The Truth About Credit Cards.com

This is a bit off topic considering I typically write about credit related news, but it still falls under the money saving scope of the site, so I thought I’d include it.

I was sent an e-mail regarding the recent rise in gas prices that included some practical ways to get the most bang for your buck when paying at the pump.

Buy Gas in the Morning

This seems to be well proven and rather interesting. The idea behind this tip is that colder gas is denser gas, so you’re getting more gas, or really just the proper amount.

As the day goes by and things heat up, gas expands and thus you’re gallon may no longer actually be a gallon.

It’s a real issue, and one lawmakers tried to get gas stations to address by compensating paying customers as temperatures changed. Of course that law seemed to get buried before gaining any strength.

Avoid Buying Gas When a Delivery Truck is Present

If you approach a gas station and see the tanker pumping gas into the station’s reserves, avoid it.

The idea here is that the tank below the station is getting stirred up with all types of dirt and soot, leading to poorer quality gas that can lead to weaker performance and even harm to your vehicle.

Typically all the gunk settles on the bottom of the gas station’s storage tank, so the gas is cleaner when a truck isn’t present.

Pump Gas Slowly

I haven’t noticed this, but apparently gas pumps have three different speed settings you can choose from.

Keeping the nozzle on the slow mode supposedly minimizes the amount of vapor created while pumping, thus giving you more gas and less vapor. This is probably minimal, but another tip from a seasoned pro in the industry for more than 30 years.

Don’t Let the Tank Go Empty

This one is disputed, and basically calls for drivers to fill up once the tank hits the half way mark.

The idea here is that the more empty space in the gas tank, the more evaporation. I know this has been argued both ways, so I can’t necessarily endorse it.

Plus it seems like a pain to fill up your tank more often.

All that said, the simplest ways to conserve gas are to keep your tires properly inflated and drive at steady, reasonable speeds.

Oh yeah, and you can use a credit card that provides cash rebates for buying gas…

(photo: futureatlas)

With all the talk about credit card reform lately, I thought it was interesting that fundamental, yet problematic aspects of credit have seemingly been ignored.

Sure two-cycle billing and arbitrary interest-rate increases are on the agenda, but are these issues letting more substantial flaws slip through the cracks?

Take for instance a credit card’s introductory rate, which is often 0% APR for 6-12 months, and now up to 16 months in some cases.

While these introductory rates drive credit card sales and provide responsible card holders with some much needed leeway (and sometimes arbitrage), they likely do more harm than good for the typical, uninformed borrower.

If you really think about it, an introductory rate that allows you to make a small minimum payment for the first several months is basically inviting you to carry a balance.

It’s saying hey, you can spend as much as you want (up to your credit limit) for “x” amount of time, at which point your APR will skyrocket and you’ll need to pay off that entire balance or face hefty finance charges.

In a way, it’s almost a form of payment shock because your interest rate jumps from 0% to as high as 30% overnight, forcing you to pay off the balance in full or get saddled with month after month of finance charges.

And let’s be honest, if credit cards didn’t have an introductory rate where you could get away with carrying a balance without incurring interest, most would probably charge less and pay their balance in full each month.

To that end, you’d be less likely to get in over your head and spend more than your means.

Of course this is all too obvious and fundamental, and thus will be ignored by the Fed and everyone else looking into the alleged malpractices of the big credit card issuers.

And there’s probably no incentive for the card issuers to quash the practice, unlike no fee balance transfers, which weren’t making sense for most banks any longer.

One final caveat: like any other incentive, an introductory period can make sense in certain situations, but on a large scale, should probably be addressed and tweaked to better protect consumers.

(photo: carbonnyc)

Ever wonder how many people are getting declined when applying for a credit card?

Well, a new report issued by UK-based MoneyExpert.com found that roughly 18,000 applications are rejected by credit card issuers on a daily basis.

That’s 3.24 million rejections over a period of 180 days if you’re counting.

Their research figures revealed that about one out of every 14 people, or 7 percent of adults, have been rejected from a credit card issuer in the past six months.

Young adults are apparently the worst off, with 10 percent of those aged between 25 and 34 denied in the past six months.

Conversely, only three percent of people aged between 55 and 64 were denied during the same period, as they are assumed to be the lowest risk category.

The company noted that the enduring credit crunch has forced banks and lenders to step up their guidelines, leading to a higher rate of denial.

Of course this is a study of British consumers, and it’s unclear if United States standards are higher or lower than theirs.

Either way, it’s clear that a large number of consumers in need of credit are being denied, which could lead to a larger number of defaults on existing credit cards.

(photo: lemoncat)

The Federal Reserve is reportedly putting together its own rules to tackle unfair and misleading credit card practices, according to the Washington Post.

Per the article, things like arbitrary interest-rate increases and two-cycle billing are on the agenda.

Discover is currently the number one purveyor of the two-cycle billing method, which can lead to significantly higher finance charges.

The new rules would also force credit card issuers to better disclose terms and conditions to cardholders, ideally not buried in the small print.

In recent months, some credit card issuers have eliminated universal default, but at the same time, raised the cost of late fees and balance transfer fees.

But things like negative payment hierarchy, the practice of paying off the lowest APR charges followed by the highest interest charges, should be addressed as well.

Credit card issuers have long been scrutinized for their seemingly unfair practices, including the latest move by many to fix interest rates as rates continue to fall.

It seems card issuers are constantly devising ways to trap unknowing borrowers, and hopefully the move by the Fed will address some of those issues.

As expected, several card issuers have already warned that new restrictions could hurt all borrowers by raising associated costs and interest rates.

Only time will tell if any meaningful changes come about from all the proposed legislation.

(photo: miopls)

According to a Government Accountability Office report released yesterday, government officials in a slew of different agencies from the Post Office to the Department of Energy used company credit cards to purchase anything from Ipods to online dating services.

The GAO blamed the excessive and extravagant purchases on so-called internal control breakdowns in certain government agencies’ purchase card programs, meaning most couldn’t keep tabs on their purchases or come up with receipts when asked.

Other ridiculous items purchased using government issued credit cards include lavish steak dinners at Ruth Chris with so-called “top shelf liquor,” lingerie, digital cameras, computers, laptops, expensive suits, and more.

Many of these items, totaling more than $1.8 million, couldn’t be tracked down for the study and were presumed to be lost or stolen.

In one case, a cardholder used the government purchase card program to embezzle more than $642,000 over a six-year period from the Department of Agriculture’s Forest Service firefighting fund.

Established in the late 1980s, the purchase card system is utilized by about 300,000 government employees and is intended to streamline federal purchasing.

And what a great time to release the report, right after we all pay our taxes…

(photo: vogueqtr)

As the credit crunch carries on, banks and lenders are increasingly looking for ways to boost capital to offset rising losses.

And one such popular way is by increasing fees, most banks bread and butter these days.

So beginning last week, Wells Fargo imposed a higher transaction fee on ATM withdrawals at non-Wells Fargo ATMs, raising the cost from $2.00 to $2.50, a whopping 25% increase.

So if you’re a Wells Fargo customer, expect to pay more when you use non-Wells Fargo ATMs.

Instead of paying say $2.00 on both ends for an ATM transaction, the cost could now be significantly higher depending upon where you withdraw money.

For example, if you’re a Wells Fargo customer and you take $20 out of a Bank of America ATM machine, expect to pay a hefty total of $5.50, or 27.50%.

That’s because Bank of America recently raised their non-customer ATM fee from $2.00 to $3.00.

So next time you need money, look for a Wells Fargo branch before considering a withdrawal at a competing bank, otherwise you’re simply throwing money away.

Expect other banks to follow suit in coming months, and for these fees to keep marching higher in the years to come.

Tip: Wells Fargo charges $1.50 for a balance inquiry and $5.00 for an international transaction at non-Wells Fargo ATMs.

(photo: justinbaeder)

British credit card issuer Provident Financial has launched a credit card that carries one of the highest annual percentage rates you’ve likely ever seen or heard of.

According to the Times Online, the Bradford, England based bank is offering consumers with poor credit a credit card that carries an APR of 183% if they borrow money over a period of about a year, or a whopping 365% if they choose to borrow for just 31 weeks.

So assuming a cardholder takes out about $600, which happens to be the maximum credit line, they’ll end up paying back roughly $1,000 throughout one year, or about $900 in just over half a year.

That’s a pretty penny, but also the cost of having terrible credit history and no steady paycheck.

Seems like a different level of subprime lending, considering it’s 10 to 30 times the typical APR of 10-30%.

The only bright spot, if you can call it that, is that Provident supposedly doesn’t charge any late fees.

I guess with an APR that high, additional fees aren’t necessary.

If your credit is in the dumps, learn some simple techniques to raise your credit score.

(photo: jamesjordan)

Much to the delight of consumers nationwide, credit card junk mail is continuing its decline that started back in October, according to data released by Mintel Comperemedia today.

The global analysis company noted that credit card-related mailers sent to consumers fell 3% from December to January and 19% since October, down from a whopping 900 million units.

Mailers to current customers fell by 30% from December 2007 to January 2008, but actually rose seven percent to non-customers.

Apparently the credit card issuers are more interested in acquiring new customers, rather than marketing to the ones they’ve got.

Since the holidays, four of the top ten card mailing companies reduced direct mail to both non-customers and current customers, while six increased direct mail to non-customers.

Credit card issuers have been much more cautious in recent months as the mortgage crisis continues to deteriorate and force many homeowners to look for other sources of assets as their home equity slips away.

It’s clear that the credit card industry is adjusting to the ongoing credit crisis and limiting credit as a result, similar to a recent move by mortgage lenders to freeze home equity lines.

Credit card terms are also becoming more stringent, with fewer no fee balance transfer offers and 0% APR offers floating around as a result.

(photo: jemsphotos)

A study conducted by public interest group Truth About Credit found that a significant number of college students are using credit cards and that related marketing is fierce on campuses nationwide.

The survey sampled 1,500 students at 40 large and small universities throughout the United States, asking respondents a series of questions ranging from credit card regulation to credit card use and marketing.

The group found that 66% of students reported having at least one credit card, and just 36% of those said they paid their credit card bills in full every month.

Interestingly, nearly 1 in 4 students (24%) said they used their credit card to pay for their college tuition, and college seniors had roughly double the debt of freshman.

Additionally, 25% of respondents said they paid at least one late fee, 15% said they paid an over-the-limit fee at some point, and 6% said they had had a credit card cancelled for non-payment.

Nearly one in five (19%) actually cancelled a credit card on their own that was in good standing, perhaps because it was burden or a temptation.

With regard to credit card marketing on campus, 76% reported stopping at a sales table on or near campus, and 31% of those who stopped were offered or accepted a free gift, with a t-shirt being the most common giveaway.

Related to that, 46% of students supported limits on how many days credit card companies can “table” each semester, and 36% supported a ban on free gifts that often lure students into credit cards they don’t need.

Lastly, 38% supported a ban on credit card fees paid to schools or school groups and 74% supported the marketing of credit cards with fair terms and conditions only.

Unfortunately, many students fall into credit card debt by accepting “free offers” because of their lack of cash to begin with, often without a clear understanding of how credit cards work.

(photo: acidcookie)

When you elect to use a credit card to make a purchase, any kind of purchase, big or small, someone obviously has to pay for that convenience.

And even when you use cash, because so many other customers opt to use their credit cards, there’s so escaping the fact that someone still has to make up that difference.

So you might be thinking oh, this is just the tiny merchant fee that the store pays per transaction that doesn’t really affect me, but there’s actually another fee in addition to the standard transaction fee.

This hidden cost is known as an “interchange fee”, and these fees drive up the price of merchandise and other goods that we buy on a regular basis, and much like every other fee, get passed on to the consumer.

It works like this: When you make a $100 purchase, the merchant will actually only receive $97.50, with the remainder being split between Visa/MasterCard and the card issuing bank, such as Citi Bank of America, or Chase, to name just a few.

Visa/MasterCard will collect the transaction fee, usually around 50 cents or less in the above example, and the card issuer will collect the remaining $2.00.

The best part is that these fees are hidden and prices are set behind closed doors, and because they are so lucrative, they’re the motivating factor driving banks to issue more credit cards to consumers.

According to UnfairCreditCardFees.com, American consumers paid more than $36 billion in interchange fees during 2006, a 117 percent increase from 2001.

On a positive note, the House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) yesterday introduced the “Credit Card Fair Fee Act”, legislation that finally addresses this mystery fee.

The hope is that these fixed interchange prices controlled by Visa and MasterCard will bet set by the market and not be monopolized by two financial giants.

Interestingly, these interchange fees often fund junk mail campaigns that send millions of credit card offers to our doorsteps 365 days a year. Go figure…

(photo: jrin)