What a difference a bank makes

This morning I called my small "home-town" bank because my debit card is broken. This bank has a feature where they transfer an extra $1 into savings every time you use the card. But they charge me a monthly fee of $5. Each time I use the card, they deduct 50cents from that fee, so if I use it 10 times, there's no fee.

Another reason I signed up for this account is that in March of this year (which started today), they are going to give me a bonus and match all of the dollars they've transferred to savings. I think in my case that will exceed the service charges I've paid.

Anyway, back to replacing my debit card. Martha at the bank was very nice and was ready to send me a new card. Then she told me there was a $5 charge. I told her to hold off.

Then I called one of the big credit card companies and told them that the card I have for them is broken (I'm rough on cards in my wallet). Michele was very nice and offered to send one out right away. I talked to her about the rewards program and she offered to upgrade my card in two different ways. The first was no charge (I pay no annual fee now) and would give me trip cancellation benefits (not a big deal, but if it's free). The second would give me more rewards, but cost an annual fee of $59. I declined the second and accepted the first.

My point here is this: people like to bash the big credit card companies and praise the little guy, but my experience is the opposite. What's your experience?

Fees from the giant banks now at the highest level ever recorded

That's the headline from this Clark Howard online article. If  you're not familiar with Howard, he has a radio program and a TV show on HLN talking about ways to "spend less, save more and not get ripped off." He's a consumer advocate. While I listen to a lot of Christian financial programs, Howard doesn't put his faith (or lack of) on the air. His show is strictly about money and ways to help.

In his article, Clark sites a newspaper article that says that AM fees, checking fees and overdraft fees have all gone up. But wait, didn't Congress solve this problem? Didn't they pass a law commonly called the CARD Act? Didn't a well-known blogger tell us about that here?

Well you're right, on all of those. Congress has also been targeting bank fees and made it so that you can't overdraft unless you ask for the protection.  But banks will continue to find all legal means to turn a buck. That's what banks do. They try to make a profit.


Back in June, the NY Times called this a "New Day for Consumers". A consumer bureau was created and the President appointed (while Congress was on vacation) a head of that bureau who will certainly write new regulations and probably attack this problem once they read my blog.

In the mean time, what do you do about the fees? Clark Howard thinks "the reality is you have so much choice in the marketplace." He suggests "a credit union or small community bank." He also likes online banks, which is a good fit for a lot of people.

So if your bank is charging you fees, shop around. You'll be glad you did.

A New Day for Consumers?

That's what the NY Times headline says in this article. And I'm sure we'll hear that from a lot of politicians, how they have saved the consumer from so much grief from the big-bad banks. You see, congress has passed a new law (well, details are still being ironed out between the House and Senate) legislating how banks can act on your behalf. But I find interesting the details of the new law.

The NY Times lays out several areas of "change" in the new bill. It shows how a new Consumer Bureau has been created with the Federal Reserve that "would write and enforce rules for most banks, mortgage lenders, credit-card and private student loan companies." Well, I'm glad a new agency was created so that more government money can be spent (hopefully the sarcasm in that comment comes through - the Federal Reserve has been doing this for years).

But the new law goes further, in allowing the consumer to get his/her credit score for FREE! Yes, the guys singing the free credit report song have been upheld by the government. Well sorta. You see, you always could get your credit report for free (3 per year). And the only way you can get your score with this new law is if you apply for credit and were harmed by your score. The NY Times points out that "nothing is stopping you from asking for the score, even if you like the rate or result of your application." Actually, that's always been true. The last time I applied for a loan (car loan circa 2004) I asked to see my credit report and score. I sat down with the loan agent and went through it line by line. (I told them I wouldn't buy the car unless they did).

Mortgages will be changed (or not) by the new law. Mortgage companies will now have to verify your actual income. The article accurately points out that "most lenders have learned that lesson by now or have ceased to exist. Prepayment penalties will now be illegal on certain types of loans. Seems to me that with a little education, consumers would have eliminated these previously. Simple rule - don't accept loans with prepayment penalties. Isn't HUD supposed to do some education like this?

There are a few more items in the bill being worked on, but when you get down to the details, they really don't do much either. This is a lot like the much-bally-hooed CARD act of 2009 (see my comments here) that "changed" the way credit cards were managed. When you look at the details of that law, you'll find it was much softer that the changes the Federal Reserve had ALREADY ENACTED. It just gave more time to the credit card companies.

You'll hear a lot about this new bill in the coming weeks and months. I suspect you'll hear a lot about it during the upcoming election cycle. But remember, we would all be better if congress stayed out of it, and made the appropriate EXISTING agencies do their job.

Your comments are welcome.

Complete Savings

Last night my wife discovered a charge on her account that shouldn't have been there. After a call to the 800# on the line item, I discovered it was a company named Complete Savings. Apparently, she had purchased something online (a few months ago) and somehow signed up for a Complete Savings membership. We're not sure how this happened, but let's assume this part is true.

"Maria", at Complete Savings, asked some basic information - last name and zip code - and then verified that information. She then verified the email address as some limited form of ID protection. At no time did she ask a credit card number or any other "sensitive" information. She explained the benefits to membership and offered me some solutions to the charge. She could cancel my (our) membership or I could log on to the website and explore the benefits more. I opted for canceling.

"Maria" explained that I still had 30 days to explore the website and that no future charges would occur. She was very polite about it. I said (not asked) that she could also reverse the charge. She said she could do that, and unfortunately it would cancel my membership immediately. I told her that was fine and she explained it would take 3-5 business days to see the credit on my account.

All in all, this was a reasonably pleasant exchange. How my wife's information got to this company, I don't know, but we plan to email the company we did purchase from to follow up. Before "Maria" answered the phone, there was a series of prompts that asked for Social Security number or charge card number, but I refused to enter it and just hit "0" for an operator. After a not-too-long wait, I got a real person who spoke at least decent English.

The worst part of the process was dealing with my bank. I wanted them to block the charge and they explained that they would have to block the card completely. This seems contrary to what I've heard that Visa Debit will do for you and I'll have to investigate some more.

Moral of the story is that you should follow up on things like this and quickly address the problem. It took less than 30 minutes total to resolve this problem.

Very interesting

No doubt, credit card rates are on the rise. We've heard it would happen and it's happening. But it seems that First Premier Bank, based in South Dakota, may be stretching the limits (if there are any).

Gordon Hageman lives in the San Diego, California area and was sent an invitation for a pre-approved credit card with an interest rate of 79.9%. Yep, just shy of 80%. Since it's probably compounded monthly, the actual yearly rate will come out closer to 103%.

Now Gordon admits his credit isn't perfect, but he thinks it's about average. Gordon called the bank to make sure he wasn't misreading it and he wasn't. First Premier claims to be the country's 10th largest issuer of Visa and MasterCards and "focuses on individuals who have less than perfect credit, but are actually still creditworthy."

I'm 103% certain that First Premier probably loses a lot of money on some people who get the card and never pay their bills. I'm certain they also make a profit. I was unable to determine who owns First Premier or to find any information about their profits & losses.

Now Mr. Hageman thinks that possibly First Premier may be trying to take advantage of him. He noted that the interest rate was not declared on the cover letter, but was on the included "fine print disclosure" (the picture accompanying the article seemed to indicate the interest rate was in large print and the rest of the disclosure was fine print).

I actually see nothing wrong with First Premier's actions. The interest rate was disclosed, on the disclosure statement. Mr. Hageman has a choice to sign up for the card, or frame the offer for continued humor (I'd laugh at it every day). Nowhere in our constitution are citizens guaranteed the right to life, liberty and low interest credit cards.

(Source for post is here).

Debtor's Revolt

It seems that Ann Minch of Red Bluff, Ca. has a problem with her bank - Bank of America. The Huffington Post (source) found her YouTube video declaring war on the bank. They have raised the interest rate on her credit card all the way to 30%. According to the article, she's made the minimum monthly payments for "several years" and never missed a payment. She even paid extra from time to time, sometimes $50, sometimes $100. And they raised her rates in reward for the loyalty.

So, Ann is getting even. She went down to her branch and closed her account and moved the money to local community banks. And now she's refusing to pay the balance on the card until they lower her rate. She's upset that the bank got a government bailout and now won't help her.

Well, I'm not sure she's following the right track (even though she has gotten her rate reduced). I'm not fan of BofA, but you have to admit they have ATMs everywhere. If Ann decides to use an ATM and her local community bank doesn't have one handy, she's likely to pay a $3 fee (or more) to get the money she moved. And refusing to pay a balance she legitimately owes can wind up trashing her credit report and causing her to owe more than she started with.

I did a little simple math to find out what her credit card has been costing her. According to the article, her current balance is $5,943.34. At her rate of 12.99%, that's about $772 in interest she's been paying every year. Wouldn't she be better off buying things with cash, instead of charging them? I'm sure she bought some stuff on sale, but did she save $772 each year on sales?

I was curious as I read this, what is my interest rate? See, I don't even know (or care). I pay off my balance each month and don't pay interest. Well, a couple of times in the last few years I have. I slipped up and made a late payment and was charged interest. Net fees & interest over the last 5 years has been under $200. I don't want to pass this off as minor, that's $200 that I could have used for something else. It's a penalty I've paid for my mistakes. Ann Minch's penalty is $772 a year. (turns out my rate is 7.9% for purchases - from Capital One).

My favorite hotel chain

I've been traveling a good bit lately and I'm trying to book all my stays at a hotel in the Hilton chain. These include Hilton, Hilton Gardens, Hampton as well as Doubletree and Homewood Suites (mostly, I use the first three).

Recently, on two separate occasions, I stayed for free (once for two nights) using the points I've built up. I like a free weekend (even if I was helping someone move).

Last week I found an extra charge on my corporate charge statement for a hotel that I have used several times. I made a few phone calls and found out that the charge was for a reservation made in my name, but was a no-show.

What really bothered me about the charge was they didn't award my any Hilton points. If I was going to pay for the stay, at least I could get reward points, right?

So, I made a few other phone calls. Looks like I made the reservation, the date of travel was a week where my plans were very fluid. I must have made the plans, then changed them and never cancelled. I don't remember it, but it must have happened.

So today, I called the Hilton again. Monica in accounting (who I had talked with last week) answered the phone and I explained the situation. She remembered me and I asked if there was something we could do about the charge. I explained I was a frequent guest and didn't feel I should have to pay.

To my surprise, Monica agreed to reverse the charge - "this time" - but she admonished me to please call next time so they could rent the room. I told her I would and that I would definitely stay at her hotel again. I thanked her and will be watching for the credit to show up on my account.

Now, the last time I stayed at this particular hotel, they were no where near full. I doubt that the room would have been rented even if I had called. But the hotel had within their rights to charge me for the room and I (or my employer) would have had to pay. I'm very glad they reversed the charges.

This particular Hilton gives me a free buffet breakfast including a made to order omelet, so it was already top on my pick list, but after this treatment it will stay there.

Roundup

I'm going to steal an idea from my blog-friend Neil and post a list of other blogs I've seen this week. Maybe I can be Neil's padawan blogger.

Don't forget my contest. You can win a big prize ($5), just for making up a story. Post it in the comments or send me an email. Today's the deadline. The judges will vote tomorrow and the winning story published.

I confess I stole the idea from the contest from (or was inspired by) the Lazy Man and Money. Lazy is one of the blogs I've been reading about practical money management. He received two copies of a book, 10,001 Ways to Live Large on a Small Budget, and is giving one away. Be sure to read the comments, some are funny, some are sad. See his post here.

Another practical money management blog I've been reading is The Simple Dollar. A recent post focused on Quantity Surcharge. You always thought that the bigger bottle of ketchup was cheaper, right?

Probably my favorite blog of late is Free by 50. It's not as much day-to-day practical information, but probes deep on some subjects. Home ownership, foreclosure, subprime lending, etc. Be sure to read several posts to get a feel for the blog.

I first heard Gerri Detweiller on the radio, she focuses on consumer alerts of all types. She's the credit advisor for credit.com. She doesn't blog every day, but her posts are good.

Credit Card Bill

You may have heard that the congress has passed a new bill, changing the way credit cards work. Congress is working to protect consumers, who have been bearing the burdens of the companies (who else would bear the burden? See the bottom of this note). No matter that the Federal Reserve had already tightened a lot of the rules, congress wanted it's name on a bill.

The new law (to be signed soon) will make it harder for people under age 21 to get cards, and "it would also ban rate hikes unless a consumer is more than 60 days late -- and then restore the previous rate after six months if minimum payments are made." (According to CNN) There are other items reported to be in the bill, I found a good list at the Simple Dollar (this site). He even some predictions as to what might come about in the future. Some of bill's line items include restrictions on raising interest rates without a 45 day notice, putting a stop to double-cycle billing, which hit me back in April 2007 (see here). Teaser rates that last a couple of months would be gone for good.

So what do you think of this new bill? I'll share my opinion. I don't think much about it. And neither should you. Not that I think bad about it, just that I haven't wasted many brain cycles thinking about it.

I'm one of the freeloaders, the folks who charge using their credit card, then pay it off each month. I never (except in April 2007) get hit with interest rates, fees, etc. In fact, I get reward points which I trade in on free travel, so I'm making money off the cards (well, not much). I pay no annual fee and therefore, I'm getting a free ride. The credit card companies are making this money by charging fees on other people. They charge interest, late fees and annual fees.

So this sounds like a reverse "tax", much like the lottery (see my note here), a Robin Hood thing - take from the rich, give to the poor. So this legislation seems like a good idea, right?

Actually, I think it's not a good idea. First, there seems to be some hypocrisy here. We're telling credit card companies they've been bad corporate citizens, but we're not telling the consumers they've been bad. Isn't that a little one-sided. Additionally at a time when we're trying to encourage our banks and financial institutions to be cut their expenses and be more liquid, we are cutting one of their tools to increase their liquidity. If they can't make a profit "on the backs of the consumers," how will they make a profit? If they don't make a profit, they will go out of business and then who profits? Certainly not the consumer.

Many conservatives have been saying that a likely change will be increases in annual fees. People like me will suddenly see new fees where they had none before. The Simple Dollar (another reference) disagrees. No problem, I'll change cards or eliminate them all together.

You may say that it's fine for me to suggest I'll change or eliminate cards, what about those who can't afford to do that? They have a super high balance and bad credit and can't get new cards. My answer is simple, if you can't afford the stuff you bought, you shouldn't have bought it. Credit cards are nothing more than a way of deferring payment on something. If you can't afford it today, what makes you think you can afford it a month from now? Instead of paying $25 a month for that big LCD TV, why not save $25 a month and pay for it in cash?

One thing is certain, this new legislation will make credit cards less attractive. Those with poor credit are less likely to get cards, because the companies can't charge the exorbitant fees. And those who pay the cards off monthly are likely to see less benefits. In reality, this is probably a good thing. Which brings me back to the original statement. Why did congress do this? Most of the line items in this bill were already set to take effect next year due to the changes made by the Federal Reserve. So why all the ranting and raving? Because congress wanted to have their name beside something good.

Seems like much ado about nothing.