Credit Cards Online Information

The Department of Defense (DoD) is bringing out the heavy artillery to curtail the misuse and abuse of government-issued credit cards by its employees. It is threatening prosecution, loss of retirement pay and the yanking of security clearances for personnel caught charging (and we don't mean up San Juan Hill) without permission.

DoD Comptroller Dov Zakheim established a Credit Card Task Force in response to General Accounting Office reports that some military card holders were abusing the privilege. Zakheim also recommended more-extensive auditing and better oversight of charge-card accounts, a 25 percent cut in the number of cards being issued (from 1.6 million to 1.2 million) and stiffer penalties against vendors or contractors who participate in fraudulent schemes. The government's increasing use of charge cards was intended to streamline the procurement process, decrease paperwork and improve accountability. But in the latter category especially, it has fallen short. In some cases, a single individual is responsible for policing use of as many as 1,000 charge accounts.

Zakheim assured taxpayers that less than 5 percent of all Pentagon card purchases are probably fraudulent and that the "vast majority" of its employees use cards responsibly. But such assurances are a little shallow given the fact that Pentagon personnel used plastic to make an estimated $9.2 billion in purchases or travel-related transactions in fiscal 2001. Even a 5 percent cut of that figure adds up to some significant losses.

In another development, the Pentagon's Office of Inspector General (OIG), responding to whistle-blower allegations, found that after six years and a $115 million investment, a $263 million project to design and build an automated travel-management system for the military is way behind schedule and unlikely ever to operate as originally intended. The OIG also warned that another $377 million being sought (representing an 87 percent increase over original projections) to complete the troubled project almost certainly will be throwing bad money after bad.

The original contract called for the system to be deployed to 11,000 sites worldwide in just four months. But the project for some reason was exempted from normal acquisition requirements and lacked any planning and performance benchmarks from the start, according to the OIG report. It was intended to "represent the 21st century model of efficiency and service," according to the report. And so it has--at least in terms of government efficiency and service.

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Britons are planning to tighten their belts this Christmas by cutting their credit card spending. Findings from Morgan Stanley show consumers will spend an average of pounds 940 over the next three months " 10 per cent less on their plastic than during the same period last year.

The biggest cut will come in socialising, with people expecting to spend a third less on going out.

Shoppers also plan to reduce their credit card spending on clothes, shoes and health and beauty.

The number one credit card spend in the final three months of the year will be on groceries, with consumers spending an average of pounds 234. But even this is 10 per cent lower than during the previous year.

'Our findings suggest Britons will be spending sensibly,' says Morgan Stanley spokesman Patrick Muir. 'This prudence may mean a leaner Christmas, but it is just as likely to reflect the growing savviness of shoppers who now demand more for their money.'

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L.A. continues to defy the pressures of skyrocketing home prices and massive consumer debt, according to several economists whose mid-year forecasts project increasing job growth for the rest of the year and into 2005.

There is some concern that with interest rates picking up, homeowners with adjustable rate mortgages might find themselves vulnerable, especially new homebuyers who have purchased near the top of the market. Another concern overleveraging among homeowners who have tapped equity lines of credit.

"Consumers are completely out of whack on their balance sheets, inflation is kicking in and interest rates are going up," said Christopher Thornberg, senior economist at UCLA's Anderson School, which this week releases its quarterly report for Southern California.

But Thornberg and other regional economists are relatively upbeat about the near-term prospects for Southern California, and while real estate prices are likely to edge lower in the coming months after a stunning period of monthly double-digit increases, the drop is unlikely to approach the free-fall of the early 1990s, when the aerospace industry collapsed, riots broke out and the Northridge earthquake devastated the region.

A report last week by Chapman University projected that home prices in California will fall 4.4 percent next year--hardly alarming considering that in May median prices in Los Angeles County jumped 26 percent from the like period a year earlier. Some of that decline has been starting to be felt by mortgage brokers, who note a recent flattening of listing prices, a lengthening of listing times and a decline in the number of multiple offers.

Consumer spending

The question regional economists are asking is not so much whether Southern California is in a potentially dangerous real estate bubble--most downplay that prospect--but whether homeowners and consumers in general are leveraged to the point where even a small adjustment in interest rates or levels of job creation could put them in financial jeopardy.

That, in turn, could affect levels of consumer spending--everything from car purchases to restaurant meals--and might serve to dampen growth. The concern is especially relevant in a region where so many of the jobs being created are in lower-pay service industries.

For the moment, there is scant evidence that such a pullback is taking place or about to. Unlike the Bay Area after the dot-com meltdown, Los Angeles has more than held its own in the last few years--helped by a 22 percent jump in the number of jobs created since 2001 in the so-called informal economy, which include workers who don't show up in traditional payroll surveys.

Conventional wisdom among mortgage brokers is that once interest rates rise above 7.5 percent, the purchase market is likely to contract. At this point, despite a slight upturn in anticipation of the Federal Reserve boosting rates next week, rates remain well below that figure.

Record-low rates have, in fact, resulted in a 39 percent plunge in default rates for Los Angeles County during the first quarter. Given the rapid appreciation of home prices, homeowners in financial trouble can sell their homes and pay off what they owe--and even walk away with some money.

Steven Cochrane, director of regional economics at Economy.com, an economic forecasting firm in Westchester, Pa., said the Los Angeles economy remains "very stable" and credit quality remains strong.

He pointed to both the low level of defaults and bankruptcies. "I think it says that the economy has been stable for quite some time and that households are taking advantage of the rapidly-building equity in their homes by refinancing to cover any fiscal shortfalls," Cochrane said.

While reported job growth has slipped 2.5 percent over the last three years, the decline in San Jose, by contrast, is 22.1 percent. Meanwhile, the latest job market survey by Manpower Inc., an employment services firm, finds that employers surveyed in Los Angeles expect to hire significantly more workers in the third quarter (the percentages vary according to the portion of Los Angeles surveyed). Retail activity appears to be solid as local merchants prepare for the best summer for tourism since before the terrorist attacks in 2001.

Not accelerated growth

Brad Kemp, a labor research analyst for the state of California's labor market information division, believes other factors are working in favor of the Los Angeles economy. These include a rise in defense spending (which has been offset by job declines in commercial aerospace), the increased flow of goods through the ports (primarily because of the falling U.S. dollar), and overall strength in the entertainment industry.

"It's very reasonable but not large growth, but it's very positive given the fact that it's been stagnant," said Kemp. "Still, it is in no way accelerated growth."

All these signs generally match a national ratcheting up of the economy. The Conference Board's index of leading economic indicators, which tracks the U.S. economy's likely performance over the next three to six months, rose 0.5 percent in May, following a 0.1 percent rise in April. This uptick, along with a jump in the producer price index, will likely lead the Fed to raise interest rates.

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Bethpage Federal Credit Union is issuing 7,000 new debit and credit cards after the accounts were exposed to potential fraud due to a security breach at a third-party processor of payment card transactions in Arizona.

Only a relatively small number of Bethpage's 130,000 customers were impacted by the breach.

We have about 100,000 credit and debit cards issued, said Bethpage CEO Kirk Kordeleski. Bethpage was far from alone. The breach, made public last month, took place at CardSystems Solutions, a firm that processes transactions for merchants and banks. It's believed that up to 40 million MasterCard and Visa credit and debit cards were exposed nationwide, when hackers gained access to the CardSystems database. But only a little more than 200,000 of the card numbers are known to have been stolen by the hackers.

We took the approach that we would prefer to be cautious, says Kordeleski. The cards being replaced were in that database. He added that none of the Bethpage members have reported suspicious activity on their accounts.

In a June 24 letter sent to its affected members, Bethpage warned customers to watch out for suspicious activity on their accounts. The note also said that replacement cards, along with a new personal identification number, would be mailed separately to their homes. Current cards would be deactivated on July 14. The reissuing of the cards will cost Bethpage $40,000 to $50,000, he added.

The CardSystems break-in affected many major banks, including Bank of America, which has information on its Web site about what a customer should do if they see suspicious activity on their accounts.

CardSystems is facing an inquiry from 44 attorneys general, who have given the company until July 25 to respond to their questions about how the hacker was able to steal information.

The stolen identities from CardSystems came after a package carrying the information of nearly 4 million Citigroup customers was lost in early June. That package, lost in transit to its Texas- based credit bureau, included Social Security numbers, names and account histories of customers. At that time, Citigroup said that they didn't have any reason to believe that the package had ended up in the wrong hands.

Back in February, Bank of America said it lost computer tapes that contained the information of 1.2 million federal employees. Bank of America and Wachovia Corp. in May reported that nearly 700,000 customers had account information stolen when bank employees illegally sold information to a man who masqueraded as a collection agency operator.

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The U.S. Supreme Court last month said Visa and MasterCard engaged in anticompetitive practices in the late 1990s, when they blocked other companies, such as Discover, from working with financial institutions in branding bankissued debit cards.

But it's an open question as to whether banks will tamper with the lucrative debitcard agreements they have with Visa and MasterCard, which are credit-card associations owned by their member banks.

"It's a complex question," says Gary Cavano of KeyBank's corporate-news mediarelations office. "It's just too early for us to say" what effect the Supreme Court's ruling will have, especially since Discover and American Express are in litigation with Visa, MasterCard, and several major banks over the debit-card issue. Visa and MasterCard have thousands of bank members.

Over the past decade, debit-card use has grown from accounting for 274 million transactions in 1990 to 8.15 billion transactions in 2002, surpassing credit cards as the preferred payment card in the United States, according to Williamstown, Mass.-based research firm, MindBranch.

The debit-card industry is a multi-billion-dollar engine that helps drive bank profits and point-of-purchase consumer sales, but it is also beginning to redefine traditional payment options, such as food stamps, benefits, and payroll, in the business and government sectors, Mind Branch says.

Discover recently got in on the debitcard action through its $311 million acquisition of debit-card network PULSE. In exchange, Discover gets access to PULSE and its 4,100 member banks, credit unions, and savings institutions.

PULSE will become a business unit of Discover Financial Services, says Beth Metzler, a Discover spokeswoman. When the deal is finalized within two months, member banks will be able to issue Discover debit cards.

"The Supreme Court ruling was a victory for consumers and financial institutions, and it gives us the opportunity to work with financial institutes and banks so they can issue Discover cards, whether it's a debit card or credit card," Metzler says.

"It opened doors for us," she says. "Let's say if one of the banks, for example, let's say it's a Citibank, wishes to issue a Discover card on our network, or ATM cards or debit cards, then they'll be able to."

In the past, Discover didn't have that option, and banks, instead, issued either Visa or MasterCard debit cards.

PULSE is one of the nation's fastest growing ATM/debit networks, currently serving more than 4,100 banks, credit unions, and savings institutions across the country. The network links an estimated 90 million cardholders with more than 250,000 ATMs and 3.3 million terminals at retail locations nationwide.

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I was in a tabloid-induced fugue state at the supermarket checkout counter, musing about whether Linda Tripp could have killed JonBenet, when my credit card problems began. "Your Visa's been declined," the cashier announced, giving me a wary once-over. I had imagined I looked like a yuppie fresh from the gym, but with Visa disowning me the impression was undoubtedly more of a fugitive on her way from the state pen.

"Impossible," I blustered. "I always pay them in full and precisely on time each month." Too bad: no turkey cutlets, Formula 409, or Glad Wrap for me that day.

I have always tried to get along with the capitalist system, or "late" capitalist system, as the theorists optimistically describe it. In my day-to-day transactions, I take the render-unto-Caesar approach, as inculcated long ago by my parents: Work hard, pay bills, change underwear daily. Those are the rules I live by. It's been decades--well, years anyway--since I've had to turn off the phone at night to avoid the collection agencies. The only utopian aspect of my financial life is Working Assets, which handles my long distance calls, my individual retirement account, and, yes, the very Visa card under discussion. My hope has always been that, by letting Working Assets serve as a go-between between me and the ruthless capitalist system, I would be helping to bring about something very different--kinder, gentler, and with lower interest rates.

But following the rules doesn't do you any good if the rules keep changing. The credit card companies, in particular, are well known to be a fickle, emotionally labile lot. When they're in a good mood, they ply you with ever-escalating credit limits, frequent-flier miles, discounts on leaf-blowers, and trips to Cancun. But if irritated in the smallest degree or temporarily deprived of their lithium, they can turn on you overnight, threatening to repossess the furniture or auction your children's kidneys. A couple of weeks after my humiliation in the checkout line, I got a letter from Fleet Bank.

Fleet, a name heretofore largely associated with do-it-yourself enema equipment, seems to have become a major global financial player and developed some sort of alliance with Visa and hence with my old friend Working Assets. Anyway, this letter explained coldly that, due to a problem with my credit rating, my credit limit had been reduced to $400, which is barely enough for a round-trip ticket to Chicago or some even less desirable destination.

All right, I admit that there is a blot--a mere flyspeck, really--on my credit rating. But it's not of my making, as I have attempted to explain over the years in a steady stream of letters to TRW, Experian, and all the other snitches in the "credit reporting" business. Anyway, this flyspeck predates my relationship with the Visa/Fleet/Working Assets gang. So I called Fleet's 800 number, got hold of "Debbie," and screamed, "But I've always paid YOU in full and on time!"

"Yes, I see that in your record," she snorted. "In full. On time. Every month."

If this conversation were not being recorded "to improve our service," she would no doubt have added "Fool!" or worse.

Because, as a little research revealed, the credit card companies are on a campaign to eliminate the estimated 40 percent of their customers, myself

included, who deprive them of interest payments by maintaining a zero balance. They will search your credit rating and possibly your closets and drawers, seeking some excuse to drop you. Upon learning of this outrageous practice, I called my friend the human rights lawyer and asked her to spare a few moments from torture in Peru and lethal beatings in New York City jail cells.

"Sorry, Barb," was all the help I got. "A Visa card is not a human right. Why don't you just pay cash?"

Well, I'll tell you why not. My biggest monthly credit card expenditure is for airplane tickets, and paying cash for airplane tickets figures prominently in the drug-courier profile the airlines maintain--right up there with dubious skin color. Buy your ticket with cash or make the mistake of being African-American and you're likely to be wrestled to the ground and strip-searched in the middle of some food court at O'Hare. What does it take to get Amnesty International's attention?

Besides, if I don't have a right to credit, what makes the credit card companies think they have a right to interest? Just look at the precedent that's being established here: The county I live in would clearly make more money off me if I committed more fine-able offenses, like tossing Bud cans from my car or installing obscene statuary in the front yard. Will the county now decide to expel me because it would be more profitable to replace me with a deadbeat or sex fiend?

Similarly, the airlines can make money off of no-show passengers with nonrefundable tickets, so long as their seats can be resold. Should they start turning away people who have a record of showing up on time, perky and eager to fly? Start down this path, and we will see restaurants ejecting customers who order the blue-plate special, department stores sending security guards to clobber anyone found milling around the sale racks.

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HOLIDAYMAKERS are warned today about hidden charges when they use credit cards abroad.

Experts accused card companies of misleading tourists by hiding travel charges in their small print and said it cost Britons, with an average of 3.5 credit cards each, millions of pounds.

A study published today found it can cost up to Pounds 20 to make cash withdrawals abroad.

"A lot of the major high street banks are the biggest culprits," said Jim Adams of website bestcardforyou.com, which commissioned the research. "These companies hide the charges deep in the terms and conditions. We found that getting Pounds 300 out on holiday can cost up to Pounds 20 with some cards and people had no idea until they got their credit card bills."

The study found that the cost of withdrawing money from cash machines abroad was the biggest charge made to consumers, followed by foreign transaction fees - the details of which are usually hidden in the terms and conditions of the card agreement.

"For all-round value, however, your top beach buddy this summer needs to be the Nationwide credit card, of fering free foreign exchange cash transactions on ATM withdrawals abroad," said Mr Adams.

"The Nationwide card stands out from the crowd by promising to save holidaymakers about two per cent every time they use it either at a hole in the wall or for goods and services."

He claimed that competing card companies were misleading consumers by hiding their charges.

"Of course [they] are not going to publicise their weak points but there needs to be a change to the terms and conditions they all offer to make it more obvious what the charges are."

Mr Adams warned: "Steer clear of cards from Natwest, the Royal Bank of Scotland, the Alliance and Leicester and Barclaycard this summer.

"People get lulled into a false sense of security because they use these cards every day. But take them abroad and they are not always such good value."

He added: "Card companies are desperate to attract holidaymakers now, with beefedup benefits like air miles, travel accident insurance and free foreign exchange transactions.

"But people need to be aware of the day-today charges they'll incur abroad before they leave."

BEFORE YOU GO

Check you have a contact phone number for your bank that can be used abroad.

If you want to change your pin number, do it before you leave.

Keep a record of your card's 16-digit number in case you need to contact your issuer to report it lost or stolen.

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START-UP: $50,000 in 2000 and 2001, to pay for the first production run of 25,000 units

SALES: $1.8 million in 2002

THE CHALLENGE: bringing a new product to market with a limited marketing budget

JAMES TISCIONE DIDN'T HAVE A LOT of money when he launched his business, but that didn't stop him from finding a way to bring his unusual product to market. Here are the steps he followed:

Steps to Success

1. Obtain a patent. Tiscione started by visiting www.uspto.gov, the official Web site of the U.S. Patent and Trademark Office, to look for similar patents. "I looked at over 1,000 patents and found only two that were even remotely similar to mine," he says. "Only after completing the search did I go to a patent attorney." Doing some research on his own did more than just save Tiscione money: "I was trying to hedge my bets before investing dollars in attorney fees, engineering design and prototypes. I also wanted to see what other ideas were out there. I was surprised no one else ever had the idea." Before long, Tiscione applied for a provisional patent, which doesn't give inventors patent protection, but does allow them to show their ideas to people. "It is an inexpensive way of protection that allows inventors one year for research and development," Tiscione says. In 2001, he applied for his utility patent.

2. Decide what help you need. Because Tiscione had never developed a product before, he felt he lacked the experience he needed to launch the idea. He asked his father, Anthony, an inventor, for help in finalizing his product design. Tiscione also approached Steve Pagac, a marketing whiz who owned a real estate and investment firm. Says Tiscione, "Steve invested sweat equity in our venture, and he is responsible for lining up all our customers."

3. Make a prototype. Tiscione knew people wouldn't understand the ACM without trying it, so he made a prototype. Tiscione ended up choosing a prototype supplier in California. Once he began using the prototype, people started asking where they could buy one. The positive feedback played a major role in moving the business ahead.

4. Locate a production source. Tiscione's first stop was the Hong Kong Chamber of Commerce, which has an office in San Francisco. "They sent me a list of companies I e-mailed," he says. He narrowed it down to one--but only signed the final agreement after visiting the company several times and viewing a few trial production pieces.

5. Explore all possibilities to find distribution outlets. Tiscione and Pagac weren't sure which retailers would want to buy their product, so they started by approaching catalogs and stores such as Brookstone, The Sharper Image and Things Remembered. "While the stores didn't bite, one promotional company did--AMG of Plymouth, Wisconsin," Tiscione says. 'AMG signed an exclusive agreement with us for the promotional products market in 2001."

Tiscione and Pagac also approached SkyMall, a specialty retailer that produces a cost-sharing catalog targeting in-flight airline passengers. "After two quarters ending in September," says Tiscione, "SkyMall reported that the ACM was the No. 1- selling product in [the catalog], and they agreed to carry the product through March."

Tiscione and Pagac also contacted MJ Media, a TV marketer in Phoenix that signed a nonexclusive agreement to sell the ACM through TV ads. "We revamped our original agreement with MJ Media to include a broader base of distribution," Tiscione says. "Originally, the contract was for TV advertising only. Since then, MJ Media has expanded into Internet sales and master distribution to small distributors." Now, Tiscione has a broad range of customers selling his products. As a bonus, Tailor Gifts, a major consumer catalog, picked up the ACM for the 2002 Christmas season.

6. Sign deals that maximize marketing exposure but limit financial risk. Advertising and marketing expenses can kill a product--but Tisclone avoided these expenses by signing contracts with limited risk. Both AMG and MJ Media signed agreements to purchase the product from ACM and promote it themselves. Also, Tiscione's deal with SkyMall was cooperative. Tiscione paid nothing to be listed in SkyMall, but all the sales went to SkyMall up to a certain sales level. Once that level was reached, sales were split equally between SkyMall and ACM. At press time, ACM switched to a standard contract, which requires them to pay for the ad but allows them to retain all sales.

Lessons Learned

1. Unique and novel products fare better. Inventors face challenges when launching their products because retailers, distributors and catalogs don't like one-product companies. But the reality is, people in any market are always looking for new and interesting products, and inventors will usually find sellers if their products are unique. But remember, developing a product that's simply an improvement on existing products usually isn't enough to overcome market resistance.

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Consumers should brace themselves for the return of annual credit card fees, according to the 'Precious Plastic 2006' report from accountants PricewaterhouseCoopers (PwC).

The reintroduction of the fee, largely abandoned in the 1990s as the credit card market became fiercely competitive, would form part of a fightback by banks and card lenders hit by a costly 'treble whammy'.

First, bad debts are rising as consumers overstretch themselves and default on what they owe; bankruptcies and individual voluntary arrangements are on the up.

Second, 'rate tart' customers, who hop from one cheap credit card to the next, continue to cost the industry money.

It is estimated, PwC reports, that consumers who switch their outstanding credit balances between 0 per cent card deals to avoid paying any interest have hit the sector's pockets to the tune of some pounds 600m this year. That has been despite the widespread introduction of a balance transfer fee of 2 per cent.

Third, a number of regulatory bodies have been looking at some of the practices of the lending industry " payment protection insurance (PPI) on loans, for example, and penalty fees for late payment " and this will probably force banks to levy lower charges in the future.

In this environment, annual fees are likely to emerge as a way for lenders to claw back some money, PwC forecasts.

'Credit card providers are coming under increasing pressure from competition and mounting regulatory scrutiny,' said Richard Thompson, a PwC partner and author of the report.

'[With the regulatory inquiries], some aspects appear to be based on the assumption of excess profitability, but there's a danger [they're] all targeting the same profit pool.'

As a result, he said, there would be a 'waterbed effect', where the costs would be reallocated with an annual fee.

Last month, the MBNA credit card company introduced annual card fees for a number of its customers.

PwC's 'Precious Plastic 2005' report accurately predicted the squeeze on 0 per cent balance transfer deals.

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Almost half of credit-card issuing banks surveyed by a San Francisco-based consumer group have universal default policies, which can lead to higher rates for cardholders who miss payments unrelated to the bank's credit card.

Citibank, Providian and Bank of America tied for the second highest default rate of 29.99 percent, according to the survey released today by Consumer Action.

Merrick Bank used the highest default rate -- 35 percent.

Jack Carsky, senior vice president for investor relations at San Francisco-based Providian Financial Corp., defended the practice.

"If people default on a payment or go delinquent on a credit card or on another bank's credit card, obviously the risk profile has increased. We look at it on an individual basis," he said.

"We do not use universal default," Bank of America spokeswoman Betty Riess said. Instead, the bank uses a "penalty rate, which is based on customers' behavior with their Bank of America credit card." The penalty rate is variable but can get as high as 29.99 percent, she said.

Janice Tarter, a spokeswoman for the credit card division of Citibank, said it recently changed its practice to provide consumers with a way to opt out from the higher rate.

"Before we increase the rate, we give the prior notice and explain why. We give the customer to right to opt out of the increase," she said.

Those who do so can continue to use their Citibank-issued credit card with the old interest rate until it expires, she said.

Both Citibank and Providian will consider lowering the higher default rate once a cardholder's credit situation improves.

The findings regarding universal default policies are included in Consumer Action's annual survey of the credit card industry released today.

"It's an easy way for them to generate more profit," spokesman Joe Ridout said."For a great deal of credit-card holders, this is something they could run into."

The survey, conducted from April 1 to June 21, examined credit card practices of 47 banks issuing 146 credit cards.

Ninety percent of banks with universal default policies raised a cardholder's interest when there was a decline in the credit score. Eighty-six percent raised rates after a late payment on a mortgage, car loan or other credit obligation.

One out of three banks with universal default policies set higher rates when a cardholder gets a new credit card, while 24 percent do so when an inquiry is made about a car loan or mortgage. (Percentages cited in the survey resulted from responses of customer service representatives).

"It's fundamentally unfair to cardholders. This is a policy that actually punishes the good customers. They don't even have to miss a payment," Ridout said.

Twelve of the 21 banks with universal default policies said the higher rates might be decreased after six months of improved credit but not necessarily back to the original rate, the survey found. Among the banks cited by Consumer Action that don't have universal default policies were American Express, Commerce Bank, Capital One, First Federal, State Farm and Wilmington Trust Company.

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Opening a merchant credit card account is easier than you think - once you understand the process.

Like any good business owner, when John Greenlee's customers talk, he listens. "We were doing festivals, and customers asked if we took credit cards," says Greenlee, who sells leather handbags and accessories at festivals, expos and home shows. "I started keeping count, and at six different events, [a total of] 25 people asked. That's 25 customers I lost because they didn't have cash, and I'm leery about out-of-state checks."

The solution to his problem seemed simple - establish a merchant credit card account. Companies offering merchant status seemed plentiful, and Greenlee found one whose program sounded good. But when he read the contract, he found some glaring omissions the sales representative had neglected to mention: "I had to sign a four-year contract," he says, "and if I didn't do at least $2,500 a month in [credit card] sales, I would have to pay an additional charge."

So Greenlee approached Pittsburgh-based Mellon Bank, where he had his personal and business accounts. The bank asked for proof of his fictitious business name filing, a copy of his product catalog and his return/refund policy; they also did a credit check. All this presented no problem for Greenlee. There was only one hurdle the Glenside, Pennsylvania, entrepreneur could not overcome - the request for two years of business tax returns.

"I had just started my business [in May 1996] and didn't have these," says Greenlee, who was eventually turned down. The story was the same at another bank he contacted.

Debra Rossi, senior vice president of electronic payment solutions for San Francisco-based Wells Fargo Bank, offers insight on the denial. The first thing a merchant needs to understand about accepting credit cards is that the bank views this as an extension of credit, explains Rossi.

"When we give you the ability to accept credit cards, we are giving you the use of funds before we get them. By the time the money actually arrives in the cardholder's account, it could be another 30 days," says Rossi.

There is also the real concern that if a company goes out of business before merchandise is shipped to customers, the bank will have to absorb any losses that might result.

* OVERCOMING HURDLES

When you go to a bank to open a merchant card account, there are some basic items you should be prepared to present, says Steven Citarella, vice president of credit policy for First Data Merchant Services Corp., an independent credit processing service in Melville, New York, which has formed alliances with 11 major banks.

"While requirements vary from bank to bank, in general a business does not have to be a minimum size [in terms of sales]. The longevity requirement varies from bank to bank: Some require nothing, others as much as three years," says Citarella.

What you will need in all cases is to provide bank and trade references, estimate what kind of credit card or debit card volume you expect to have, and what you think the average transaction size will be. Some banks also require financial statements.

Rossi says the bank's goal is to find out if your business is profitable and if it will be around for a long time to come. "We approve a lot of start-up businesses, and, in those cases, we rely on the personal financial picture of the business principals," says Rossi. "We look at tax returns and where they got the money to start. We'll also look to see if you're a customer of Wells Fargo and look at your relationship with Wells."

Wells Fargo evaluates a business's product or service to see if there might be the potential for a lot of returns or customer disputes. Other factors that will strengthen your package in a bank's eyes, continues Rossi, include demonstrating your longevity in the industry, presenting your marketing plan to show who your customers are and how you will reach and sell to them, and giving your Internet address, if you have one, so officials can check out your site.

The approval process can be a major hurdle for businesses that banks consider risky. According to Citarella and Rossi, these include companies where a high percentage of business is done by phone or mail, as well as industries where there is a delay between the time merchandise is paid for and received by the consumer.

While being considered a risky business is a key reason a bank may deny your merchant card account request, the most common reason for denial is poor credit.

Rossi says Wells Fargo has established a procedure to enable otherwise qualified high-risk entrepreneurs to obtain credit card acceptance privileges. "We approve you [provided you put up] security such as a certificate of deposit, which you keep at the bank for one year."

* WHERE TO GO

Once you understand how the merchant card approval process works, the next step is finding a place to apply. Look for a credit card processor in your own backyard, advises William Murray of Network Consulting Service. "Your banking relationship is what you've got going for you if you deal with a commercial bank," says Murray, whose Sterling, Virginia, company publishes a newsletter on the credit card industry.

# posted by Medical Information : 3:24 AM  0 Comments

Total Card Inc., is an independent servicer of Master-Card and Visa accounts. The company issues its own cards geared to people with less than perfect credit. We market our cards through a variety of advertising channels, steering potential customers to our company Web sites: www.sendvisa.com or www.newvisacard.com.

When customers arrive at the Web site, they complete a short application form and the approval process begins. A key part of the approval process is verifying that the information entered on the application is correct. We do real time verification of their social security numbers, validate whether the person has applied for a card, and we flag potential frauds.

Total Card must diligent and careful that the correct address has been received. To comply with Patriot Act regulations to fight terrorism and money laundering, Total Card, like all financial institutions, must obtain the street address for each applicant as well as other identifying information. People frequently enter incorrect address information on applications, either inadvertently or for other reasons. The result, however, is the same: we were getting crushed by returned mail.

To solve this problem, we turned to Melissa Data Corporation and reviewed a number of potential solutions, opting for their Data Quality Web Service, (DQWS). DQWS provides real-time address and telephone number validation over the Internet. Information is wrapped into a Web services (SOAP) document and sent to Melissa Data's servers for verification. If the information is validated, the application process continues if not, errors are flagged for investigation.

DQWS offered several advantages. First, DQWS is a platform-neutral solution. Total Card uses open source technology extensively, including the Apache Web server running on Linux, and the PostgreSQL and MySQL open source databases. We are very security oriented. Nothing beats Apache and Linux.

Second, with DQWS, Total Card does not have to maintain large address databases on its own servers. Melissa Data is licensed to maintain the U.S. Postal Service database of more than 142 million deliverable addresses. We don't have to worry about monthly or quarterly updates of the data. And we don't have to set aside gigabytes of space on our servers.

Third, the solution was easy to implement. All you need to do is add a little bit of code to generate a valid XML package. In fact, Melissa Data supplies examples of the needed code on its Web site. We simply modified that code to fit our specific set up. Melissa Data's technical staff was available to help me make the necessary changes, and I was able to implement the production solution in a single weekend.

The most important benefit, however, is that DQWS works and works well. Address verification is the last step in the application process and must be completed quickly and efficiently. You don't want people hung up at the end of the process. From a sales perspective, once the address is verified, you have closed the deal. From a customer service perspective, we could get hundreds of calls from people saying that they tried to apply for a card and never got a response.

Currently, Total Card verifies more than 1,000 addresses daily using DQWS. There has been no degradation in performance. DQWS is supported by multiple servers using load-balancing technology to guarantee a real-time response. DQWS has served its purpose. The impact has been substantial. During September 2004, the first month of using of the address cleansing solution, credit card packages returned due to bad addresses had decreased 70% compared to August figures.

# posted by Medical Information : 3:20 AM  0 Comments

PERUSING THE pages of amazon.co.uk for something to read (what else are you to do when eating lunch al desko?), I came across a book called Behind with the Mortgage and Living off Plastic (subtitled 'Charge up your life, not your credit card') by Lynette Allen.

Now, that sounds like the kind of information I need, so although it isn't published until 13 October, I used my powerful position as hack for hire to get an early copy " for your benefit, you understand, as much as mine.

It's a chunky little tome with plenty of pink on the cover (why do publishers think all women flock to fuchsia?) and the author pictured in a ballgown surrounded by glossy carrier-bags. Not a scenario I've ever found myself in, but I get the message, which is not so subliminally screaming: 'You are a spendaholic!' With a sky- high stack of credit-card statements and impending urgent winter- coats-for-children crisis, I think I should investigate.

Using Lynette's advice to close my eyes, picture what I'm worried about, then flick the pages randomly " the 'logic' being that it will fall open just where I need it most " I alight on a section titled Divine Intervention.

Paraphrasing wildly, what follows is the story of Julia, up to her ears in debt and in crisis. Out of the blue, a friend calls and asks her how much money she would need to clear her debts. A great deal, Julia admits. The friend, it turns out, has been left a fortune, and will be only too happy to oblige. Julia, you see, needed an angel to give her a sign and, wings flapping, the angel appeared down a BT line.

If you are gagging on your Earl Grey at this heartwarming anecdote, you're like me. It's the kind of empowerment crap that fills acres of space in bookshops (which is why I was online rather than in Borders, where new age is the new everything).

But everyone deserves a fair chance, so I dived back in. In fact, little in the book is about finances, but there is a handy quiz for women to work out what kind of spender they are. Here's a sample: 'You've had the day from hell. You're leaving the office, hungry and cold, when you realise there's no food in the house. You nip into the nearest supermarket with the intention of buying dinner, but mysteriously find yourself in the clothes section, choosing a new pair of shoes to make yourself feel better " after all, you deserve it! a) Yes, I would do that; b) I have been known to do that occasionally; c) No, I wouldn't do that.'

Putting aside questions of how many neighbourhood supermarkets sell shoes, and whether any footwear bought there would really make you feel better, check out the advice. If you had pleaded guilty to this and the other rather obvious 'splurge or not' scenarios, you have an unmet emotional need that you are filling with purchases. I don't know about you, but the pair of shoes I bought yesterday (OK, it's a fair cop) were not an attempt to fill an emotional void, but the solution to the 'what shall I wear to Clare's wedding?' question.

Sorry, Lynette. I'm sure you're a very successful life coach and all, but I'd rather read the wise words of the experts on these very pages if I really want to sort out my credit cards.

And my advice to you, dear reader, if you like the thoughtful approach to making life better, is to read Lesley Garner's superb Everything I've Ever Done That Worked (Hay House, pounds 10), which has chapters about all areas of life that might be worrying you, including 'Make Friends with Money'. Her soundbite? 'It's always better to make it than take it.'

She has another section called 'Running Away Money', which isn't about the wallet-draining that seems to happen when I'm not looking. It's about keeping a little aside for whatever life throws at you " and that's the best advice of all.

# posted by Medical Information : 2:23 AM  0 Comments

FINANCES | If you're still using a CALLING CARD, holiday calls may cost too much.

LONG-DISTANCE rates are so cheap that you probably don't even consider the cost when you pick up your home phone. But that's a mistake when you're traveling because a 20-minute call on the road can cost anywhere from $1 to more than $20, depending on how you make it.

We're not just talking about sky-high rates from hotel phones. Consider a typical holiday scenario: You don't want to run up your parents' (or your kids') phone bill while you're visiting, so you dig an AT&T calling card out of your wallet and dial 1-800-CALL-ATT. That'll cost you. Unless you have enrolled in a special calling-card plan, AT&T charges 89 cents a minute, plus a $1.25 surcharge per call. That comes to $19.05 for a 20-minute call. (The surcharge may be even higher: $2.25 if you use a credit card instead of a calling card, and a whopping $4.99 if you use a calling card issued by your local phone company. Tack on another 30 cents if you make the call from a pay phone.)

A similar call using an MCI WorldCom calling card costs $16.25. With Sprint, it would cost you $12.79 to $14.79, depending on your long-distance plan. Meanwhile, if your host has a 5-cent-a-minute calling plan, the call would cost $1 dialed direct.

So perhaps it's time to ditch the old etiquette and encourage family members to dial direct when they're visiting. (You don't charge them for water and electricity, do you?) But if your family isn't that laissez-faire, there are other ways to keep long-distance costs within reason.

Use your cell phone. A simple solution, assuming you have a reasonable calling plan.

Use a prepaid phone card. Rates vary, but you can find prepaid cards with rates as low as 10 cents a minute with no per-call surcharge. (One example is GE's Prepaid Virtual Phone Card, available at www.geprepaid.com.)

Sign up for a calling-card plan. If you want to stick with the Big Three long-distance companies, you can get more reasonable (but not the cheapest) calling-card rates by signing up for a special calling-card plan. Under AT&T's One Rate Calling Card plan, you pay 25 cents a minute with no per-call surcharge--plus a $1-a-month service fee. Sprint's FonCard savings-plan rates are identical. MCI's Calling Card Savings Plan costs $2 a month, but you pay just 15 cents a minute.

# posted by Medical Information : 2:19 AM  0 Comments

Electronic payments have grown exponentially over the past few years in the quick-service restaurant industry. Today more than eight out of 10 QSR operators now let guests pay by credit or debit card, according to the National Restaurant Association's 2004 Quickservice Operator Survey. The growth is being fueled by a variety of factors including new point-of-sale technology that reduces the time it takes to process electronic payments.

Electronic payments can boost sales at your restaurant. Consumer surveys show that more than 60 percent of guests say they would visit a QSR outlet that accepts payment cards more often than a QSR that accepts only cash. In its annual consumer survey, STAR, the leading debit network, found that consumers spend 32 percent more when paying with their debit card than when paying with cash.

While the benefits of accepting electronic payments are apparent, the differences between the many payment options are not as obvious.

Most operators know that the two basic electronic card payment types are credit and debit.

In addition, most QSR operators realize that a credit card allows a customer to purchase now and pay later, whereas a debit card payment deducts directly from the cardholder's bank account.

However, there are two types of debit cards, PIN-secured and signature-based.

Debit is the fastest-growing payment type in the country, and, according to a recent study by the American Bankers Association, consumers prefer it to credit.

Both signature and PIN-secured debit transactions deduct from the cardholder's checking account, but that is where the similarities end.

PIN-secured debit transactions require a personal identification number, or PIN. This requires the operator to have a PIN pad at the point-of-sale. A cardholder enters the PIN to authenticate card ownership and authorize the transaction.

A PIN-secured debit transaction removes funds from the cardholder's account almost immediately. PIN-secured debit transactions are processed over electronic fund transfer, or EFT, networks, the same as an ATM transaction.

By comparison, if the customer signs for a debit transaction without the requirement of entering a PIN, it is a signature debit. This transaction closely mirrors a credit transaction at the point-of-sale.

Recent changes by the card companies eliminate the need for signatures when processing signature debit or credit transactions and make receipts optional for low-ticket industries like QSR. The purchase amount deducts from the cardholder's account in about 24 hours.

Electronic payments have penetrated the QSR market. Providing consumers with their payment of choice, whether PIN-secured debit, signature debit or credit, is a good idea, as is finding partners that can help you understand and make the most out of the point-of-sale.

Gregory Holmes is senior vice president of enterprise customer development for Greenwood Village, Colo.-based First Data Corp., a leader in merchant transaction processing.

# posted by Medical Information : 2:19 AM  0 Comments