score, which studied credit scores between April and October of 2008, found that 16 percent of U.S. consumers experienced a reduction in revolving credit during that time.
Of those consumers, 11 percent had no “risk trigger,” defined as a late payment, collection, or public record, while the remaining five percent did experience some kind of adverse event.
Fico found that in many cases card issuers cut credit limits unrelated to risk, such as to free up capital for use in other lending products and/or to meet regulatory requirements.
Those with no risk trigger typically had their credit lines cut as a result of inactive or low-balance credit card accounts, doing little to impact most consumers’ credit utilization rates.
In fact, lenders only cut an average of $2,200, representing approximately five percent of the average total revolving credit line for these consumers.
“For borrowers in the no-risk-triggers segment who received a reduction in total revolving credit, the median FICO score actually increased from 768 in April to 770 in October 2008,” Fico said in its report.
“Contributing to this positive score change were lender updates to their credit reports which reflected good credit habits such as paying bills on time, paying down revolving debt, and taking on new credit sparingly.”
“For the smaller population of people with recent negative triggers on their credit reports, their scores tended to drop at least slightly in response to the lenders’ actions, their own delinquent repayments, and other changes on their credit reports.”
So there you have it; if you continue to pay bills on time, keep balances low, and apply for new credit sparingly, you shouldn’t see any major credit score dings, even if a credit card issuer decides to slash your limit.
(photo: neubie)
This post was written on June 10, 2009
The FDIC, which controls the nation’s largest thrifts, voted to ban struggling banks from offering excessively high interest rates on savings accounts to lure in customer deposits.
It’s unclear what that exact number is, as it was characterized as those that “significantly exceed” prevailing market rates.
Most banks currently are offering rates around 1.50% APY, though more troubled banks like GMAC Bank are pitching savings accounts with yields of 2.25%.
Of course, the rule is only an issue for banks deemed not “well capitalized,” though those are the very institutions offering the highest savings account yields.
The bad news is borrowers won’t be able to take advantage of these high yields assuming the poorly capitalized banks are indeed the ones offering the highest rates.
Earlier this week, the FDIC said its “problem list” of banks grew 21 percent in the first quarter to a whopping 305 institutions, the highest number since the mid-1990s.
And so far this year, 36 banks have failed, up from 25 in 2008 and three in 2007; expect that number to rise even more as the months go by.
This post was written on May 29, 2009
With credit card rule changes on the horizon, many cardholders are probably looking forward to a more level playing field devoid of excessive fees and other shady practices.
But we all know big business will find a way to make up the difference, and that’ll likely come in the way of new fees and higher interest rates.
One possible method to recoup lost revenue could come in the form of annual fees, which are typically only charged for select rewards cards or to those with poor credit.
As competition becomes less fierce, card issuers may begin imposing annual fees as opposed to dropping them, especially for higher credit-risk borrowers and those who don’t spend enough on their cards.
For example, if you don’t spend a certain amount on your card annually, a fee may be imposed; the same could be true if your credit score is below a certain threshold.
We’ve already seen no fee balance transfer credit cards get phased out, and many 0% APR credit card offers have since disappeared.
Credit card issuers will also likely raise interest rates to make up for lost income they used to reap via questionable practices like universal default and negative payment hierarchy.
So you better believe the card issuers are putting their minds to work, figuring out ways to exploit or circumvent the new laws.
That said, keep a very watchful eye on your credit card terms and conditions going forward.
This post was written on May 27, 2009
Federal law has made it simple to get a free credit report without a credit card instantly, online.
That’s right; you don’t have to buy into those so-called “free credit report” gimmicks to get your hands on your credit report instantly.
Those companies promise free viewing of your credit report and credit score for a certain length of time, but require a credit card that will eventually be charged if you fail to cancel within the designated trial period.
If you head over to Annualcreditreport.com, they’ll provide a free credit report from all three credit bureaus for free, instantly online, without a credit card requirement.
All you need to do is fill out a short form, and then select the credit bureaus you would like to receive a credit report from.
It is recommended that you get all three reports, as information may vary across different credit bureaus.
The information on these reports is exactly what you’d receive if you paid for a credit report or signed up with a credit card for those “free trials.”
The only difference is a lack of credit score, though you can easily review your free credit report and determine where you stand (how to read your credit report).
If you have low account balances, no derogatory accounts, and a lengthy and well-rounded credit history, chances are your credit score will be quite high. Check out my credit score range for more on that.
If you do decide to get a free credit report via the site mentioned above, be careful as you navigate the credit bureau sites.
While they will provide a free credit report, they’ll also try to sell you their services; take your time and read the fine print to ensure you don’t accidentally sign up for their paid services if that’s not your intention.
This post was written on May 19, 2009
The new high-end “Chase Sapphire Card” is being rolled out soon for select existing credit card holders.
It’s unclear what the credit card actually offers, but I received a letter in the mail from Chase concerning the card yesterday.
It read: “Thank you for being one of our most valuable customers. We’re recognizing your loyalty with an exclusive invitation to upgrade your card to the new Chase Sapphire – at no cost.”
Among the known features, the Chase Sapphire credit card will provide a “higher level of services and benefits,” including 24-hour concierge service and improved rewards via the company’s new “Ultimate Rewards” program.
The rewards program offers no earnings caps, no expirations, no blackout dates, and no travel restrictions.
According to the letter, I’ll receive a formal application in the upcoming weeks to upgrade my current Chase credit card to the new Sapphire card.
It’ll be interesting to find out more details about the card, and just how exclusive it really is.
It seems to be following in the footsteps of the Visa Black Card and the Black American Express Card.
Credit card issuers are certainly pooling card holders into two diverging groups; one group is seeing credit card accounts closed or credit lines cut, while the other group is seeing improved benefits and services.
Of course, it’s probably all of bunch of hype, and there’s a good chance I won’t actually bother upgrading, as I don’t use my Chase credit card much anyways.
Update: The Chase Sapphire Card basically wipes out a pre-set spending limit, similar to some higher-end American Express credit cards, and instead determines how much you can spend based on your purchase history and other credit reporting details.
That means no over the limit fees, but it also means your credit utilization could get thrown out of whack because your actual balance may appear as your total credit limit on your credit report.
As a result, I’m not going to upgrade…just not compelling enough for me.
(photo: gemteck1)
This post was written on May 13, 2009
If you’re curious how bad it’s getting in the credit card world, a new report from Equifax might be a pretty clear wake up call.
Last month, banks closed a whopping 20 million credit card accounts, according to data from credit bureau Equifax obtained exclusively by Reuters.
The total number of credit cards has now fallen by 58 million from a July 2008 peak of 380 million cards, wreaking havoc on small businesses and consumers who rely upon credit.
Additionally, credit limits have slid by $425 billion from a July peak of $3.59 trillion to $3.16 trillion as of last month.
Meanwhile, card issuers are putting the brakes on new card applications, with the number of new bank cards issued in January and February off 38 percent from a year ago.
It’s no mystery why; last month, 4.7 percent of payments on bank-issued credit cards were at least 60 days behind, an increase of nearly 40 percent from the same period last year.
The good news is that those who continue to make on-time payments and keep balances low should be unaffected by the ongoing credit crunch.
Most of those seeing their credit card limits cut carry hefty balances without paying them down significantly, while many others have had their accounts closed simply due to inactivity.
If you have a credit card that you rarely use, but want to keep open for the credit score benefits, consider using it to pay a recurring monthly bill with automatic billpay.
(photo: smith)
This post was written on May 4, 2009
Credit card rules are often gray, what with the fact that multiple companies are operating in the same space.
Then you’ve got the merchants’ own rules, which sometimes don’t coincide with the terms of Visa, MasterCard, or American Express, whether they are contractually acceptable or not.
That brings us to a common question regarding identification and credit cards. Some merchants may ask for ID when you attempt to make a purchase with your credit card, though according to Visa, it’s not a “condition of acceptance.”
This is straight out of Visa’s rulebook: “Merchants cannot refuse to complete a purchase transaction because a cardholder refuses to provide ID.”
“Visa believes merchants should not ask for ID as part of their regular card acceptance procedures. Laws in several states also make it illegal for merchants to write a cardholder’s personal information, such as an address or phone number, on a sales receipt.”
Now, this is where it gets controversial, because Visa doesn’t want merchants to check for ID, but cardholders may actually want to show ID to reduce the likelihood of fraud (the opposite is also true).
Of course, Visa is in the business of collecting interchange fees as much as possible, so they wouldn’t be too pleased if consumers were repeatedly denied if they didn’t happen to have ID, though they can spin the policy as a measure to protect the identity of cardholders.
Merchants, however, must look at the back of the credit card to compare the signature with the one on the receipt, that is, if a signature is required for the purchase.
These days, it seems more and more purchases require less and less, as most merchants allow you to swipe a credit card on your own without it ever leaving your hands, which can obviously be good and bad for the consumer.
At the same time, incidental purchases no longer require a signature at many establishments, though policy certainly varies from merchant to merchant.
If you present an unsigned credit card to a merchant, they do have the right and should ask for identification before completing the transaction.
Some cardholders seem to think they are protecting themselves from identity theft by not signing the back of a credit card, but in actuality, how often do merchants really verify the signature anyways?
And if you fail to sign your credit card, it may result in a declined transaction, which could be more hassle in the real world than the risk associated with identity theft.
Personally, I don’t mind if merchants ask to see my ID, but some consumers are aware of the rules and adamantly deny requests for ID, which usually results in nothing more than arguments.
This post was written on April 27, 2009
If you’re wondering why credit card issuers are tightening guidelines, cutting credit lines, and refusing more applicants, look no further than credit card default data.
American Express, the largest U.S. charge card operator by sales volume, said its annualized net charge-off rate rose to a record high 8.80 percent in March, meaning nearly one in ten delinquent credit card accounts could never be paid back.
Similar numbers were seen at other leading credit card issuers, including Chase, Citi, Bank of America, and Discover.
On a positive note, American Express said its rate for loans at least 30 days delinquent, an indicator of future defaults, slipped lower during the month to 5.1 percent from 5.3 percent.
That could be an indication that measures to reduce risk are paying off, such as reducing credit lines of higher-risk customers and more carefully considering new applicants.
But Citigroup, one of the largest issuers of MasterCards, said its default rate rose, indicating more stress ahead for one of the largest U.S. banks, especially with unemployment numbers rising.
Unfortunately, there are a number of forces working against the credit card issuers, including unemployment, falling home prices and a subsequent lack of home equity, which used to bailout spenders during the boom.
The card issuers are even working against each other, by denying new credit to customers who might otherwise have executed a balance transfer to give themselves some breathing room.
Card issuers have also been raising minimum payment requirements as well as interest rates, which could lead to more defaults as borrowers struggle to keep up with larger payments.
But the moves are aimed at getting outstanding credit lines paid down quickly, especially for those who like to carry balances, thereby reducing their risk exposure.
CIBC analyst Meredith Whitney estimates that $2 trillion in credit card lines will be expunged from the system by the end of this year, which could make it difficult for many who rely on credit, especially those who have recently lost their jobs.
(photo: poopfaceproductions)
This post was written on April 16, 2009