Credit Cards Online Information

A credit card can be a great way for a college student to learn about finances and build a good credit record early. But in the wrong hands, a credit card -- or worse, several -- can result in premature financial ruin. Local colleges and universities report they limit or forbid the presence of card issuers on campus, but issuers get around that by showering students with mail offers. Indeed, research shows this is the primary way young people get cards. In response to the growing temptation to "charge it," many schools are following a national trend of expanding their financial education beyond a brief speech at freshman orientation. This fall at Dillard University, for example, the financial aid department plans to offer a life skills class that will include lessons on smart spending such as how to select and use a card. The class is open to all students and consists of five one-hour classes that will also cover topics like paying back student loans. For the past couple of years at the University of New Orleans, a one-semester course called University Success has been part of its student retention program. UNO urges new students to take the one-credit course, says Charlotte Maheu, associate director of the program. Each class is small enough to encourage interaction. As often as possible, the class brings in guest speakers to offer testimony about the danger of credit cards. One female student recently spoke to the class about having to postpone graduation because of credit card debt. "She thought her parents were going to take care of (the debt) but they didn't." The 20-year-old student now works two part-time jobs and pared down school hours to part time. Finance professors tell students not to rely on cards for daily needs. "We tell them to avoid buying consumables on a card and to pay for those with cash," says Edgar Chase III, dean of Dillard's business division, who teaches several classes. Chase encourages financially fit students to get a credit card only after doing their homework. In a one-semester class called personal wealth and risk management, students do Internet searches to compare cards' interest rates as well as which banks offer the best (package) deals to students. Students study a textbook that covers wise choices in credit cards and read credit card-related articles from newspapers such as the Wall Street Journal. "My class emphasizes building wealth, and a great way to start doing that is to establish credit," says Chase. Banks agree. It's no secret card issuers view college students as fair game to be showered with offers from issuing banks as soon as they enroll. The onslaught typically continues throughout their academic career, picking up steam near graduation. Roy Baas, a personal finance professor at UNO, says university students get anywhere from three to 10 direct mail solicitations during the time they are in school. Some get many more. If a reckless student takes all the offers, eventually they can only make the minimum payment -- if that, Baas says. He holds a particularly dim view of credit card companies, calling them "loan sharks." Many have raised their interest rates, he says, to double-digit levels approaching 30% that make debt particularly hard to handle, especially when coupled with other debt like student loans. Some 44% of students have student loans that will take, on average, seven years to pay off, according to Student Monitor Inc., a market research firm in Ridgewood, N.J. Baas recently discussed with his students the drawbacks of making only minimum payments on cards: At a tame interest rate of 7.9%, a $1,500 debt would take eight years to pay off. At a 29.9% interest rate, it would take 30 years, he says, "longer than most mortgages -- and that's ridiculous." According to data from Student Monitor, 64% of students pay their balance in full each month. This is up from 58% the previous year. The average balance for students who do not pay in full each month is $531, says the data. Chase tells students to limit themselves to one card, and sign up for one with a low interest rate of about 9% to 13%. Cheryl Bragg, a local independent certified financial planner, says she would like to see more parental involvement and more card companies requiring parents to co-sign for the card "so the parent is paying attention to the debt as well." Still, she realizes that many college students get cards on their own. Indeed, Student Monitor research shows that only 10% of student cards have co-signers. Card companies, she says, often assume students will graduate, land well-paying jobs and be able to pay off their debts. The current job climate makes this far from certain. Bragg says before getting a card, students should make sure they'll be able to pay the bills and keep in mind caveats like late fees and related penalties, which can damage credit ratings. If the prospect of paying a credit card bill is too daunting, there's a simple answer, she says: "Don't get one." This might be easier said than done for many college students. While the banking industry acknowledges that people of all ages fall into credit card debt, it maintains that banks do not intentionally foist credit cards on people who are ill-prepared to handle them. "I would be a fool to sit here and say that people don't get into credit trouble, because they do, all the time," says Catherine Pulley, public relations manager with the American Bankers Association in Washington, D.C. "People assume that just because you're in college you're stupid, but in many cases the college students are more responsible than older cardholders." She adds that 90% of Americans pay their credit card bills on time. A person drowning in credit card debt is not likely to be able to partake of banks' most lucrative products, says Pulley, such as mortgages, CDs and mutual funds, "so it does a bank no good to offer a card to someone who can't afford it." Pulley says a "financial facts of life" talk between parent and child is crucial when a child is between eight and 10 years old. She also says that banks and banking organizations have been very active in providing education designed for young borrowers. Unfortunately, students aren't paying attention: 53% of students feel they did not get adequate credit education from the issuer of their first credit card, according to Student Monitor.

Over 45 million smart cards will be in use in public transport in Europe by 2003, according to a new survey by Datamonitor.

The London-based market research group says the cards could revolutionise urban travel by giving low-cost, convenient ticketing.

ERG, an Australian company with bases, partners and contracts in Europe, is one of the leaders in the fast moving market. With its partner Motorola, ERG this month won a contract for smart card ticketing in Rome.

ERG has extensive experience in automated fare collection. It supplies single mode, magnetic stripe based systems and integrated smart card systems. ERG systems handle more than 22 million transactions each day in more than 200 cities.

Having started at payphones, the cards are replacing conventional magnetic-stripe credit cards or paper tickets and will become common in everyday travel.

Card manufacturers, public transport operators and airlines are preparing for the changes. With air and road traffic volumes increasing and public transport becoming more important, there is a growing need to design and apply technologies for more efficient ticketing.

Richard Fairbank knows where you live. He knows the stores you shop at, the restaurants you frequent, and the last credit card purchase you made. Understanding how people spend money - and how much they spend - is part of Fairbank's job as chairman and CEO of Capital One Financial Corp., one of the country's top-10 issuers of Visa and MasterCard credit cards. Ever opened the mail to find a card issuer promising a pre-approved credit line, a teasingly low annual interest rate, and the convenient transfer of balances from higher-cost cards? Under Fairbank, Capital One pioneered this now entrenched marketing trend.

Fairbank, a tall, athletic-looking 46-year-old, is the son of a physics professor and keenly aware that properties are in constant motion. Overlay that with his prior incarnation as a marketing consultant and the roots of Capital One's intense development methodology become clearer. Capital One is Fairbank's laboratory, where new ideas are constantly in various stages of conceptualization, testing, and implementation.

Being an innovator has its privileges. When introduced in the early 1990s, balance transfer foisted competition on a high-growth, high-margin business and snared Capital One many credit-worthy customers. Since its former parent, Virginia's Signet Banking Corp., took it public in 1994, the Falls Church, VA-based company has had 20 percent-plus annual gains in earnings-per-share and return on equity.

In a vivid illustration of how competitive the UK credit card market has become, next week NatWest, part of Royal Bank of Scotland, is helicoptering journalists from London to a plush Oxfordshire restaurant for an exclusive briefing on their latest attempt to woo high earners.

But so many card issuers are jostling for their slice of the business that the Treasury select committee was told this week that it was no longer possible without advanced mathematics to calculate interest charges on the cards.

Ian Harley, the beleaguered chief executive of Abbey National, said credit card interest rates could be compared only with the use of calculus. To which an MP on the committee, Andrew Tyrie, said: "You are saying you need assiduous research to find out how much is actually being charged? So how on earth is a customer supposed to do it?"

Since credit cards were launched in Britain 36 years ago, the banks have been unable to resist tinkering with them, and that has intensified with greater competition. Barclaycard was the first, but we now carry 90 million pieces of plastic from 33 issuers of 1,300 card brands. By 1999, a total of pounds 70bn a year was being spent through cards, and that figure has risen since. Of that, the unpaid debt was pounds 29bn.

The industry mouthpiece, the Credit Card Research Group (CCRG), says: "This plethora of credit card choices is a result of a combination of factors including the entry of new players to the market, consumers' growing enthusiasm for plastic payments and the development of co-branded and affinity schemes which have broadened the scope and appeal of cards."

To be heard in such a crowded market issuers have become increasingly ingenious, offering cards with or without annual charges, carrying high or low interest rates, high or low credit limits and the now-ubiquitous special deals for transferring your debts to a new card.

CCRG says: "The entry of American issuers such as HFC, MBNA, People's Bank and Capital One to the UK has led to the recent increase in market competition." The 1974 Consumer Credit Act was supposed to cut through the jungle with a single interest rate calculated to an ordained formula and called the annual percentage rate (APR). But this has been overtaken by the complexities of today's credit cards.

The Consumers' Association (CA) has found the same debt on two credit cards with the same APR can lead to monthly repayments which vary by as much as 40 per cent. Mick McAteer, CA's senior policy adviser, says: "It's a difficult problem which makes a mockery of informed decision-making by consumers."

CCRG explains APR this way: "The annual rate is multiplied by the credit limit to give the total amount that would be owed on the card after 12 months. For example, on a card with a credit limit of pounds 1,000 and an annual rate of 19.5 per cent, the calculation is 1.195 x pounds 1,000 = pounds 1,195.

"For the purposes of the calculation, the fee is deducted from the credit limit to reflect its payment as an `upfront' charge. For example, if a card has a credit limit of pounds 1,000 and an annual fee of pounds 10, the relevant figure for the APR calculation is pounds 990. The figure for the amount owed after 12 months (in the case of the example pounds 1,195) is divided by the credit limit minus the annual fee (pounds 990), to give the APR including the annual fee. In the example being used this would produce an APR of 20.7 per cent, the inclusion of the annual fee having boosted the APR by 1.2 per cent."

Not surprisingly, faced with that, no one likes the present position. Richard Holmes, spokesman for the US card issuer Capital One Services, says: "Clarity of information is absolutely key. And, although people may find it difficult to calculate their exact charges, people do understand the difference between 0 per cent and 12 per cent. It's a complex issue, but we welcome any move that clarifies things for customers." For MBNA, another growing card issuer, John Greaves says: "We are addressing this whole issue. We too want clarity."

But Abbey National's Mr Harley implicitly blamed card issuers for the problem when he added: "If you want to have absolute transparency you have to have standardisation of products."

Matthew Whittaker, CCRG's research analyst, suggests: "Because of the complexities of converting an annual fee into a percentage charge, the monthly rate plus any annual fee is often a more true guide to comparing the costs of borrowing.

An employee of a New Berlin company charged more than $16,000 in personal expenses on company credit cards, a charge alleges.

Jeffery Schick, 26, of West Allis was released on a signature bond Wednesday after being charged with felony fraudulent use of a credit card.

According to the criminal complaint filed in Waukesha County Circuit Court, Schick was hired by ABB Automation in New Berlin in April 2000 as a repairman and was given two credit cards to charge fuel for company vehicles and purchase tools.

Between July 2000 and August 2001 he used the cards to buy personal items at businesses in eight counties, the complaint alleges. Even after he was fired, he used one credit card number to rent a party tent, it says.

Schick apologized to police investigators and said he planned to pay back ABB as soon as possible, the complaint says.

It was 35 years ago yesterday that Barclaycard introduced the first credit card in the UK. Now there are 55 million cards in issue and we have a choice of over 1,500 from more than 60 providers. The newest, NatWest Black, follows in the footsteps of American Express's Centurion, an elite credit card for high earners.

Gold cards started as credit cards for the well-off, but as more and more providers offered them, the entry criteria came down and they lost their cachet. So the platinum card was introduced and the same thing happened. Now most people eligible for credit can get a gold or platinum card. Will history repeat itself with the new generation of black cards?

There is no doubt that they add an edge of exclusivity. Centurion customers must be existing Amex members, be invited to have a Centurion card and pay pounds 650 a year for the privilege. Also, while there is no minimum salary specified, most users are thought to earn at least pounds 150,000 a year. NatWest has lower entry requirements: a minimum income of pounds 70,000 and an annual fee of pounds 250.

The providers claim the service and benefits make the fees worthwhile. A spokeswoman for NatWest says its research showed that customers would be attracted to a premier card with travel-related benefits. This has been reflected in the design of the card.

Washington -- Some 200 Army personnel used government charge cards to get $38,000 in cash that they spent on "lap dancing and other forms of entertainment" at strip clubs near military bases, Sen. Charles Grassley said Wednesday.

Citing a congressional investigation, Grassley (R-Iowa) said the soldiers used their military identification and government travel card to obtain cash from adult entertainment bars and spent the money there.

The General Accounting Office, which conducted the investigation, said the clubs charged a 10% fee to supply the soldiers with cash, billing their travel cards for the full amount as a restaurant charge.

An Army spokesman said he did not know what, if any, disciplinary action had been taken against the 200 individuals.

But the GAO said it found "little evidence of documented disciplinary action against Army personnel who misused the card, or that Army travel program managers or supervisors were even aware that Army personnel were using their travel cards for personal use."

The GAO report is the latest volley in a two-year congressional probe of the Pentagon's credit card program, which is huge. Last year, 1.4 million defense employees with government travel cards charged $2.1 billion; and 230,000 Defense Department workers used purchase cards for $6.1 billion in goods and services.

Defense Secretary Donald H. Rumsfeld created a special task force earlier this year to look into credit card abuses, and it made 25 recommendations last month to tighten controls over cards and to increase prosecutions of those who abuse or misuse them.

In its Army investigation, the GAO also found that government cards had been used for personal purchases of more than $100,000 for computers and other electronic equipment, $45,000 for cruises and $7,373 for closing costs on a home.

Investigators also questioned purchases on government cards of fine china, cigars, wine, a trip to Las Vegas, Internet and casino gambling and two pictures of Elvis Presley purchased at his Graceland mansion in Memphis, Tenn.

Rep. Jan Schakowsky (D-Ill.), one of the House government reform leaders who requested the GAO investigation, said the findings point to an overall management failure at the Pentagon.

"Financial management at the Department of Defense is as bad or worse as at Enron, WorldCom or any other corporation that has misled the public," she said.

James T. Inman, the Army's acting deputy assistant secretary, said the service is "aggressively correcting" the problems uncovered by the GAO investigation.

In one instance, the GAO found government charge cards were used for a $30,000 purchase of 80 Palm Pilots at the Pentagon's top procurement office. An internal e-mail said there was a need "to get enough goodies for everyone."

Grassley said the e-mail sends a message that "we can splurge at the taxpayers' expense and not worry about it."

"It's unfortunate that such an attitude is being nurtured in the purchase card 'czar's' front office. It sends the wrong message to the troops in the field," he said.

The new GAO report is the first to focus on the Army, which has more than 430,000 travel cardholders and more than 100,000 purchase cards in use. The Army's charge bill last year totaled more than $3 billion.

Investigators audited purchase card transactions in five major Army commands, including detailed work at Fort Benning and Fort Gordon in Georgia, Fort Hood and the Army National Guard in Texas, and the Soldier, Biological and Chemical Command in Massachusetts.

The travel card audits were conducted at two separate commands at Fort Bragg in North Carolina plus Fort Drum in New York and the California National Guard.

The GAO said the Army had worked to maximize the use of purchase cards to save money by reducing procurement costs but "has not focused equal attention on internal control."

Auditors said they found that 40% to 86% of the monthly purchase charge bills at the five bases had not been reviewed by managers to ensure charges were properly documented.

The GAO also found 1,200 Defense Department personnel had written bad checks to pay their government travel card bills. In examining the worst 105 cases, the GAO found 40 of those cardholders hold secret, top secret or higher security classifications. Bank of America, which runs the Army charge card program, had to write off nearly $150,000 in bad debts on those 40 accounts.

Learn how your credit rating can help you get credit easier and faster

FOR STEVE JONES, 44, GETTING enough credit to run his business had, always been a frustrating experience. "I've dealt with some of the largest banks in the country," says Jones, president of National Communications Link Network 20, an emergency dispatch contracting agency based in Pleasanton, California. "Sometimes it took over a year to get a small, secured line of credit, a year in which I literally spent days going to banks and making presentations."

Jones' last experience was a bit different. "I called Wells Fargo Bank and provided information by phone," he says, explaining that he needed extra cash for his expanding business. "Within a week my loan was approved; within two weeks we had a $ 100,000 unsecured line of credit at a favorable interest rate."

What made the difference this time around? scoring, the process of putting a numerical grad applicant's creditworthiness. "Credit reviewing enable us to make small loans economically," says James, an executive vice president at Wells Fargo Francisco. "Decision-making time is much shorter, so we can grant credit more rapidly."

Credit scoring is by no means limited to one bank's small business loan department. Today, whenever you apply for a credit card, an auto loan, or a home mortgage, you're likely to be scored. The same is true when you buy auto or homeowner's insurance. Credit scoring not only helps determine whether you'll be accepted or rejected but also the interest rate you'll pay. The better your score, the lower your expenses will be.

The good news is that credit scoring is objective. Unlike lending officers, credit scores don't have "a bad day" or judge applicants by the way they look. While Jones believes he encountered racism in prior face-to-face attempts to get credit, he says that wasn't the case with his latest request.

The bad news is also that credit scoring is objective. If you've missed payments, defaulted on loans or declared bankruptcy, that data will be incorporated into your score, dragging it down. The worse your score, the lower your chances of winning credit approval, no matter how Much personal charm you exert. Therefore, it's vital that you know the score about credit scoring and take steps to improve your grade.

CREDIT SCORING 101

Credit scoring is a process designed to predict the future: whether or not you'll live up to the obligations you incur today. When you make a loan application, the tender will request a credit bureau report showing your prior history (see "Cleaning Up Your Credit," July 1998). The report may be loaded with information, positive and/or negative. How can the lender evaluate that data and make a fair judgment of the likelihood you'll pay your debts?

"Based on past experience, we've determined the most powerful indicators of future risk," says Sally Taylor-Shoff, director of credit bureau risk products for Fair, Isaac & Co., the San Rafael, California, firm that pioneered credit scoring. "We've developed models that weigh the data and produce a score that indicates risk level. Lenders can then decide whether they want to extend credit to borrowers who present that amount of risk."

Credit scores look at three factors, according to Taylor-Shoff: severity, recency and frequency. "In terms of severity," she says, "a report of a 30-day late payment is not as serious as a 90-day late payment. Obviously, one late payment is not as risky as several late payments." As far as recency is concerned, a credit lapse four or five years ago might not concern a lender who sees that you've been paying your bills since then.

Credit availability also may affect your score. If you have no credit cards, for example, you can't show you have been approved for credit and made payments regularly. On the other hand, having many cards--and a huge overall credit line or high outstanding balances--can be a risk indicator. Fair, Isaac data indicate that having two cards probably is the lowest risk level; once you have seven cards or more, credit scores may decline.

On the other hand, there are many factors a credit score doesn't look at, because some factors have not proven to be reliable predictors of debt repayment, says Tom Ducey, vice president of credit policy for Fannie Mae, a federally sponsored mortgage purchaser in Washington, D.C . "Credit scores don't consider your income, the neighborhood where you live or where you work," he says. "They don't consider how many years you've been at your current job. Therefore, credit scores may be helpful to young people who are just starting their careers, provided they handle their debt prudently. On the other hand, if you misuse the first credit card you get when you're still in college or just out of school, the negative reports will hurt your credit score for years."

ALLIANCE & LEICESTER has sold its credit card business to card issuer MBNA for pounds 225m as part of its plans to cut costs and reduce exposure to bad debt.

MBNA, the world's second-largest credit card issuer, will be gaining account balances of about pounds 800m and 1.34 million customers. A&L is being paid pounds 225m over the outstand- ing balances.

The deal means 350 jobs at A&L's credit card business are threatened, but efforts are being made to redeploy staff and avoid compulsory redundancies.

MBNA will sell new Alliance & Leicester credit cards through the bank's 310 branches, which will still carry the A&L brand. The deal gives MBNA a market share of about 14 per cent in the UK.

A&L had been reviewing its credit card business for some time and decided it did not have the scale to compete in the expanding market that is being increasingly dominated by worldwide players.

It said the investment required to sustain the business and the risks in trying to build market share were too high to justify to shareholders. In 2001, the credit card business cost A&L pounds 44m, pounds 19m of which was a bad debt charge.

A&L said selling the credit card operations will allow it to lower bad debt charges and help release capital tied up in the business. Disposing of the business will decrease costs by pounds 20m and boost surplus capital by about pounds 60m.

The move comes a week after A&L reported a 12 per cent jump in profits for the first six months of the year.

The chief executive, Richard Pym, announced then it was in talks with a third party to take over running the credit card business as part of its strategy to streamline the group.

Mr Pym said yesterday: "We are committed to providing our customers with a full range of personal banking products - including an attractive choice of credit cards. After a full review we have concluded the best way to achieve this for our customers is through this arrangement with MBNA."

A&L is now concentrating on four main areas - mortgages, current accounts, savings and unsecured personal loans.

It has also now disposed of its life insurance business to Legal & General, releasing pounds 34m of capital, which will be used in the forthcoming share buyback issue.

JR East, Japan, has launched its new Suica contactless smart card ticketing system, based on an integrated management package developed by Hitachi, Japan. Suica has been installed initially in the Tokyo region at a cost of about $US 400 million.

THE first phase of JR East's Super Urban Intelligent Card (Suica) system covers 424 JR East stations within a 100km radius of Tokyo, and it has involved installing 3100 gates and 1000 ticket machines. Four million Suica season ticket passes are being issued, plus up to a million stored fare cards, and these are expected to generate more than 16 million transactions per day.

Suica was launched throughout the Tokyo regional network on November 18 2001, following a successful three month trial which covered 27 stations on the Saikyo lines, including a section of the Yamanote line which forms a ring route around the city. The trials convinced JR East that it could adopt the so-called "big bang" approach to introduce the contactless smart card ticketing system immediately. Smart cards are being issued either on application or as existing season tickets become due for renewal.

New or upgraded equipment installed at stations includes gates, ticket vending machines, and fare adjustment machines. Many stations already had gates, which have been modified to enable use with smart cards rather than magnetic stripe technology.

It is expected that Suica will be extended later to other stations, as well as to sales kiosks and retail stores. JR East is also discussing the possibility of making it available to other railway and bus companies in the Tokyo region in the future.

Most cards hold both a season ticket pass and a stored fare value that can be spent on irregular journeys. When a passenger's journey ends outside the area covered by the pass, an automatic fare adjustment is made. The card's stored value is used to automatically "top up" the season ticket, rather than forcing the passenger to visit a fare adjustment machine before exiting. There are also simple stored fare-only cards available.

Suica, which means water lemon in Japanese, is intended to reduce costs, increase profitability, and provide a better service for passengers.

Cost reductions will be achieved by installing cheaper smart card-operated station gates to replace magnetic stripe ticket-operated gates that had reached the end of their natural service life. This was one of the key factors behind the swift introduction of the new system.

Fewer ticket vending and fare adjustment machines are needed than before, while general maintenance costs for smart card equipment are lower, primarily due to fewer moving mechanical parts. While fraud is not regarded as a major problem in Japan, control over fares collection is greatly improved. In addition, float income will be generated by the loading of stored fare value onto cards.

A faster, improved service for customers is being delivered not only through automatic fare adjustment but also the need for less frequent ticket purchases. Entering and leaving stations is much easier as Suica cards can be scanned at the gates without being removed from wallets or purses. If they are lost, Suica season passes, including any remaining stored value, can be easily reissued. As a result of increased automation, JR East staff have now been re-deployed into roles where they deal directly with the public.

Ultimately, the issue of Suica smart cards will provide a platform for new business opportunities. As well as extending their use to other rail and transport modes, JR East plans to merge its existing View credit card with Suica, allow the use of Suica cards in kiosks and shops, and rent out card memory space to other companies for different applications.

A flexible central management system is required, therefore, to manage and monitor all the records of smart card usage gleaned from a diverse range of equipment.

This is being supplied by Hitachi in the form of its e-ticketing and fare collection smart card management system (SCMS) package.

Hitachi's information systems and electronics division, whose role includes the development and sale of smart cards and e-ticketing systems, has a much lower public profile than its power and industrial systems division, whose responsibility includes the manufacture of rolling stock. However, the former accounts for 32% of the group's revenue, compared with 24% for the latter.

Hitachi is a leading semiconductor and chip manufacturer, including those for smart cards. It sold 100 million chips in Europe during 2000, though this particular market is declining at the moment.

The new SCMS package provides comprehensive and integrated management of large and complex smart card-based ticketing systems. It detects fraud in many ways, and manages any illicit, lost or stolen cards. Customer and card usage data is, of course, available for planning or other business uses.

Verment's credit unions have prospered in the shadow of multi-state bank mergers and acquisitions. At a time when financial services sectors are increasingly consolidating banking, insurance, investment - they provide their ownermembers with more basic services, including share ownership versions of checking and savings accounts, personal and sometime mortgage loans, and debit and sometimes credit cards.

Like Vermont's independent community banks, with which they sometimes have very cordial relationships, they appeal to those who have had enough of navigating telephone voice messaging systems, dealing with distant owners of resold mortgages, and struggling to get minor errors corrected.

There can be monetary advantages in belonging to a credit union, in terms of lower borrowing rates, lower credit card interest, and dividends if the non-profit organization has a surplus. But those in the field again and again said the main reason for their historic growth has been the desire for truly personal banking, on a first-name basis. One source, who asked not to be named, summed up by saying, "Every time there is a bank merger, we get more members."

Another factor is the "flight to quality" among investors, which has also helped boost the community banks' reputations following the stock market debacle of the past couple of years. This may continue to motivate people to put at least part of their money in local credit unions, since the plunge that appears to be giving way to malaise rather than recovery in the wake of the Enron accounting scandal. Which is not to say that hard times have not affected the credit unions.

John Revilla, vice-president of the Vermont Credit Union League, said that many members have trouble finding enough loan opportunities for the influx of savings money. Meanwhile, with interest rates so low, "it's hard to get more than 1 percent' on investment of the accumulated money.

Belonging to such a cooperative is not an option for all Vermonters.

Joseph Bergeron, president of the 41-member Vermont Credit Union League, said that roughly 20 percent of the state's population is eligible to belong to one. But growth and consolidation are taking place in the credit union world as well. The trend has been for smaller groups to merge, and for larger groups to use the additional financial capacity to offer more and more services as demanded by their members. Relations with the rest of the depository world have sometimes been tense.

The Vermont Bankers Association has criticized the credit unions' taxexempt status as giving them an unfair advantage. On the other side of the ledger, credit unions complain about the statutory cap on business loans, at 12.5 percent of their assets, that has kept them out of potentially lucrative markets.

In general, the two cultures have coexisted in Vermont more amicably than in the country as a whole. At one point in the 1990s, the American Bankers Association brought a federal suit claiming that the enabling legislation for credit unions limited them to a single employee group. The matter went to the Supreme Court, but Congress took the issue off the judiciary table by amending the credit union act to allow broader membership.

"Select employee groups" keep joining existing credit unions, and communitywide and even county-wide membership are permitted. It may be only a matter of time, assets, and executive experience before most Vermonters have such an opportunity to literally take stock of their finances.

While seniors have positive feelings in general toward Medicare, they expressed negative feelings toward the new Medicare drug benefit, according to a study the Henry J. Kaiser Family Foundation released earlier this month.

The study, which included a series of focus groups with Medicare beneficiaries conducted in Pittsburgh, Kansas City, Kan., and Washington, found seniors are confused and uncertain about the new Medicare law and how it will be administered, with the level of confusion contributing significantly to their negative feelings. Specific concerns researchers uncovered included personal cost, how the new benefit will affect current Medicare coverage, future access to drugs prescribed by a doctor, logistics of the benefits and an overall lack of information.

The focus groups also revealed that seniors who lacked sufficient personal knowledge of the new Medicare law formed their opinions of the law based on news reports and advertising, both of which they reported as being negative.

Overall, complaints about the discount drug cards centered on five areas: discounts are not substantial enough to make drugs affordable; discounts are not guaranteed; the plan ends after only two years; the number of cards from which to choose is overwhelming; and the $600 credit, while a good idea, may not be sufficient.

When asked their opinion of the drug discount cards, 57 percent of focus group participants had an unfavorable view, while 22 percent looked upon the cards favorably and the remaining participants had no strong opinion either way.

In addition, seniors and beneficiaries with disabilities expressed further apprehension about investigating and choosing which card is right for them.

Card sponsors reported a slow start to the June 1 launch of Phase One of Medicare drug benefits, as fewer seniors than anticipated began to take advantage of discounts offered through 73 local and national cards.

"We didn't know what to expect, so we prepared for ... seniors [to] flood our stores," sad Michael Polzin, a spokesman for Walgreen Co., one of 28 government-approved sponsors.

But that hasn't happened yet, Polzin said. "What we have seen is a steady flow of seniors into our stores asking for information or enrollment forms."

Polzin attributed the slow sign-up pace to the fact that most seniors still don't know about the program ... so there's still a lot of education to be done." In addition, he said, "the government was encouraging people to wait and take their time to sign up. So I think we're going to see people signing up for this well into the fall. It's just going to take time for seniors to hear about it and look into it."

Michelle McKenna, spokeswoman for the Pharmacy Care Alliance, agreed that seniors are taking their time before signing up for a card. "[The Department of Health and Human Services] is telling people to sit back and wait and do their research, and I think that's what folks are doing. They're ... trying to decide which card is the best fit for them, she said.

The moderate enrollment comes despite evidence that seniors' interest in card-based discounts is rising. According to the Scripps Howard News Service, the Medicare hot line for seniors with questions about the cards and drug discount levels received more than 3.5 million calls in May, and the CMS Web site for price comparisons generated more than 10 million hits.

HHS has allocated an additional $4.6 million to organize and fund community-based organizations to help low-income beneficiaries learn about the discount card program.

The Pentagon is tightening up over-sight of issued purchase and travel cards. Defense Department Comptroller Dov Zakheim briefed reporters last month on the findings of a three-- month study on the department's charge-card program.

Zakheim said the overall instance of misuse or fraud within the department is probably lower than that experienced by private-sector companies. But there have been egregious examples of card misuse and outright fraud within the department, he acknowledged.

The department must take steps to educate users about the cards, enforce laws and regulations against misuse and look at other ways of conducting business, he said.

Zakheim stressed that the charge-card program saves money, manpower and time and is enormously beneficial, he said.

Deputy Defense Secretary Paul Wolfowitz issued a June 21 memore-emphasizing the importance of the programand detailing two things.

First, agency heads must report to Zakheim by July 15 with what they have done to deal with current cases of abuse, misuse and delinquencies. Second, Wolfowitz directed the DOD inspector general to coordinate audits and investigations of the charge-card programs.

The department will also immediately cancel 100,000 expired travel cards and review another 300,000 for possible cancellation that have been inactive for a year.

Other aspects remain to be worked out. One is enforcement.

The Justice Department's Public Integrity Section will prosecute. DOD will also look at pursuing cases in state and local courts.

Finally, commanders and supervisors must take action in charge card cases. If they do not, they may be held liable.

NEW YORK -- Fitch has upgraded the credit card seller/servicer rating of Providian National Bank (PNB) to 'ABPS/S 3+' from 'ABPS/S 3'. This action results from PNB's improved financial profile following the completion of Washington Mutual Inc.'s (WM) ('A/F1'; Stable Outlook) acquisition of Providian Financial Corp (PVN), the parent of PNB. On Oct. 3, Fitch Ratings upgraded the senior debt rating of PNB to 'A' from 'BB-, in order to align its ratings with those of WM. WM has retained a significant portion of the current PVN management team to run its credit card business, which will provide stability. Structurally, PNB has been merged into Washington Mutual Bank, while PVN has been merged into New American Capital, Inc., a subsidiary of Washington Mutual, Inc.

As of December 2004, PNB managed a credit card portfolio of $18.5 billion, making it the ninth largest issuer of consumer credit cards in the U.S. PNB targets 'mainstream America' i.e. middle-class consumers. Since 1999, the bank has issued a total of 20 asset-backed security (ABS) credit card series under its Fitch-rated Providian Gateway Master Trust program with a total invested amount of $14.2 billion. As of Aug. 31, 2005, PNB had 17 ABS credit card series outstanding from the Providian Master Note Trust and the Providian Gateway Master/Owner Trusts, representing a total invested amount of $11 billion.

Fitch rates ABS seller/servicers on a scale of 1 to 5, with 1 (no '1+') being the highest rating. Within each of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating.

IF YOU'RE SETTING UP an E-commerce Web site, sooner or later you'll have to solve the problem of granting credit. Most of the industry's attention has been directed to various methods for accepting credit cards online; solutions for automating the granting of direct credit to businesses or for large consumer purchases have been slower in coming.

"The approval of these credit relationships is necessary if you want to close orders," says Dan Sholler, analyst at IT consultancy Meta Group Inc. However, taking hours or days to approve credit using faxes and phone calls is not always acceptable in E-commerce. "You're going to lose orders if you can't match people's speed expectations," says Sholler.

The equipment finance division of CIT Group is using an automated credit scoring system from eCredit.com Inc. (www.ecredit.com). "We've been using the CCX scoring system [from Acxiom Corp.] for years," says CIT vice president Hal Hitch. An E-commerce customer types data into an online form. The eCredit.com software evaluates the data, instantly obtains online credit reports from Dun & Bradstreet Corp. or Experian Inc., and does the CCX scoring, customized for CIT. "The software comes up with a raw score, which specifies automatic approval, automatic decline, or human review," says Hitch.

The software took CIT close to a year to implement and cost about $600,000, including consulting fees. Generally, eCredit.com charges from $8 to $25 per transaction for its software, depending on such factors as volume, the length of the agreement, and average dollar size of transactions. In addition, credit agencies typically charge 85 cents to $2 for online reports, although full-company D&B reports can cost up to $25.