Saturday, September 09, 2006
Fed says consumers put credit cards back to work in September
The latest snapshot of people's appetite to borrow showed that consumer credit rose by a seasonally adjusted annual rate of 5.8 percent in September from the previous month, or by $9.8 billion.
The increase left Americans' consumer credit outstanding at $2.05 trillion.
The figures are consistent with a strong retail sales report for September released by the government last month. That report suggested shoppers ignored soaring energy prices and rediscovered their urge to splurge.
Consumers took a bit of a breather in August, when consumer credit grew at a 1.3 percent rate, or by $2.2 billion, according to revised figures. Still, that turned out to be more brisk than the cutback in borrowing the Fed initially estimated for August.
The Fed's report includes credit card debt and loans for such items as boats, cars and mobile homes. It does not include real- estate loans, such as home mortgages or popular home-equity loans.
In September, demand for revolving credit, such as credit cards, led the way. Such borrowing surged at a 10 percent annual rate, or by $6.2 billion, from the previous month. That represented the biggest gain since January. In August, revolving credit had dropped by $2.1 billion, or at a 3.3 percent annual rate.
Demand for nonrevolving credit, which includes loans for cars, vacations and education, rose at a 3.4 percent rate, or $3.7 billion in September. That compared with a 4 percent growth rate in August, an increase of $4.3 billion.
Consumers' spending accounts for roughly two-thirds of economic activity in the United States. Thus their behavior is closely watched by economists.
What's the splash, credit cards or terror threat?
The tabloid Times strikes me as more interested in consumer stories than politics
FORM drives content. Thus newspaper coverage of the progress of the Prevention of Terrorism bill through the Commons and the Lords has shown a significant divide between the remaining broadsheets on the one hand (The Guardian and The Daily Telegraph) and the new quality tabloids (The Times and the Indy) on the other.
When the Government majority on a key amendment fell to 14, The Independent instead put a Baghdad bombing on its front page and The Times led with the guilty plea by a young Muslim from Gloucester to charges of conspiracy to endanger an aircraft.
Yesterday, when the Lords had wrecked the Government's bill, the two papers again did something else. The Indy invited us to consider whether President Bush had been right about the Middle East after all (though it quickly concluded that he had not).
The Times thought its readers would be more interested in credit card fraud.
By conventional standards, both parliamentary occasions were exciting and important. On the first, the Government almost lost a major vote in spite of its crushing majority, MPs vociferously complained about the shambles Labour had made in tabling amendments and the Lib Dem leader, Charles Kennedy, along with several colleagues, failed to vote. Next morning, The Guardian and The Daily Telegraph led their front pages with full accounts.
On the second occasion, Labour rebels in the Lords were led by no less a figure then Lord Irvine, the former Lord Chancellor and family friend of the Blairs. Again The Guardian did its stuff and The Daily Telegraph made Lord Irvine's betrayal a strong second lead. In contrast, Times readers found the news on page six while the Independent carried a short story on page two.
The Indy and The Times are thus setting aside one of the fundamental rules of serious journalism as it has been conducted during the past 150 years.
This states that the weight the editor gives to a story by its position, length and headlines precisely indicates the newspaper's assessment of its importance to readers. By this criterion, I can't see, for instance, that an item on credit card fraud can ever overtake a Government plan to remove the right of habeas corpus.
The Independent and The Times, however, seem to be working on different assumptions. The Independent uses its most important page, the one which people see first, to make readers think for themselves, to provoke them. I declare an interest as a founder and continuing columnist, but I have often rejoiced at the creative use of its front page.
When the paper was launched in 1986, its advertising slogan was "I am, are you?".
Now it has reinvented itself under a new motto - "I think, do you?".
The Times has taken a different route as a tabloid. It doesn't so much treat its readers as well educated, with wide interests and concerns - which they are.
It treats them primarily as consumers of goods and services. Thus, in the past week it has also splashed on internet music pirates, on a computer tax that may replace the TV licence fee, on a possible rise in the cost of home loans and on plans to extend maternity rights. Forty years ago, The Times used the slogan: "Top People Take The Times."
Now it's a jungle out there and The Times fights your corner. At least I think that is how the paper is positioning itself.
A tricky question for the censor
I SHALL see a preview of Michael Winterbottom's 9 Songs later today.
It is the 18-rated, uncut film, which is said to take sexual explicitness in the British cinema further than ever before.
I shall be interested to see whether it is pornography or not.
After my years as chief film censor, I am clear what constitutes pornography.
Pornographic films have no artistic merit and their only purpose is sexual arousal.
Professional makers of films of the type sold in licensed sex shops know these rules well. They wouldn't dream, for instance, of importing any artistry into their productions.
One reviewer, however, said that 9 Songs is not porn and is not acting. Oh dear, that will give a film classifier like me real difficulty.
Not acting, not porn, and we are promised masses of real sex - what can it be? It sounds like an animated sex manual.
The BBC's error of judgment
THE weaknesses in the BBC's editing processes exposed by the Hutton inquiry still remain. As illustration, take the decision to pay a fee to the convicted burglar Brendon Fearon, one of the intruders into Tony Martin's Norfolk farmhouse, who was wounded by Mr Martin.
Fearon's testimony is required for a dramadocumentary about the incident which turned on householders' rights to selfdefence.
A BBC explanation cites "exceptional public interest ... where there is no other way of obtaining such a contribution ...", the need for a full account of the event and requirement for balance in any such treatment.
The Home Depot Launches Co-Branded Credit Cards
Do-It-Yourselfers and Businesses Earn Rewards for Purchases Made With The Home Depot Rewards and Business Rewards MasterCard Cards issued by Citi(R) Cards
ATLANTA, Aug. 25 /PRNewswire-FirstCall/ -- The Home Depot(R), the world's largest home improvement specialty retailer, announced today the launch of its first co-branded consumer and business rewards credit cards - The Home Depot Rewards MasterCard(R) and The Home Depot Business Rewards MasterCard(R) issued by Citi Cards - providing consumers and business owners with the power to earn rewards for their everyday purchases.
The Home Depot Rewards and Business Rewards MasterCard credit cards provide cardmembers with special incentives and rewards. Cardmembers earn 2,500 bonus points with their first purchase (enough for a $25 gift card), two points on every dollar spent at The Home Depot and EXPO Design Center, and one point for every dollar spent on purchases at the millions of locations worldwide where MasterCard is accepted. Customers can choose from hundreds of reward options, including everything from gift cards to travel and merchandise.
The cards include optional cash access through the worldwide Cirrus ATM network, and consumers enjoy the same MasterCard zero liability protection in the United States that applies to consumer and small business MasterCard cardholders if their card is subject to loss, theft or fraud.
"The Home Depot is pleased to offer our customers a chance to earn points for rewards while still receiving low rates and enjoying no annual fees," said Frank Blake, executive vice president, Business Development and Corporate Operations for The Home Depot. "The MasterCard Rewards and Business Rewards products are the perfect addition to our existing credit financing options."
"Citi Cards is proud of our ongoing relationships with MasterCard and The Home Depot in providing our customers with exceptional value, benefits and rewards for all of their purchases," said Loren Kranz, senior vice president, Citi Cards. "These relationships reinforce our goal to be the 'partner of choice' for innovative, leading business partners who seek new programs to enhance their relationships with current and prospective customers."
"MasterCard Worldwide is always seeking opportunities to provide additional customized benefits that cater to the needs and interests of our cardholders, customer financial institutions and retail partners," said Gareth Forsey, Group Executive, US Commerce Development & Co-brand, MasterCard Worldwide. "With The Home Depot Rewards MasterCard and Business Rewards MasterCard from Citi Cards, cardholders will receive all the purchasing convenience, flexibility and security of a MasterCard card, while earning points for great rewards."
Thursday, September 07, 2006
Chinese banks to offer U.S. credit cards
American Express Co. and China's largest state-run commercial bank, Industrial & Commercial Bank of China, launched standard and gold versions of the American Express card aimed at a burgeoning market of affluent Chinese consumers.
Bank of China, another major state-run bank, also said it is launching a co-branded Visa card to mark Beijing's hosting of the Olympic Games in 2008.
The bank also said it had been approved to open its own bank card center, allowing it to better coordinate the revolving credit mechanism that is at the heart of the credit-card system.
American Express chairman and chief executive Kenneth Chenault said the co-branded ICBC-American Express card would provide a vehicle to further extend the 3 percent penetration of credit cards into the China market.
That penetration rate makes a paltry contribution to the $3 trillion in credit card transactions that occur annually out of a total $20 trillion in worldwide consumer purchases.
American Express expects China will eventually have a penetration rate similar to Hong Kong's 20 percent of consumer transactions as the country continues to develop its economy and standard of living.
"Clearly, I think there is strong potential over the next several years for a dramatic expansion," Chenault said.
He said the new cards would initially target the affluent and the aspiring-to-be-affluent consumers in China.
The dual foreign currency and yuan credit cards to be marketed by ICBC allow users to tap the American Express travel services and rewards programs, he told reporters.
While China-based customers traveling overseas can use the many merchants signed up to the American Express network, within China they will be able to use the card at the 400,000 merchants using the China Union Pay network, which ICBC is a member.
Chenault said ICBC would bear all the risk as card issuer while American Express, the New York-based financial services giant, would provide training and technology to improve the bank's credit-risk assessment systems.
That is a big issue in a country where loan defaults are high and banks struggle with double-digit nonperforming loan ratios.
ICBC already has experience managing credit through its own Peony- branded card, which in the past three years has clocked up 31 percent annual growth rates in card spending.
Initially, the American Express cards will be available only to residents of Beijing, Shanghai, Guangzhou and Shenzhen. Even then, applicants will have to have a minimum income of 20,000 yuan a year - - or about $2,400 -- which is about 2.5 times the average annual wage in China.
"This is a market that is in its infancy," Chenault said. "But we think there are tremendous opportunities for growth going forward."
American Express Global Network Services president Peter Godfrey said in a country of 1.3 billion people, even if the high end of the market is just 1 percent of the population, it still delivers 13 million new credit card customers.
ICBC rival Bank of China is also making inroads into the China market for credit-cards through its partnership with Visa International.
Bank of China managing director Hua Qingshan said China's banking regulator has approved its plan to establish a professional bank card branch office.
"Right now, we are setting up the relevant internal policies, selecting sites, putting into place a computer system and training staff," Hua said at a news conference. "We expect the center to be officially launched in 2005."
Hua said the center would combine both the supervision and operation functions of its bank card business.
"Previously, our bank card center focused mainly on supervision while paying less attention to operation," he said. "The new bank card center will combine the two functions together to manage and operate the full product line of Bank of China's bank cards, including debit cards and credit cards, both domestically and overseas."
Salvation Army opens up a new front — credit cards
The effort, in Phoenix, is one of the Salvation Army's first using the card swipes to collect donations at its kettles, which have been a holiday institution since 1891.
"So many people shop with a debit card now. They just don't have cash, or extra change," said Sandi Gabel, a Salvation Army spokeswoman in Arizona. "It will be a nice way for people to make a donation if they don't have that cash on hand."
Local officials hope the cashless option will grab new donors and help make up a projected $200,000 decline in donations expected locally after Target stores nationally banned bell ringers. That represents about a fifth of the $1 million raised through kettle donations in Arizona last year.
The donations are used for services including medical assistance, emergency services and food and clothing for the needy.
"We knew we were going to have a loss this year in our kettle income, so we were looking for ideas, things to do to spark the interest of the public and our donors," Gabel said.
The card swipe machines have been tried at least once before by bell ringers in Pittsburgh. The Salvation Army there offered them in 1997 but found they weren't very popular.
"There's a whole psychology to it," said Ginny Knor, a spokeswoman for the Western Pennsylvania Division of the Salvation Army, which covers about half of the state. "People would come over and look at it, then put their change in the kettle."
"We found that people like to give small donations repeatedly," she said. The Pennsylvania experiment lasted only a year.
At the introduction of the machines in downtown Phoenix Wednesday, some donors had a similar response. In the first hour, dozens of people whizzed by volunteers holding card readers and instead emptied their pockets into a giant kettle.
The card swipe machines are wireless and transmit data. They print paper receipts for tax purposes.
Gabel said to ensure security, bell ringers will be dressed in Salvation Army uniforms when the card swipe machines are in use.
"They will be people you'd feel safe running your card," she said.
The effort in Phoenix is one of many nationwide that local chapters are developing to increase Salvation Army donations, said Theresa Whitfield, a spokeswoman for the charity's headquarters in Alexandria, Va.
She noted an effort in the South to use scores of animated, cardboard bell ringers to staff kettles. The cutouts, which bear the image of a uniformed Salvation Army officer, are being used at 200 Books-A-Million and Hibbett Sporting Goods stores in 14 states.
Equipped with motion sensors, each corrugated cutout has a battery- operated, motorized arm that waves a silent cardboard bell. Anyone who draws near hears a loud, jingling sound from a speaker and "Merry Christmas, God bless you."
From the Gallery - credit card scam targeting golfers
Editor's note: January's Special Report on credit-card scam artists who prey on golfers under the guise of "risk-free" club testing hit a nerve with readers unlike any Golf Digest story in recent memory. We were inundated with mail from readers detailing how they had been defrauded, and shortly after our story went to press two California men were indicted on 10 counts of mail fraud and 10 counts of wire fraud in a scheme that U.S. Attorney John S. Gordon says collected more than $8 million from victims.
According to the indictment in U.S. District Court in Santa Ana, Calif., Mitchell David Gold, 44, and Jonathan P. Cohen, 29, ran a business that purported to offer golfers a chance to test state-of-the-art golf clubs for no charge, but in fact charged exorbitant "security deposits" for cheap golf clubs, and falsely informed victims that the charges would be reversed if they chose to return the clubs.
According to the indictment, telemarketers at Platinum Pro Tour and State of the Art Golf would cold-call golfers throughout the United States and offer them the opportunity to test-play "state-of-the-art" golf clubs they claimed had a retail value of $2,500. The telemarketers employed by Gold and Cohen told victims they could try the clubs with no financial risk if they agreed to have $1,500 charged to their credit cards as a security deposit. The telemarketers, who have not been charged, went on to tell the victims that at the end of the test-play period golfers could return the clubs and obtain a refund of the deposit. However, according to the indictment, the golf clubs could not be customized as promised and were worth "far less" than the $1,500 deposit. Instead of simply returning the security deposit, Gold and Cohen "obstructed and complicated the return process" and refused to accept cancellations of the test-play period or the return of the clubs before a 60-day period, "thereby causing most victims to lose the opportunity to contest the charges on their credit cards." The indictment adds that funds used to pay refunds to some victims would come from the deposits of other victims.
If convicted on all counts of the indictment, the defendants face a maximum of 200 years imprisonment. Outraged readers who say they have been bilked by other companies detailed variations on the club-testing scheme. One reader's credit-card company flagged a four-figure expense that scam artists attempted to hide in a towing charge (the reader's car had never been towed). Another reader was under the impression that he was on the hook for a security deposit of $14.95, only to be shocked to see a credit-card charge of $1,495. Many readers reported being bullied by telemarketers when they attempted to return clubs. Still other readers were promised that if they provided referrals of other golfers' names they could "earn" free clubs.
Here's a sampling of your letters (to read January's full Special Report, visit www.golfdigest.com/equipment):
When I tried to return clubs, the telemarketers kept trying to sweeten the pot with more clubs and credits. I wondered: Why would a company try to get me to keep a set of woods by offering clubs and cash that supposedly were worth twice as much? I've been called on at least five occasions since then. On one of those occasions, the representative scolded me for allowing him to waste his time making his whole pitch when I had no intention of making an order. In fact, I was in the middle of reading your article when I was called again.
To further confirm that the "pump and dump" practice exists, I got another call the next night! Thanks for a great article that exposes these scam artists.
Rick Wessel, Hampshire, Ill.
While trying to return clubs, I was put on hold, and the people on the other end accidentally hit the speaker button. Not realizing I could hear them, they were laughing and joking about this whole situation, comparing it to a wrestling match!
Randy Badgero, Indianapolis
I had a buyer-protection plan with my credit card, and the charges were reversed, but the victim in the article is correct when he says that the embarrassment of falling victim to a scam prevents people from pursuing the issue.
Tuesday, September 05, 2006
Have costly credit cards exceeded their limits?
CREDIT-CARD COMPANIES, which are already reeling from reports of new-year teething problems with the new Chip and Pin system, this week came under fire for excessive charges from two consumer champions, moneysupermarket.com and Which?.
Which?, formerly the Consumers' Association, claimed: "Unless you pay off your bill in full every month, you could be paying through the nose for your piece of plastic - and probably not in ways you'd expect."
The report says that credit-card companies boost their profits by selling expensive and sometimes inappropriate insurance, which is supposed to cover you if you can't make your payments. They also charge customers a total of pounds 400m a year for paying bills late or overspending.
Moneysupermarket claimed that free 0 per cent balance transfers on credit cards could soon become a thing of the past. Royal Bank of Scotland's Mint card has just introduced a fee for balance transfers, following similar moves by Barclaycard and MBNA.
Stuart Glendinning, moneysupermarket's director of credit cards, said: "It could be that the days of long 0 per cent balance-transfer deals without a fee could be numbered. Providers will be looking at ways to avoid losses accruing from customers who move their debt from one card to another without using the card for purchases."
Charging a fee on balance transfers is being seen by the banks as one way of recouping losses, because so many cardholders are simply not spending on new cards that make this offer. Moneysupermarket says that Halifax One Visa is the best card for fee-free 0 per cent balance transfers.
Sandra Quinn, spokeswoman for Apacs, the banks' trade body, said: "That's fair comment. Balance transfers are one of those things banks use every so often, depending on whatever the current trend is. There will be another offer coming along, because the banks want to recruit and keep customers."
However, Ms Quinn was less happy with the criticism from Which? "If they had issued that report 18 months ago, I would have understood it," she said. "They haven't taken into account any developments since then - summary boxes, guidelines on issuing credit- card cheques and raising credit limits. If you don't want anything to do with credit cards, opt out."
All credit cards must be signed
Dear Heloise: In regard to the recent credit-card hints, you forgot this one:
Sign the card across the back with your signature. You can place a small piece of tape across the strip to prevent it from wearing off. If it has already worn off, use a thin-tipped permanent marker to sign it. It does not matter if it is debit or credit -- all cards should be signed.
Since many stores only accept credit cards, debit cards are swiped just as a credit card would be, making the signature the only form of identification.
If the card strip is left unsigned, anyone can pick it up and sign it, and then the person's signature will always match the one on the card, thus overriding any security features. --Sarah Maximiek, via e- mail
Sarah, these are valid points that everyone should read and follow. Most debit-card transactions are deducted straight from a savings or checking account, so you should treat debit cards just like cash --Heloise
Dear Heloise: For a simple car trash bag, I take a regular paper grocery bag and turn the top outward, then roll it down about two or three times. This keeps the top open and sturdy. When full, I just throw it out and make a new one. Try it! --Dick Enright, via e-mail
Dear Heloise:As a military brat, you can appreciate this story. When my husband's Army assignment took us to Belgium, we sent two of our car's four snow tires with our household goods, the maximum number of tires the moving company would take. The private-car shipping company said we could put the other two in the trunk of the car. A paid driver took our car to the port, but the shipper would not allow the tires to go. The driver was not happy when he had to take the tires along on his bus trip back. How to get our tires to us? The company mailed them to our military post office, wrapped in paper. I took the paper off and rolled the tires out to the car. -- Linda C. Shirk, Bellevue, Neb.
Dear Heloise: I like a few blueberries or raspberries and sliced banana added to my cereal. By putting some plastic containers of them in the freezer, I can take out a few anytime, rinse them and enjoy. - -Barbara Fenley of Buena Park, Calif.
Good idea, Barbara. Another easy way to freeze berries is to freeze them whole in a single layer on a cookie sheet. Once frozen, put them in a container or plastic freezer bag. This way, it is easy to grab as many or as few as you want. --Heloise
Dear Heloise:When taking a shower, especially on a cold morning, light a candle in the bathroom. The mirrors will remain clear and not get foggy when your shower is complete. No bothering to wipe the mirrors. I've tried this several times, and it worked each time. -- Dawn in Maryland
How Legislation Affects Value: The Failure of Credit Card Cap Legislation
We examine the credit card cap bill of November 1991. This legislation took only six business days to be formulated, pass in the Senate, and then die unenacted. We find that banks with high credit card exposure experienced significant negative abnormal returns during the period in which the bill looked certain to be enacted. When it became evident that the bill would fail, the banks did not recoup the full value lost.
* Recent finance literature has examined the impact of several regulatory events. One difficulty with these studies is that information tends to develop over a sometimes lengthy period of time. For example, Congress debated and revised the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 over an eight-month period (see Sundaram, Rangan, and Davidson, 1992) and the FDIC Improvement Act (FDICIA) of 1991 over a 13-month period (see Chen, Cornett, Mehran, and Tehranian, 1998). Risk-based deposit insurance called for in FDICIA took Congress another nine months to debate (see Cornett, Mehran, and Tehranian, 1998). As of July 1999, Congress continues (after more than three years of debate) to consider the Leach Bill, legislation that would repeal sections of the Glass-Steagall Act. Such lengthy periods of review, revision, and debate make it difficult to pinpoint a clear event date for studies involving regulatory events.
In contrast to most legislative action, credit card interest-rate-cap legislation, which initially called for a cap of credit card interest rates of 14%, took only six business days in November 1991 to be suggested, see overwhelming Senate passage, and die unpassed. Therefore, this legislation presents an opportunity to examine a clearly identifiable event date of an issue that was a clear "surprise" to the financial markets.
In this paper, we use traditional event-study methods to examine the stock returns for bank holding companies over the six- (business) day period associated with credit card cap legislation, and in particular, how banks' reactions depended on their credit card exposures.
The results of the study indicate that during the period in which credit card cap legislation appeared to be imminent (November 12 through November 15, 1991) bank holding companies experienced significant negative abnormal returns that were related to the size of their credit card receivables and their credit card risk exposure. When it became evident that the credit card legislation would fail, the banks did not recoup the full value lost. It appears that the surprise involved in this legislation left a lasting impact on bank values. Despite the demise of this particular piece of credit card cap legislation, the market appears to have impounded this surprise permanently in the form of loss in value, possibly in anticipation of further attempts at such regulation (that no longer would be quite the unexpected event).
The paper is organized as follows. Section I discusses the events that took place while Congress debated the credit card interest-rate-cap legislation. Section II describes the data and methodology used in the empirical tests. Section III presents the results, and Section IV concludes the paper.
I. Chronology of Events and Their Expected Impact on Bank Stock Prices
In this section, we outline the series of events over the six- (business) day period from Tuesday, November 12 through Tuesday, November 19, 1991. Because stock price values are affected by other macroeconomic events, we also summarize other macroeconomic-oriented news events that occurred on each of the six days. Both categories of events are listed in Table 1.
On Tuesday, November 12, 1991, during a fundraising luncheon in New York, President George Bush suggested that the economy would recover faster from recession if banks reduced their credit card rates commensurate with other rate declines throughout the economy. [1]
Wednesday's Wall Street Journal quoted several consumer advocate and credit card watchdog groups as doubting that the Bush comments would spur banks to make any changes.
On the same day, the Wall Street Journal (WSJ) reported a one-point gain in 30-year Treasury bonds and attributed it to strong overseas demand. The Standard and Poor's (S&P) 500 rose 0.92%, and the S&P Financials increased 0.68%. The 90-day T-bill rate remained constant at 4.62%.
The next day, Senator Alfonse D'Amato introduced a bill in the Senate to cap credit card interest rates at 4% over the rate the Internal Revenue Service charges on unpaid taxes. Based on rates at that time, the cap would have been set at 14%, compared with the average of 18.94% charged by credit card issuers. The bill, which came as a complete surprise, breezed through the Senate by a 74-19 vote late Wednesday afternoon (although the story did not cross the Dow Jones News Wire until 7:32 a.m. Thursday). The administration backed away from the bill. On Wednesday night, President Bush said that cutting credit card rates "... isn't a government decision."
Monday, September 04, 2006
Unsolicited loans and credit cards to be banned, ministers say
Unsolicited offers of credit cards and loans are to be banned this week amid further evidence of irresponsible lending.
Around pounds 140m-worth of pre-approved credit application forms were mailed to customers before Christmas by finance firms.
Among aggressive marketing techniques used are facsimile cheques for thousands of pounds written out to potential customers.
The pre-approved forms mean that often all that borrowers need to do is sign on the dotted line. The flood of easy credit is luring many people into debt that they cannot afford, MPs warn.
Now ministers are indicating that they will ban finance companies from sending the pre-approved forms when new laws tightening the rules on consumer credit are debated in the Commons this week.
Chris Bryant, the Labour MP for Rhondda who has been pushing for the change, said: "These sort of promotions are simply irresponsible. They can lure people into debts they first don't understand and then can't pay."
The finance industry has been fighting a desperate rearguard battle to save pre-approved mail-shots. Paul Rodford, policy head of card services at the Association of Payment Clearing Services, said companies already encouraged "responsible borrowing".
"If used wisely credit cards are a way of spreading the load of increased expenditure during Christmas over the first few months of the following year," he said.
The industry is increasingly on the defensive, however, as stories of personal tragedy linked to credit card debt underline the dangers.
It was reported yesterday, for example, that Richard Cullen, a 65- year- old grandfather, killed himself after running up debts of more than pounds 130,000 on 23 cards over six years.
The mechanic had started borrowing to pay household bills when he gave up work to care for his wife when she fell ill with breast cancer.
In a quandary about credit cards, insurance, mutual funds?
Q: I've run up a big balance on my credit card. Does it make sense to shift it to a low-rate card?
A:Perhaps. There is a lot of competition in this marketplace, and you should be able to got a good rate. But there are some pitfalls, too. Before you transfer your balance, promise yourself that you'll stop spending and work on paying down the balance.
If you see the low rate as a now opportunity to spend, you'll be defeating your purpose.
You should also know about the hidden fees that might be lurking behind a low interest rate. For example, some card issuers charge a fee of 2 to 4 percent on the balance you transfer. Don't accept one that does.
Check, in addition, to find out what fee you'll be charged for new purchases. The card issuer may be using the low rate as a lure, with plans to charge you 17 to 19 percent on new purchases. And be careful about penalty fees, which can be applied to a whole range of things, everything from late payments and bounced checks to charges that go over the limit.
If your payment is just one day late, some card issuers will hike the interest rate-to 20 percent or more. They use the low fee to get your business and then stick you with a high fee when you're not paying attention.
Other hidden fees: Extra charges-maybe 4 percent-and higher rates for cash advances than for other charges and a special fee for those who don't carry a balance.
Q: I rent an apartment. Do I need homeowner's insurance?
A: Yes. although it's actually called renter's insurance for you. You need it for the following two reasons.
First, for liability purposes. If people are injured in your apartment, they can sue you. Your renter's insurance will protect you. Second, you need insurance on your personal belongings.
I remember when I was working at my first job at the Kansas City Star. My friend, a travel writer, was off on a trip when her apartment was totally stripped-every knife and fork and towel and shoe and pair of sox and underwear, as well as her television, audio equipment, books, and jewelry.
My friend didn't have insurance, and she had to start from scratch.
Renter's insurance is also good because it covers most of the belongings you carry with you when you're traveling.
Q: How often should I reView my mutual fund portfolio?
A: Once a year. January is a good time. As you know, you shouldn't be looking your funds up in the newspaper every day, panicking and second guessing yourself. But January is a good time to determine how your funds have performed and to rebalance your portfolio.
Collect all your statements, including those from the end of 1998. Many statements show you what percentage of your account is in each fund and what portion is in stocks, bonds, and cash. If your statement does not, do it yourself. Then look at your actual asset allocation to see how it has diverged from your target strategy.
Only certain credit cards protect shoppers from defective products
You bring a touch of safety to your financial life when you shop with a credit card. If the goods are defective, and the merchant balks at taking them back, you can ask the credit-card issuer to rescind the charge.
But the issuers can't rescue you every time. Only certain types of transactions are covered.
Several readers recently complained to me that their banks had refused to reverse an unjust charge. As it turned out, the banks were following the rules. For your own protection, you need to know when you're covered and when you aren't.
The first thing you need to think about is the card you use. You're protected, by law, if your charge card was issued by the same store where you bought the disputed goods.
The rules change, however, if you shopped in person, using a bank card like Visa or MasterCard, or a travel-and-entertainment card like American Express.
With them, you're protected only if the item cost more than $50 and was bought in your home state or, if not, then within 100 miles of your mailing address. (Some card issuers stretch this role.)
You might also be protected if you used a credit card to buy by phone, mail or Internet, from a company that advertises in your state or sent material (such as a catalog) to you there. Whether these transactions occur in-state depend on state law, but they normally do.
You have to make a good-faith effort to resolve your problem with the merchant, unless the merchant is out of business. That means reporting the problem, immediately and in writing, and asking for a refund or other fix. Keep copies of your correspondence, as well as written notes of your telephone conversations.
The dispute must be over a consumer purchase. The law doesn't cover items used in business, including home businesses. If you're suckered into using your card to buy an overhyped "business opportunity," you'll be stuck with the bill unless a consumer-protection agency steps in.
You have to have paid with a credit card, not with a cash advance on your credit line. The "ready checks" or "cash checks," mailed to consumers by many banks, are treated as a cash advance. If you use them to buy goods that turn out to be less than advertised, the bank won't get you your money back.
The law also helps you only if you haven't paid for the item in full. The card issuer can erase an outstanding bill but won't recover money you've already paid.
In most cases, the merchant will settle the problem. If not, and if your transaction qualifies under all these rules, write to the card issuer.
Explain your case factually. Don't moan and groan all over the page. Attach evidence that you tried and failed to resolve the dispute. Ask the issuer to rescind - or "charge back" - the transaction under Regulation Z, as applied to the Truth in Lending Act.
The law requires the card issuer to investigate your complaint. During that time, the issuer cannot close your account or report you as delinquent - although it can note on your credit report that the payment is in dispute.
You're allowed to withhold payment only on that one transaction. Keep making payments on anything else charged to the card.
There's no time limit on asking for a charge back. But as a practical matter, you'll want to take care of it right - away before your nonpayment gets reported to a credit bureau.
If the card issuer believes you're right, it will charge the disputed payment back to the merchant's bank. The unpaid amount, plus any finance charges, will be taken off your bill.
On the other hand, the issuer may blame you for the problem - especially if the issuer is the very store you're arguing with. A bank might judge the dispute with a more disinterested eye.
If you're found to owe the money, and refuse to pay, the card issuer may report you as delinquent and blacken your credit standing. You can add your side of the story to your credit report, but that won't cut a lot of ice with other lenders you apply to.
You're generally not sued, unless the debt is large. More likely, your unpaid bill will be sold to a collection agency that will dun you for awhile.
Fortunately, few disputed cases ever get this far. Banks will usually rescind an unjust charge, as long as you're covered by the law.
New wrinkles in insurance
The next time you buy term insurance, you might not sit down with a life insurance agent. That's a costly way of selling, especially for term (term policies are cheap to buy, pay off when you die and have no internal investment values). The commissions are so puny they're rarely worth an agent's power of persuasion.
A new distribution system is developing, with different players and new ways of marketing. Banks and stock brokerage houses are selling by telephone, mail or Internet. Licensed agents still take your order, but they're voices at the end of a phone.
Term coverage, by contrast, will be mass-marketed to middle-income families. You'll have to take the initiative to buy coverage yourself. The new competition, however, should help you get a better deal. Price-quote services are proliferating. They search a term-policy database to find the best price for someone of your age and health.
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