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Is This the end of Foreign Transaction Fees?

By: Jason Steele
10/18/2011

The movement to eliminate foreign transaction fees is accelerating. Recently, I told you how Discover became the latest credit card issuer to announce that they were dropping foreign transaction fees. While Discover might not be nearly as large of a network as Visa, MasterCard, or American Express, don’t forget that they are also a very large bank that issues credit cards. Therefore, this move is very significant. Each time a new bank announces that it is dropping these outrageous and unnecessary charges, it makes it even more difficult for the market to bear the continued imposition of these fees.

The Latest Banks To Eliminate Fees:

Since I wrote that article, there have been other announcements. First, PenFed, the Pentagon Federal Credit Union, announced that they were dropping foreign transaction fees on all of their products:

Now all PenFed cardholders traveling overseas with a PenFed credit card can be certain that they will not be paying a foreign transaction fee; no matter which PenFed card they carry.

“Staying true to PenFed’s core principles to bring products to our membership that have every day value is a key element to the successful growth of the credit union,” says Deborah Ames-Naylor, Executive Vice President, Credit and Collections, PenFed. “Eliminating the Foreign Transaction fee on all of the credit cards in our portfolio is just our way of creating a unique and competitive line of cards that come packed with practical benefits that our members can actually utilize.”

I will admit this came as a surprise to me. Not that they were dropping these fees, but that they had them in the first place. I knew of several cards they offered without the fees, and I presumed this policy was in effect across their product range. This statement confirmed that some cards were already free of the fees:

PenFed’s two most popular “Best in Class” cards, The PenFed Premium Travel Rewards American® Express Card and the PenFed Promise Card have both been void of the Foreign Transaction Fee all along. However, the fee has now been eliminated from PenFed’s Platinum Cash Rewards Card, Visa Gold and Visa Classic and MasterCard programs, which is a competitive distinction in the card industry.

PenFed joins Discover and fee free pioneer Capital One in having no foreign transaction fees for any card. If your card is PenFed, Discover, or Capital One, feel free to use it across the border at no additional charge. Other banks continue to offer some fee free cards, typically high end products aimed at travelers, while socking it to the rest of their customers. The latest move is the Marriott Rewards Premier Visa Card from Chase. This mega-bank offers dozens of cards, and they seem to be hanging on as tightly as possible to their foreign transaction fees. So far, this Marriott card is the only one of three co-branded cards (two consumer and one business) they offer that eliminates this fee. Other cards they offer fee free include the British Airways card and the Chase Sapphire Preferred. American Express has been even more stingy, eliminating this fee only on their Platinum card.

The clock is ticking on foreign transaction fee.

Ten Bad Habits That Put You at Risk for Identity Theft

By: patton
10/17/2011

We’ve all been careless a time or two with our credit, but there are some mistakes that could cost you big.

Whether it’s tossing your receipts into the trash, allowing a server to slip out of sight with your debit card, or using the same password for your online accounts, you’re needlessly putting yourself and your credit at risk.

Ten Bad Habits That Put You At Risk for Identity Theft

 

1. Allowing the server to disappear with your card after a meal.
This might seem like no big deal, but it can have major repercussions. A practice known as skimming allows an employee to swipe your card number and security code completely undetected—if he’s out of your line of sight.
It’s not just restaurants where you need to be watchful, though. If you order things over the phone, those employees have access to your information while you’re completing a transaction. As always, monitoring your accounts closely will help in the event that you’re a victim of fraud.

 

2. Choosing not to opt out of pre-approved offers.
Thieves have a field day with the pre-approved credit card offers that come in the mail. Whether they swipe them directly from your box or rummage through your garbage, they’re easy pickings for a would-be thief. There are two ways to opt out of credit card offers. You may choose to opt out for a 5-year period, or a permanent end to these offers. The FTC (Federal Trade Commission) recommends calling 1-888-5-OPT-OUT (1-888-567-8688) or visiting www.optoutprescreen.com.

 

3. Buying with your credit card while using public WiFi
If you’re surfing at Starbucks and think you need to buy that new album on iTunes pronto, think again. A public network could spell disaster for your credit rating.
According to the Federal Trade Commission (FTC):

If you use an unsecured network to log in to an unencrypted site – or a site that uses encryption only on the sign-in page – other users on the network can see what you see and what you send. They could hijack your session and log in as you. New hacking tools – available for free online – make this easy, even for users with limited technical know-how. Your personal information, private documents, contacts, family photos, and even your login credentials could be up for grabs.

 

4. Using your debit card as your exclusive payment method.
When a credit card is stolen or used fraudulently, the cardholder has a maximum of $50 in liability for a lost card, and zero liability if the card is retained but the number used.
The FTC explains the difference with debit cards, stating:

If you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use. However, if you don’t report the loss within two business days after you discover the loss, you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing unauthorized use is mailed to you. That means you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts.

 

5. Never Changing Your Passwords
Change your password often, and don’t use the same one across all of your accounts. It’s important that it be something long, complex, and seemingly random.US Bank recommends changing all passwords regularly, using a mix of numbers and characters. Memorize your passwords and write them down only in a secure place.

 

6. Tossing receipts into the trash
Receipts add up fast and create lots of clutter in your wallet or handbag, but that’s no reason to chuck them into the nearest trash can. When you find that you don’t need a receipt, be sure to shred it. The account information on your ATM, gas station, and sales receipts can be enough to give away your financial security. Shred what you don’t need, and keep what you do need secure.

 

7. Not checking your credit report at least once per year.There’s just no excuse for not checking your credit report at least once per year since it’s become so simple. Under federal law, every consumer is entitled to a free credit report from each of the three major reporting bureaus.You may obtain your free reports by calling 1-877-322-8228 or visiting annualcreditreport.com

 

8. Carrying around all of your credit cards.
We all like to feel like Daddy Warbucks, with a platinum card filling every slot in our tri-folds, but it’s not smart money management. If your bag or wallet gets stolen, thieves have your entire financial arsenal in their hands.Keep on your person only those cards you use regularly, and keep the rest in a secure place, such as a safe or safety deposit box. The same goes for your social security card. When in doubt, leave it out!

 

9. Refusing to Go Green / PaperlessJust like you don’t want to have credit card offers come through the mail, paper bills can wreak havoc on your financial security. Paper bills, in addition to being bad for the Earth, are bad for your risk level. Everything from credit card statements to gas bills are available in paperless format, so get on the bandwagon!

 

10. Not having important information at your fingertipsIf you’ve got multiple credit cards and bank accounts, as many of us do these days, your best bet is to keep a list of all your relevant account information, along with customer service numbers, in a safe place. Having information right where you need it allows you to check balances, look for identity theft, and call if you find fraudulent charges without having to search. It’s one less thing to stress about in a very stressful situation.It can be a scary world out there, but following these 10 tips can help you keep your eyes on your credit and your stress level low.

Can too Many Inquiries Hurt Your Credit Score?

By: Christina
10/15/2011

What happens to your credit score when you apply for a bunch of credit cards at the same time?

Normally this type of behavior can lower your credit score, but it really depends on your total credit profile. In this article we’ll discuss what actually happens when you apply for multiple loans at once.

A reader, Jace, recently wrote in to us asking this same question.

I was wondering, can applying for seven or eight credit cards at the same time hurt your credit score? I have excellent credit, but I would like to take advantage of some of the different miles and point promotions going on right now. I just don’t want to tank my score if i do.

Jace W

Consumers have often been told that multiple credit inquiries can lower their credit scores and completely ruin their credit. At one time, it may have been possible because high amounts of inquiries meant higher risk of default. It was believed that when someone was in trouble financially, they would go on credit card or loan application sprees to see who would approve them and then file bankruptcy or default on the loan.

Credit inquiries, however, account for a very small part of the credit score.  Your credit score is more heavily dependent on whether or not you pay your bills on time, how often you are late, the number of public records such as bankruptcy, judgments and collection accounts that you have on file.

What Are the Different Types of Credit Inquiries?

Credit inquiries are of course viewed differently and calculated based on the type of inquiry. There are what are called “soft inquiries” and “hard inquiries” and knowing the difference will help you understand which ones could affect your credit score and which ones basically don’t mean anything.

Soft Inquiries on Credit Reports

A soft inquiry on your credit report is an inquiry made when you request your own credit report or when a business verifies your identity in order to offer you something. This is also the type of inquiry that a credit card company makes before they send you a credit card invitation. Most often, it is simply to verify who you are.

Soft inquiries are not counted at all and do not affect your credit report or score in any way. If you view your report, you will see who has made soft inquiries and usually there is a note in the report stating that these inquiries do not affect your report to separate them from the hard inquiries.

Hard Inquiries on Credit Reports

Hard inquiries are the inquiries that are generally made by credit cards, mortgages and loans and these are for the purpose of viewing your credit history and determining if you are  worthy of the loan or line of credit that they are providing.

Mortgages and Car Loans

If you have multiple mortgage or car loan inquiries within a short period of time, these are often bundled together as it appears as though you are just credit shopping and looking for the best rate or offer. Although these pulls are hard inquiries, they do not affect your credit as multiple inquiries as long as they are all made within the same period of time, which is typically 45 days.

Credit Card Inquiries

Credit cards inquiries are considered hard inquiries, although they don’t often harm your credit. If you have one credit card inquiry it will probably not affect your score at all. These inquiries stay on your credit report for two years, but only the first year is counted in your score, and usually only the first 6 months make a difference. Inquiries affect your score according to the age of the inquiry; the newest ones will make the most difference.

So How Much Does a Credit Inquiry Affect a Credit Score Anyway?

Here is the breakdown of how your FICO score is calculated to give you an idea of how little credit inquiries count in configuring your credit score.

Although you have excellent credit and the inquiries may not affect your credit score, it depends largely on what else is on your credit report. It is a good idea if you are able, to take advantage of the different rewards programs and sign up bonuses that are offered to new cardholders.

If you have a fairly new credit file or a very small number of accounts for example, eight new credit inquiries could potentially cause some harm. After all, according to FICO, people with 6 or more hard inquiries on their reports, are eight times more likely to declare bankruptcy.

In short, I would not suggest applying all at once for all of the credit cards as this is counted as eight hard inquiries which at the very least may affect your credit for six months. Start out with choosing the cards with the best time sensitive offers. In order to cut the risk, I would suggest applying for a couple at a time and waiting before you apply for more. If you spread out the applications over a period of time, the inquiries are not likely to affect your credit at all.

How to Settle Collection Accounts for Less Than The Original Balance

By: Christina
10/14/2011

Do you want to settle a past due account for less than you originally owed? It is possible, but there are specific steps you need to follow to come out on top.

One of our readers recently wrote in to us with a similar situation. We’ll take a look at her question and give some clear advice on how to settle collection accounts the right way.

I have a past due AMEX credit card that is currently in collections. The collection agency has sent letters saying they will settle for much less of my original balance…what kind of payments would they accept…they are settling for about 27000…if i told them i would make payments am i still in jeopardy of getting sued? What can i say to them to try and get a lower balance? E.

When trying to determine what to do with accounts that are in collections we have to figure out how exactly collection agencies operate. Some say to never, ever make payments to a collection agency and to pay them off completely in one shot. Obviously, that isn’t always possible and you have to make payments, but having an understanding of collection agencies and how they work will insure that you take the necessary steps in protecting your financial health.

Without knowing what kind of balance you owe American Express, I’m going to guess it may be large if the collection agency is willing to settle for $27,000. However, the negotiations should probably not stop there, even if you are able to pay that amount. Collection agencies typically buy accounts from the original creditor (in this example, American Express) for pennies on the dollar.

Debts that have been recently charged off by the creditor are usually purchased at 6 to 7 cents to the dollar; while older debts may be purchased for as low as 1.5 to 2 cents on the dollar.

There is a statute of limitations on when the debt can be collected based on the state you live in, which is normally around 7 years. If the debt has passed the statute of limitations, the collection agency cannot sue you. Still, these accounts are purchased by collection agencies for as little as a penny or less on the dollar.

This means that if your original debt with AMEX was at least $30,000 and was recently charged off, the collection agency probably paid at the most $2,100. This is just an estimate based on whether the amount you owe to AMEX is around $30,000. It still gives you an idea of how little the collection agency is expecting to receive for the debt. If they have in fact paid $2,100 for the account, there is a good chance that they would receive as low as $5,000 to settle. When you think about it, if they accept a $5,000 settlement, the collection agency earns a profit of $2,900.

The point is that you have a good chance of negotiating a lower settlement payment with the collection agency. Keep in mind that you are no longer dealing with American Express at this point so it basically makes no difference to AMEX what you settle on. For one reason or another, they have turned your account to collections and don’t expect to receive anything from it.

Can the collection agency sue you after you have paid?

One of the rules of dealing with a collection agency is to get all agreements in writing and to correspond in writing once you have agreed upon settlement.  Although collection agencies do periodically threaten lawsuits when attempting to collect the debt, they almost never do. Going to court costs money and considering what they have already paid just to get the account, the expense is usually not worth it.

This means that after you have agreed on settling and have paid off the account, it is not in the best interests of the collection agency to still sue anyone. Their main concern as a collection agency is turning a profit on the debt that they have purchased.

Not only should all terms of the agreement be made in writing, you should also make sure you keep copies of everything. When negotiating your settlement over the telephone, keep track of who you speak with, when you spoke with them,  and always ask for a mailing address at the beginning of the conversation. It is also recommended that anything you mail is sent certified with return receipt requested. These steps will eliminate headaches in the future when you are trying to track down the collection agency you have spoken with.

One more tip in negotiating with the collection agency: consider asking how the account will be noted on your credit report. You may be able to ask that the account with the collection agency is completely removed from your credit report. You may also be able to contact the original creditor and notify them that the account has been “settled.” It doesn’t hurt to negotiate everything because in the end, the collection agency does not care how or what is reported on your credit report as long as the debt is paid.

Making Payments to Collection Agencies:

It is often suggested that you should not make payments to collection agents out of fear of judgments and garnishment of your bank account in the future, in addition to fees and interest that may be charged to the account, keeping it from ever being paid off.

If the account is old, the payments may also cause the statute of limitations to start over, so make sure you keep these things in mind when negotiating. Again, make sure all terms of the arrangement are in writing and that you retain copies. Remember that the older the account is, the lower the amount will be that they require for settlement. It is almost always best to wait until you can pay one payment and pay it off completely, rather than setting up a series of smaller payments.

How to Stop Bill Collectors from Calling You at Work

By: Christina
10/13/2011

There are very few things more embarrassing than having a bill collector call you at work. Besides the humility, it can also cause problems with your employer and jeopardize your employment.

Unfortunately, bill collectors rarely care about these things as their concern is only for collecting the amount due and making a profit or commission on what is collected.

What Bill Collectors Cannot Do to You:

In order to arm yourself when dealing with debt collectors you must be informed. The first step is being aware of the laws and what collection agents can and cannot do.

First of all, many consumers are unaware that bill collectors are prohibited by law from threatening debtors with arrest. There is no debtor’s prison where people go that do not pay their bills. Collectors are also not allowed to tell you they will seize or garnish your property unless they are permitted by law to do so and actually intend on it. If they are not intending to take legal action, they are also prohibited from making threatening statements implying that they will.

Harassment is also prohibited, which includes using threats of violence or harm, obscene language or even repeatedly using the phone to harass someone.

Can a Bill Collector Call You at Work?

If a bill collector is calling you at work, they must still follow the guidelines and laws regarding collection of accounts. Collection agents cannot call at inconvenient times, such as before 8 a.m. or after 9 p.m. They also cannot contact you at work if you notify them that you are not allowed to receive those calls at your place of employment. You are obligated to notify them either orally or in writing, with writing being the preferred method so you have proof that you have notified them and requested that they stop.

You will need to document the conversations and keep records of who you spoke with, the time of day, the day they called and that you specifically requested the calls to stop from the agency. At the beginning of any collection call, specifically ask for the name of the agency, address, phone number and name of the person you are speaking with. If you have more than one agency contacting you, it is important that you document each one separately.

Any correspondence made through the mail should include the account number and what you are requesting. In this case, specifically note that you cannot receive collection calls at your place of employment and to stop immediately. Anything sent through the mail should be sent certified with return receipt requested.

You will still owe the debt and the debtor is permitted to contact you to notify you if they are taking further action or filing a lawsuit. Otherwise, this should stop the phone calls at work.

What If the Debt Collector Still Calls Me At Work?

If the debt collector continues to call you at work, after you have requested that they stop you will probably need to contact a Fair Debt Practices Attorney. From January to August of 2011, the number of lawsuits against debt collection agencies for alleged violations of the Fair Debt Collection Practices Act jumped to over 7200. These lawsuits specifically claimed violations by collection agents and can potentially result in enormous cost and expenses in fees as well as settlement awards from the collection agencies.

You have the right to sue the collection agency and may be entitled to up to $1,000 even if you can’t prove that you suffered because of the illegal practices.  If you do win your lawsuit, you may be entitled to attorneys fees, and court expenses. Additionally, you may find that others have been subjected to the same illegal activity and can sue as part of a class action lawsuit which may result in damages up to $500,000 or 1% of the collector’s net worth.

Most of the time however, bill collectors want to avoid the cost and trouble of lawsuits and will stop calling you when you request that they do so. The record number of lawsuits filed against debt collectors in this year alone indicates that consumers are becoming more informed on what is legal and what is illegal concerning debt collection practices. If you feel that a debt collector has violated any of the terms of the Fair Debt Collection Practices Act, you should contact and notify the Federal Trade Commission as well as seek out an attorney that specializes in this type of violation.

Does Your Credit Score Go Up When You Pay Off Credit Cards?

By: patton
10/12/2011

In this article we will discuss what happens to your credit score when you pay off your existing credit cards.

When you pay off your existing cards, your score will go up. How much it goes up, and how quickly it goes up depends on a number of factors. The best illustration really is a fast example. A reader recently sent us this question about paying off credit cards prior to buying a house:

I have a 606 credit score, and I need to get to a 640 in order to qualify for a home loan. I just paid off my credit cards and 8 creditors. Will my score go up?

It sure will! There are some variables here though, and you need to know what they are before you go apply for that loan.

First:

When you pay off your credit cards, and those payments are listed on your credit reports a month later, your score usually goes up. However, there are instances where you might have to do a little bit of extra work to get your score up because not all items on your credit report are created equal.

Let’s take a look at some of the most common scenarios:

You Paid Off Normal Credit Accounts

When you pay off an account in good standing that has revolving credit, and you keep the account open, that is going to bring up your credit score.  You get a boost to your score for having a low balance, and for every extra month that you have accounts that are not past due.  That’s just a fact.  So, you might have accounts that you never touch.  Keep them open anyways.  It makes everything much simpler for you in the long run.

What happens when you pay off multiple current credit accounts?

You have said that you paid off eight accounts in a rather short period of time.  That is a wonderful thing, and it will certainly benefit you. However, you cannot expect all of those payments to show up on your credit reports instantly. Each lending bank has its own credit reporting policies. Individual lenders may report to one of the credit bureaus, all three, or none at all.   Unfortunately there is no standard answer. The best thing to do in this case it to monitor your credit reports so that you know exactly what effect your payments have on your credit score. You can expect most companies to report your payments to the credit bureaus sometime within the next month.

You Paid Off Bad Accounts

Accounts that were previously showing up as being past due, closed due to late payments, etc. are handled a bit differently when your credit score is factored. If you paid off credit card accounts that had already been closed because you went too far past due, your best course of action is to wait three to six months and challenge those accounts on your credit reports. In other words, try to have them removed. In many cases, completely removing a negative account from your records will benefit you more than simply paying the account off. Two things you need to know though:

How Much Will Your Credit Score Go Up?

This is not included in your question, but it’s worth a quick answer.

There’s no telling exactly how much your score will go up because there’s no way to do the math on your own.  The computations that go into credit score are trademarked, patented, and everything else under the sun.  In other words, you wouldn’t figure it out anyways.  Suffice it to say, you pay off more, the score goes up more, you pay off less, the score goes up less.  You get the idea.

The best thing you can do is be diligent, use a reliable service to track your credit score, and monitor how close you’re getting to your goal.  That will always be the best solution.

Happy house hunting!

Inside the new TSA PreClear Program

By: Jason Steele
10/11/2011

Last week, I exposed what I feel is one of the biggest issues with the TSA’s new PreClear system. In general, it is always a good thing when the normally obtuse TSA decides to take a more common sense approach to aviation security. The only problem I had was that they were rolling out this program based on an arbitrary requirement; status in an airline’s frequent flier program.

A Report From The Field

Even though I travel very often, I don’t hold status due to my heavy reliance on frequent flier awards and my interest in finding the best deal for each flight. Nevertheless, I was able to speak with Burton Strauss who was kind enough to share his experiences as one of the first members of the TSA’s new PreClear pilot program

JS:  Burton, first, thank you for helping me out with this, I really appreciate it. Where are you based?

B. Strauss:  Dallas-Fort Worth International Airport

JS:  How often do you travel?

B. Strauss: Every week – one way or the other

JS: What is your current status with American Airlines?

B. Strauss: Executive Platinum

JS: Are you a member of Global Entry?

B. Strauss: No

JS: Do you know how you were selected for the PreClear program?

B. Strauss: AAdvantage status

JS: What did you have to do to qualify?

B. Strauss: AA invited me to apply. First email just described the program:

The Transportation Security Administration (TSA) has announced it will be trial testing this fall a new pre-screening program that could offer some airline passengers expedited screening through U.S. security checkpoints.

American Airlines is pleased to announce our partnership with the TSA in testing this new concept at our hubs in Dallas/Fort Worth and Miami. Because of your current status as an AAdvantage® member, you may be eligible to participate and potentially be cleared through the TSA pre-vetting process, resulting in some screening benefits at the checkpoint. During the first phase of testing, certain frequent flyers and members of Customs and Border Protection’s Global Entry, NEXUS, and SENTRI programs, who are United States citizens, will be eligible to participate in this pilot program which could qualify them for expedited screening.

The TSA will determine who participates in the trial on a per-flight segment basis. Please be aware that AAdvantage membership itself does not guarantee that you would receive expedited screening. To be considered for participation in the trial, you will be required to opt-in and give us your consent to share your AAdvantage status with the TSA. The details and instructions regarding the opt-in for this program will be sent to you at a later date. Your consent will add you to the subset of flyers that may be considered for the TSA’s expedited screening procedures at our Dallas/Fort Worth and Miami hubs.

The second message had a link to enable the exchange of information:

Due to your status in the AAdvantage® program, you may be eligible to participate in a screening pilot program being tested by the Transportation Security Administration (TSA) this fall. The goal of this pilot program is to evaluate expedited screening processes for selected American Airlines travelers through designated security checkpoints at the Dallas/Fort Worth International Airport (DFW) and the Miami International Airport (MIA).

Some important things to note about participating in the screening pilot program:
·         You must be a United States citizen
·         There is no charge
·         Your eligibility and participation will not necessarily ensure an expedited screening for every flight
·         When you opt-in, you give American Airlines permission to share your AAdvantage status and passenger reservation information with the TSA’s Secure Flight system
·         At time of opt-in, although not required, you will also have the option to share information about your enrollment in U.S. Customs and Border Protection Trusted Traveler Programs such as Global Entry, NEXUS and SENTRI

More details about the expedited screening pilot is available on the TSA’s website. Please note that if you wish to participate, you must opt-in no later than September 23, 2011, 12:00 midnight, CT.  Ready to register now?  Just click below.

If they ever sent a message beyond this, some spam-trap caught it and I didn’t see it.

JS:  How many times have you gone through the new preclear process?

B. Strauss: Once, it just started on the day of my 1st flight according to the TSA suits.

JS: What are the differences between this and the traditional process?

B. Strauss: They scanned my BP, it was validated (green light just like the mobile BP), and apparently told the TDC to direct me to the special line.  Once there I was able to keep my shoes on, there was no need to remove my laptop from the bag (I’m not sure about the 3-1-1 baggie – I don’t travel with one – but my escort didn’t ask and when I started to unzip the checkpoint friendly laptop bag he told me I didn’t need to). Less traffic so it might go faster?

JS: Thanks again Burton, and safe travels.

Conclusions

Burton’s experience shows us a few things. First, eligibility seems only to be dependent on airline frequent flier program status, not Global Entry membership. Second, the advantages of participation are significant, but limited to keeping shoes on and laptops in their bag. Think of it as a pre-9/11 screening option. There is also a shorter line, which people with airline status already get.Perhaps this new program will have an even shorter line at first, but in the end, it will probably be the same as the normal priority line.

In short, it would be nice if they rolled this out further, and I renew my objection to letting private companies; the airlines, determine our eligibility for obtaining government services. It is not to blame people like Burton in any way, but until I can use my Starbucks card to cut in line at the DMV, this just seems out of place.

 

Paying Off A Timeshare With A Credit Card.

By: Jason Steele
10/07/2011

A reader asks:

We own a time share that we owe $15,000 on we have the money in savings to pay it off. We have and excellent credit score close to 800.Would like to pay it off with a credit card then pay that credit card off right away and hopefully get some perks for doing that. The timeshare is owned though Marriott. Any thoughts?

Thank you,

Bruce&Kathy

This is an excellent question. It seems you have figured out the premise for reward card use; charge as many regular expenses as possible to your card, but pay the balance in full before interest accrues. People like ourselves have been using this formula for years in order to earn free travel, cash back, and all sorts of other types of rewards. Marriott heavily promotes the purchase of their vacation time share properties, but they do little to inform prospective buyers of the method of payment accepted. Nevertheless, a quick call to their billing center will give you the answer that you seek.

What Are The Possibilities?

It is likely that that they will not accept credit cards. That is unfortunate, but credit cards are rarely accepted for large payments such as this, including rent and mortgage payments. Simply put, the rewards you receive are paid for by the payment recipients in the form of credit card merchant fees. These fees can be 2-4% of the payment, an amount few companies are willing to part with for large payments that they are owed.

Another possibility is that they accept credit cards, but will charge some sort of processing fee. Typically, these fees are a percentage of the amount owed. Unfortunately, these fees usually equal or exceed the value of the credit card rewards you hope to earn, making the process a moot point in most cases. The only times these fees might make sense is if you are eligible or trying to qualify for a unique promotion. For example, many travel related cards offer status elite qualifying miles when customers reach a certain annual threshold. If this status is worth a lot to you, it might be worth paying a 2% fee or more. Other cards, like the AARP card from Chase, come with an promotional cash back rate of 5%, which is probably more than any processing fee.

If you are really lucky, they will accept your credit card without a fee. If this is the case, you will always be better off putting these charges on a rewards card, so long as you have the money on hand to pay off your balance in full and on time. If that is the case, try to make your payment the day after your statement closes. This will give you almost two months of free float before the payment is due.

Good Luck!

If you have a question about credit cards or travel, always feel free to drop us a line here at Ask Mr Credit Card.


My Problem With The New TSA Trial

By: Jason Steele
10/05/2011

Among traveler, opinions on the TSA are united; we hate it. Opinions do vary on the subject of how to fix it. Some feel that it should be abolished altogether, while others believe that it should be the subject of some serious reform. Prodded by the people who are in favor of dismantling, the current head of the TSA, John Pistole, is undergoing some changes that can only be seen as groundbreaking if you are part of the TSA.

The New Program

According to the Atlanta Journal and Constitution, “The Transportation Security Administration launched a pilot program called “TSA PreCheck” for expedited security screening in Atlanta, Detroit, Dallas/Fort Worth and Miami.” Other reports indicate that this program is only open to customers with status in American and Delta’s frequent flier programs.

The Good News

The idea here is that the TSA will take people who are relatively well known, frequent fliers, and subject them to slightly less intrusive searches. Those people agree undergo a background check and release their flight history. For them, shoes can remain on and laptops do not have to be removed. This is good; the TSA is focusing on people who may be a threat

The Bad Stuff

I have always objected to using Airline frequent flier program status to segregate security lines, and this more recent move takes it a step further. Airline status is a fictitious designation based on the random rules of private companies. For example, one could obtain Delta status by signing up for their SkyMiles Reserve card and hitting various spending thresholds. In other instances, status is given away though various promotions such that a traveler might only have to take a single flight. On the other hand, people like me, who travel frequently on many different airlines, are effectively penalized. I choose carriers based on the best deals and the most ideal schedule for my trip. I almost always use frequent flier miles, so I have little chance of making status anytime soon. In focusing on bestowing benefits to the most frequent customers they are leaving out the people who happen to be the most frequent travelers.

Finally, no story about airline security would be complete without comparing the dysfunctional system we have here in the United States, with the most highly effective system in the world, the one they use in Israel. It has been reported that plenty of research and intelligence assets are put into place analyzing passenger backgrounds before they even reach the airport.  On my latest trip to Israel, like previous trips, I was constantly amazed at how easy their process was. Yes, I was asked a few questions by their security officers, but they I flew through their actual screening process in seconds. No shoes were removed and no electronics were taken out of my bags.

I don’t know if the TSA should be eliminated or just completely transformed. I do know that whatever actions are taken, they shouldn’t be a the behest of the airlines and favoritism shouldn’t be shown to those who happen to qualify for elevated membership in loyalty programs of Blockbuster video, Burger King, or even Delta Airlines.

Another Blow Against Foreign Transaction Fees

By: Jason Steele
10/04/2011

Regular readers know that I have a serious grudge against foreign transaction fees. The reasons for my vendetta range from the principled to the personal. First, I don’t like getting ripped off when I travel outside the United States, which I do regularly.  Furthermore, I just feel it is wrong. There is no real added cost to accepting credit cards across the border, something that the New York Times pointed out:

… Duncan MacDonald, who was general counsel for Citi’s card business in Europe in North America for part of the 1990s, said he believed that the fees provided a big boost to the issuers’ bottom lines. “My guess is that some major part of it is just pure profit,” he said. He pointed me toward revealing details in Schwartz vs. Visa, one of the many lawsuits that ultimately led banks to disclose these fees more prominently. The trial judge, Ronald M. Sabraw, noted that from Feb. 1, 1996, through Dec. 31, 2000, Visa had $6.9 million in multicurrency conversion costs for American cardholders and $630.1 million in currency conversion and related revenue. Visa and MasterCard “merely act as a clearinghouse, performing arithmetical calculations at insignificant cost,” Judge Sabraw concluded.

In fact, I found out that the very same credit card issuers who tack on foreign transaction fees when our cards are used outside of the United States, add those very same fees to the very same cards that they issue to foreign citizens when they visit the United States! Foreign currency conversions  are a trivial cost, yet most companies charge a whopping 3% of all purchases processed outside the United States. Companies have even been caught adding these charges to domestic purchases processed in of shore locations as well as dollar transactions completed outside the United States.

The Tide Is Turning Quickly

In the last three years since I have been blogging here, card issuers have largely retreated from their outrageous fees. Naturally, I take full credit. Amex did raise their fees from 2% to 2.7%, but dropped them altogether on their Platinum cards. Chase, Citi, and BoA also dropped these fees on some of their products targeted at international travelers. Capital One, god bless them, has never charged these fees as far as I know. Clearly, they are not giving up these un-earned profits unless consumers were starting to demand it. Maybe they catch the drift when I call them up to tell them I will be traveling overseas, but never use their card.

The Latest Domino To Fall, Discover

Discover has their loyal following, but they also charge the 2% foreign transaction fee. It is not that the Discover card is widely accepted outside the United States, but they nevertheless wrote to their customers recently announcing that they would no longer have this fee as of November. According to numerous cardholder reports, Discover sent out a letter indicating:

We are pleased to inform you that, effective 11/06/11 we will no longer charge a Foreign Currency Fee on any international purchases made with your Discover® card.

This can only be seen as good news. Discover is accepted anywhere Diner’s Club is, and they also have an affiliate in China, making it a preferred card for people who travel there.

Hopefully, this news is an indication that the last days of the foreign transaction fees are here. As the world becomes a global community, we don’t need our banks levying unjustified surcharges if we dare to cross the border.

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