Saturday, November 29, 2008

Heads Up: American Express Flexible Payment Option Suspensions -- On My Radar Screen

My subscription to Site Meter has been a real boon to Not only can I monitor my traffic statistics, I can also monitor search queries. I'm already using these search queries for my 10-Credit-Questions-and-Answers column (link here). I'm also using my search queries to alert my readers to things that my search-query results are pulling up. I call these "heads up" alerts. Last month I did a heads-up alert on Macy's and Citibank, which turned out to be quite accurate (story link here).

During the past several days, I have noticed a big spike in American Express flexible payment search queries. In particular, I have seen search queries that make me think that American Express is suspending and canceling the option for a large number of customers. For those of you who don't know, American Express charge cards are supposed to be paid in full each month. However, American Express has a flexible payment option for larger purchases that customers make. It allows customers to pay for these purchases over time (just like a credit card). However, American Express doesn't like customers to leave balances for long periods of time. In other words, if you do set aside some of your bigger purchases, and allocate them into your flexible payment option, American Express wants you to pay these purchases off sooner rather than later.

Anyhow, I'm giving people a heads up because some people might be planning on utilizing this option in the near future. If American Express kills the option before a customer can take advantage of this feature, customers will have to look elsewhere to park balances.

If American Express is killing this option for a lot of its customers, I am not surprised in the least. American Express has seen a spike in charge-off data and delinquencies. It makes perfect sense that American Express would not want a bunch of receivables (loans outstanding) sitting on its charge cards at this juncture.

That's it from here, folks. Have a great weekend.

Related Articles:

•Read More American Express Stories Here

Friday, November 28, 2008

How The Credit Card Securitization Process Works

If you've ever wondered how the credit-card securitization process works, you're in luck. Paddy Hirsch, a senior editor at Marketplace, does an excellent job -- in a video -- of explaining how the credit-card securitization process takes place. Most people have heard about securitization, but most people don't know how it works. If you have a murky understanding of the securitization process, then this video is for you. Hat tip: Mary Pilon, the Wall Street Journal.

Paddy Hirsch Explains The Securitization Process

Cartoon Of The Day -- Coupons and Discounts, Oh My

Given that today is Black Friday (the busiest shopping day of the year), I thought today's cartoon would be just perfect. Granted, our little cartoon doesn't depict a shopper trying to save a dollar at the store, but it'll do. Gave me a nice little chuckle.

In the meantime, folks, stay safe out there. There was a fatality this morning at a Walmart store in Nassau County (NY), when an employee was trampled to death by a senseless crowd (story here). And during the last hour or so, two people were shot at a Toys R Us store in Palm Desert, CA (story here). Just another reason why I do so much of my shopping online.

In the meantime, here is today's cartoon. Hat tip: Bob Wang.

Jim Toomey, November 28, 2008

Related Articles:

Citibank's Rate-Hike Strategy -- Where To From Here?

In journalism, reporters can't sit still. When you're working a story, the goal is to continue moving the story forward. Thus, I've written about the Citibank interest-rate hikes. But that's yesterday's story. How do I keep this story moving along? Where does Citibank's strategy go from here? In the end, what will Citibank's cardholder base look like? That's the story for today.

As you can imagine, I have received a lot of email and comments about my Citibank stories during the past couple of weeks. Some of the comments have been thoughtful. Some have been belligerent. But that's OK. That's what makes a market (of ideas). I received an anonymous comment this morning, though, that prompts this story. Rather than tell you, in my words, what the poster said, I'll simply quote it here (link to comment):

People, please!

Credit Card Companies make next to nothing on people who don't carry a balance, and whose utilization is very low.

Thus, the customers with the best credit scores, lowest utilization and minimum balance carried will be given the highest rate increases precisely because those are the people they need to get more profit out of. They may very well be LOOSING [sic] money on you, which is why they are offering to close your account.

The company makes money on carried balances that they can charge interest on, as well as fees. If you never carry a balance, and you have no yearly card fee, you are not a good customer (good, as in, "we make money off of them"), you are a BAD customer and they WANT to get rid of you.

And here is my response: Anonymous reader, think about what you just wrote. People who carry NO balances. Whose utilization is low. Best credit scores. These people need higher rates so that card companies can make more profit????

Do you realize that people like me, with low utilization ratios, no balances, and high scores, are not impacted by these rate hikes? We don't carry balances, so Citibank still can't make money by lifting our interest rates. My interest rate could be 100%. I don't carry balances. Thus, interest rates are irrelevant to people like me.

This is why I do NOT have to opt out of these rate increases. My account is staying open.

Citi isn't getting rid of a person like me. Instead, Citibank is getting rid of people who carry balances -- the so-called "good" customer in your scenario. Indeed, the customer that is carrying a balance MUST opt out -- or they will be paying interest at a significantly higher rate -- on the balances they do carry. Do you see why your postulation is flawed?

The customer who doesn't pay interest isn't opting out of this increase at all. Therefore, the customers you are calling "bad" are unaffected by rate increases. We'll just continue to pay our bills in full each month. And we will continue to ignore our interest rates.

But that customer with the large balance will be opting out -- and eventually leaving Citibank. This is the "good" Citibank customer in your example.

Therefore, in the end, Citibank is chasing away all of the people who carry balances -- and can't afford the interest-rate increase. Your "good" customers are being driven away from Citibank. They'll be opting out and eventually leaving Citibank.

See the letter that Citigroup sent to WSBT (story link here) in South Bend, Indiana. One can only conclude that Citi is looking to rid itself of high-balance-carrying customers (click image to enlarge).

All of us "bad" customers will remain -- the ones who don't carry balances from month to month (and therefore pay no interest). We will be staying with Citibank. We don't carry balances and therefore we have no reason to opt out of this interest-rate hike. Thus, the "bad" customers will actually be left standing at the end.

Which leads me to this. If Citibank is actually driving all of its balance-carrying customers away from Citibank (because they're going to opt out), and leaving all of the pay-in-full customers intact, how will Citibank make money down the road?

People have argued to me that Citibank doesn't just make money on merchant fees (which are generated whenever customers make purchases), but also on fees generated by those who carry balances every month. Indeed, some have argued that Citibank needs to keep people who carry balances in the fold. Citibank, these people say, needs to get rid of customers like me, who only generate merchant fees. If that's the case, then Citibank has itself a problem.

The latest interest-rate hike is driving away customers who carry balances. They're opting out. Their cards will ultimately be closed.

The Citibank Opt-Out Decision -- Everything You Need To Know (link here)

Somewhere down the road, if Citibank drives enough people away (customers you would think are Citibank's most profitable), Citibank is going to have an income problem at its credit-card unit.

Of course, American Express has always relied on merchant fees for a majority of its income. Indeed, some 54% of American Express's profit is generated by merchant fees. Even during this horrific financial crisis, American Express still remains profitable.

But Citibank wasn't built that way. It hasn't built up a client-base that resembles American Express's customer base. So, merchant fees alone will not be able to sustain Citibank.

Perhaps Citibank will implement a monthly maintenance fee on its customers. But all that would do is drive people like me away. And those who would have been more likely to accept the monthly fee would have been those who carry balances. But they're being driven away now. A monthly fee, then, likely wouldn't work either.

Here's what I am thinking. Citibank is driving customers away right now. There can be no question about that. It would appear that Citibank is driving away its most profitable customers. Again, people like me have no reason to leave. This new interest-rate increase is powerless over us.

It's my belief that Citibank is desperately trying to pare down its cost structure. By getting rid of customers, Citibank's costs are reduced. I think this entire move is being driven by Citibank's desire to become a smaller credit-card company. And it will absolutely succeed if that is what it's trying to do with these rate hikes.

But to think that Citibank is trying to drive people like me away is foolish. If it wanted to do that, it could just cancel our accounts. There would be no need to lift our (irrelevant) interest rates.

No. Citibank knows that it needs to keep no-balance, low-utilization, merchant-fee-generating, high-FICO customers. If you get rid of us, you'll just be a subprime credit-card company on the back end.

Let's make no mistake. In this bizarro world that we are currently living in, "good" has become "bad," and bad has become good.

Citibank is reducing its cost structure. It's doing this by ridding itself of customers who have historically been some of its best (read most profitable) customers. These customers have carried balances, generated interest-fee income, and they've been highly profitable.

Citibank is telling those people to take a hike.

We'll see how this turns out for Citibank on the other side.

See you there.

Related Articles:

The 10 Most Important Stories Written By

This blog entry is inspired by a comment that one of my readers made to me a few days ago. This reader, Zach, said that a particular story I did more than three months ago was one of my more "educational and unique" blog entries (see Zach's comment here). That got me to thinking. I've written a lot of stories during the past five months. Indeed, there are now some 235 stories on this site. Of those 235 stories, there are some really fundamental stories. Some more important than others. In light of Zach's comment, though, I thought it would be a worthwhile project to highlight ten of the most important stories that I've done at since July.

My list moves from ten down to one (with one being the most important).

10. When it Comes to Credit, it's Always Business (link)

9. Lowering Your Credit Limit is Stupid (plain and simple) (link)

8. Why You Need a Credit Union Relationship (link)

7. When Should We Start Teaching Our Kids About Credit?(link)

6. Want to be a FICO High Achiever? Do What They do (link)

5. If Your Relationship Ended Today, Would you be Prepared?(link)

4. Paying in Full is Not Only Good For Your FICO Score -- It's Good For Your Piggybank Too (link)

3. During the Credit Crunch, Work That FICO Score (link)

2. If You Don't Have A Credit Plan, You're Doing Something Wrong (link)

1. Utilization: What It Is And Why It Matters (link)

Thursday, November 27, 2008

Happy Thanksgiving -- Sending Out Some Thank-Yous

I hope that everyone has a terrific Thanksgiving.

I have a lot to be thankful for. I have my marriage, my health, my family, and my good friends. Anything beyond that is gravy.

I usually spend Thanksgiving in front of the television. That's because I'm an NFL fan, which means that I'll have several games to watch. In fact, there are three games to watch this year. Woot, woot. I'm also in a season-long football pool, so I tend to pay attention to the games anyhow. Thanksgiving just gives me a chance to be even more vigilant.

In the meantime, my wife prepares the family meal. There will be turkey, stuffing, cranberries, mashed potatoes, yams (with marshmallows), green beans, dinner rolls, pumpkin pie, and apple pie. I can feel the pounds getting packed on already.

Anyhow, in addition to my family and friends, I'm also thankful for my readers here at This blog would be no fun without you guys/gals. Everything I do here, I do for my readers. So, as long as you'll keep reading, I'll keep writing.

I'd like to thank some of my readers personally for all of their great contributions during the year. I'm thankful for all of them:

The Lion, thanks for visiting so often. And thanks for never holding back.

Bob Wang, keep keeping it real, pal. Your support is much appreciated.

Lupoman, congrats on having a great credit year. And thanks for protecting our country.

azntg, one of my earliest readers, thanks for your support.

L, thanks for taking care of the Web site. If not for you, the site would still look like crap. Thanks for making it look good.

Far Left Texas, you da man. Happy Thanksgiving.

SpaghettiBender, where have you been? You've been missed.

Nikky, thanks for always being kind.

Willgator, forgot about you. Never see you post here, so it slipped my mind. You've been a ghost of late (working on those rentals of yours). Thanks for being my buddy.

Samantha (Sam), welcome to the blog. And thanks for reading.

Hegemony (who doesn't post here a lot), thanks for helping me understand some of this difficult stuff that I write about. Your help has always been appreciated.

To Scott, a new reader, thanks for your support and belief in what I do here.

JG, keep up the good work on your blog. And thanks for being a reader.

Midnite, much love, pal. Thanks for supporting the site.

Don Miguel, one of my most thoughtful readers, couldn't do it without you. You keep me sharp.

cb_opus, thanks for reading, pal. Much appreciated.

To Marilie, who tends to lurk quite a bit, hope you're doing well. Thanks for your continued support.

hdporter (Harry), thanks for your credit tips. Also thanks for helping me sort things out in my stories.

cvfd1615, sorry for missing you the first time through this list. I knew I would forget someone. Thanks for reading!

bubba, thanks for the help with questions that I send to you from time to time. Can't do this blog without people like you.

Michelle Malkin (Fox News and blogger extraordinaire), thanks for promoting me on your site this week. Hope we can do it again some time.

Jake, thanks for your difficult requests. I can't interview credit analysts! They won't talk to me. Ha!

MelNYC, thanks for your support here and at CB. I'm always thankful.

Cosmo, my pal. Thanks for being you.

Tate, thanks for being a reader and supporting the site.

Red Dwarf, be well. Thanks for stopping by every day. If you stop reading, I must be doing something wrong. Let me know if that ever happens.

Clutch, thanks for all of your posts. You make this site a better place.

Charlena, thanks for your support, too.

Josh, you're well on your way. Keep up the great work.

Trevor (Bad Influence), wish you would post here more often. You've got a lot to add. My readers would love you. Thanks for being my credit wing man for so many years.

persevering, thanks for promoting my blog. I notice the links.

GEORGE, even though we don't always see eye to eye on everything, you've taught me a lot. Thanks. Relax a little bit and let down your hair down from time to time.

Virgil, don't change (or I'll kill you). Your support has been most appreciated. Your contributions are immeasurable.

Lynn, thanks. Enough said.

Surfer, thanks for the continued support. I notice it.

LBCS, sheesh, I could go on and on but I won't. Thanks for everything.

Jen, thanks for being a great friend.

Curious, I would have mentioned you, but I can't know if you're a reader here. You've never posted before. Give me a holler one of these days.

Athensguy, thanks for your comments. Go dawgs!

JazzyBurrell, I haven't seen you lately. But I do know you're lurking. Thanks for the support.

To Diane: you don't post very often, but I know you read my stuff. Love ya.

Collins, thanks for being a loyal reader -- one of my first.

Kiowa, stay good. Thanks for reading.

Shawnee, enable your signature and you'll be able to read me! LOL. Thanks, buddy.

AtkinsonAsylum, thanks for lurking. And thanks for the occasional posts, too. Hope you and yours are doing well.

TangMeister, thanks for your support both here and there. The blog wouldn't be what it is without you.

To all the haters out there, sorry if I have offended you at some point. It wasn't my intention. I can just be straight to the point at times. Can we be friends?

Big Daddy, thanks, pal.

Nighshift (yes, that's really the name), thanks. Be well.

Darth Gilbert, visit more often, will ya? Thanks for supporting the blog.

To Mary Pilon, over at the Wall Street Journal, thanks for reading. And thanks for the occasional mention. Keep up the great work.

Indeed, thanks to every journalist friend who reads my blog on a daily basis. Thanks for spreading the word. Miss you guys.

DiggingOut, you've taught me a lot during the past three years. Thanks.

Tabbycat, an occasional poster, thanks for everything.

Lisa, thanks for your thoughtful posts. Much appreciated.

Taxwizard, if you're reading, post. I'm getting tired of your lurking. : ) Thanks for everything. Tell your son, D, I said hello. Haha.

Thanks to every source that has helped me write a story this year. My material often needs input (and substance). I couldn't do it without you guys.

Drew, thanks for giving me the heads up. Keep 'em coming.

Infamous, thanks.

To my emailers: thanks for your many story tips.

Bridad, here's your shiny new dime. Thanks for reading.

Philly (1030), thanks for your support. Glad you're around.

Sean! I can't forget you. Thanks for the emails. I can't do this blog without good people like you. And thanks for the insight you bring to the blog. Your comments are HUGE (as Jim Rome would say).

Diamondgurl, big wave to you. Thanks.

To toopooor: for being contentious. But you know I'm right. Thanks for reading.

Elusive D, did you think I'd forget you? Not a chance. Thanks for reading. And congrats on the new apartment.

lsacto, thanks for your support. And thanks for defending me back in October (you know what I'm talking about)!

GoldenDomer, you should bring your blog back. I enjoyed it. In the meantime, thanks for being one of my original readers.

Shane@cb, thanks for being a reader.

parttimegenius, thanks for supporting the blog. I do it for readers like you.

Scott in VA, thanks, buddy, for reading.

Savemanatees, thanks for answering questions about bankruptcy issues that my readers have from time to time.

Centex, not sure if you're lurking, but if you are, thanks for your support.

Robert (in Canada), thanks, buddy.

Romadant, thanks for the support. Glad to have you as a reader.

Big bear, thanks for reading during your free time. Appreciated.

Hkbushido, thanks for the support. I notice your every post.

Awedio, not sure where you went, but you've been missed. Thanks for your support.

No, Joe (in NY), I did not forget you. I just wanted to make sure you read all the toward the bottom. LOL. Thanks for letting me interview you earlier this year. Be well.

sohowcome, thanks for the support. So how come you don't post more often? You should.

Tina, you are way behind in your reading. Catch up! Thanks for being a loyal reader.

Thanks to the entire creditboards admin: LKH, Rad, Breeze, and the gang. Thanks for the support. Wouldn't be here without you.

Steve Rhode, glad to have you as a reader. Continue to help those who are in debt, pal. You're doing great work.

Curtis Arnold, keep up the great work at Thanks for your support.

Russ, thanks for being there during the last 25 years (that goes for the other R in your life as well; she knows who she is). I'm not here without your constant support.

Marky Mark, you're reading, even it you ain't posting. And I appreciate it. Thanks for taking care of Russ.

To the other MarkyMark, we'll hook up some time in Los Angeles. In the meantime, thanks for your support.

And, finally, to every anonymous reader whose name I do not know, thanks for coming here on a daily basis.

And while I am at it, thanks to every lurker that hasn't posted here before. Even though you haven't posted, I know you're here. I can see from my traffic statistics that there are far more lurkers than posters. Thanks for the readership.

If I have missed a name, it was not intentional. These were names that I could recall off the top of my head. I didn't want to dig through 234 blog entries to see who I might have missed.

Have a happy Thanksgiving, everyone.

Wednesday, November 26, 2008

American Visa Signature Card -- You Can't Afford To Leave Home Without It

One of my long-time readers has created a fictitious credit card that he thinks the U.S. government should consider issuing. My reader, who goes by Azntg on my site, has given me the exclusive on this particular card. The terms and conditions are among the best I've ever seen. Indeed, when you see the terms, you'll wish that you could apply for the card right now. Imagine how envious your friends would be if you whipped out this particular card at dinner.

Rather than wax eloquent, I'll let you make up your own mind. If these aren't the best terms you've ever seen, I'll eat my hat. (Click the image to enlarge.)

Thanks to azntg for creating this term sheet. Very clever, pal. And thanks for the exclusive.

Cartoon Of The Day -- Bare Market

Yes, the Dow Jones Industrial Average extended its gains today -- marking the fourth straight day of wins. However, we're still down substantially since reaching 14,000 on the Dow earlier this year. We call these victories bear-market rallies. I'm, quite frankly, thankful that the market is closed tomorrow. And we only have a half day on Friday. More to be thankful for during the Thanksgiving holiday.

Michael Ramirez, over at IBD, thought he'd take the bear-market theme a bit further, though.

Michael Ramirez, Investor's Business Daily November 26, 2008

Have a great Thanksgiving holiday, dear reader. Despite the doom and gloom, we all have a lot to be thankful for.

Related Articles:

U.S. Defense Department Plans Travel Charge Card Switchover -- To Citibank

Words cannot even express what I think of that headline. The timing is exquisite. Effective November 30, 2008, Defense Department military and civilian employees will have a new travel card. Previously, the Defense Department used Bank of America for its travel purchases. Indeed, the Defense Department is severing its 10-year relationship with Bank of America. Citibank must have given the DoD a deal it couldn't refuse.

From the Armed Forces Press Service (via DefenseLink):

Citibank has the new contract, and eligible defense military and civilian travelers should have received their new Citibank travel charge cards in August or September. The switchover to Citibank is slated to occur at midnight the morning of Nov. 30.

“The way the new Citi card will be used is exactly the same as the current Bank of America card,” Nina Richman-Loo, DTMO’s chief of special programs and outreach, said during a July 10 interview. “The cardholder agreement is the same cardholder agreement that our travelers read and signed when they got their Bank of America card.”

I wonder if those new customers will be receiving a rate-hike notice in the mail (story link here).

Probably not. I don't think they're allowed to carry a balance. In fact, one of my readers tells me that these operate just like charge-card products. They're supposed to be paid in full.

One of my readers, meanwhile, tells me that Bank of America did not bid for this deal, which gave Citibank a better chance at landing the travel-card deal. Thanks, Marshall, for the tip (see below in my comments section).

You can read the entire press release here (link).

Related Articles:

The Fed and Treasury Will Print As Much Money As They Have To

That's the takeaway from the latest bailout news. The New York Times has a nice roundup story, detailing the latest bailout moves. The subhead for the story really caught my attention, though: "The Fed and the Treasury signaled that they would print as much money as needed to revive the banking system." Folks, at some point, inflation is going to rear its ugly head with a vengeance.

Look at this chart, which comes from

That chart is accurate as of October 1, 2008. And it represents the amount of cash that's been flooded into the market by the Fed. Read the Chris Martenson piece (link here). You'll see just how daunting that chart really is. Indeed, think about how much more liquidity has been pumped into the system since October. Yikes.

Meanwhile, here is an excerpt from the New York Times story:

The new actions are unlikely to be the last. Until the economy begins to turn around, Fed officials have made it clear they are prepared to print as much money as needed to jump-start lending, consumer spending, home buying and investment.

“They are using every tool at their disposal, and they will move from credit market to credit market to reduce disruptions,” said Richard Berner, chief economist at Morgan Stanley.

The Federal Reserve has now moved to a radical new phase of its effort to shore up the economy. Until now, it has carefully distinguished between two goals — reducing the panic and turmoil in financial markets, and propping up the economy itself, which has been battered as the supply of credit has dried up.

We'll see how this all ends.

You can read the rest of the Times story here (link).

Related Articles:

Citibank Tells Cardholders To Take A Hike

Michelle Malkin has written about Citibank this morning. Indeed, my headline is her headline. It turns out that one of her readers, Elizabeth, received a nice letter from Citibank. In that letter, of course, she found what we've all been finding. A nice rate-hike notification. Elizabeth was miffed over the same stuff that we've been talking about here at If this recent rate increase affects less than 20% of us, and if the rate increase will be about 3 percentage points (on average), why do I have so many Citibank refugees posting away at my site?

From Elizabeth's email (which is now prominently displayed at Michelle's blog):

When I called to opt out, a Citibank representative assured me that I did not have any problems with my account that would have prompted a rate increase and read me a canned message about the “current economic crisis” and how Citibank would otherwise be “unable to keep its doors open” if it doesn’t increase its cost of extending credit. It is my understanding that last week, Citibank told the Wall Street Journal it would be raising APR rates 3% on average and the rate increase would affect about 20% of Citibank cardholders. Sure. My fiance also received the same notice despite his high credit score. When he called Citibank, he was given the same canned speech.

You already know how I feel (story link here). I fully empathize with Elizabeth and every other Citibank customer who bought what Citibank was selling in the media.

You can read the rest of the Elizabeth's email at Michelle's site (story link here). Also, Michelle has a tremendously active readership. Unfortunately, Michelle's site is so unfreaking popular that registration to her site is unavailable. You can only read the comments posted there. How's that for popularity??

In addition to Michelle picking this up, Don Surber's blog has picked this up as well. Don has an interesting take on Citibank's actions. In referring to my situation, here's what Don says:

I have got news for him: He’s a lousy customer. He does not borrow much or pay much in interest rates. Citigroup is culling the herd of non-borrowers — CINOs — Customers in Name Only.

That is good business.

CINOs clog up the computers. You have to send them monthly statements for their $0 balances. They generate $0 revenues.

A sound business practice is to place them on the iceberg and let them drift off to sea.

How's that for publicity? Hey, I'll take any kind of pub. By the way, Don, I get electronic statements. Citibank isn't sending me anything. What's more, I generate merchant fees (which drop straight to Citibank's bottom line).

You can read my counterpoint story here (link).

Anyhow, here is a link to Don's site (link here).

Related Articles:

The Wealth Effect in Reverse

The market giveth and the market taketh away. When home prices and stock prices were soaring, people felt more wealthy. Now that they're both in decline, people don't feel nearly as flush. Robert J. Samuelson, a columnist writing in the Washington Post, has a piece on the wealth-effect phenomenon. Samuelson has been a reporter for a long time -- and he's written about this topic before. But his latest iteration is worth a read.

From the story:

The "wealth effect" refers to the tendency of people to adjust their spending as their wealth -- concentrated heavily in housing and stocks -- changes. When wealth rises, spending strengthens; when wealth falls, spending weakens. For the past quarter-century, higher stock prices and home values propelled the economy forward by inducing Americans to spend more of their incomes and to borrow more. In 1982, the personal saving rate was 11 percent of disposable income; by 2006, it was almost zero. The lowered saving rate added about $1 trillion annually to consumer spending -- more shoes, laptops, books -- out of a total of about $10 trillion.

But now the wealth effect is reversing. As stock and home values drop, Americans are scrambling to increase savings and curb spending. The plausible math is daunting. Since September 2007, Americans' personal wealth has dropped about $9 trillion, says economist Nigel Gault of IHS Global Insight. A common estimate is that every dollar's change in wealth causes people to change their spending by 5 cents. If so, the hit to consumer spending would be $450 billion ($9 trillion times .05). Gault thinks the effect would occur over several years.

How about it, readers? Even before we hit this rough patch, were you already feeling this reverse wealth effect -- as home prices started to slide? Or did the reverse wealth effect only hit home after the stock market got pounded?

You can read the rest of the Post story here (link).

Tuesday, November 25, 2008

Free Experian Credit Monitoring For 12 Months -- Via MSN Money (First 10,000 Subscribers)

Update: 10,000 subscribers have joined. Thus, the deal has expired. MSN Money is offering free Experian credit monitoring to the first 10,000 people who sign up through its Web site. The offer is being made so that MSN and Experian can raise awareness about the importance of credit monitoring. There are, according to MSN, no strings attached. You simply sign up and enjoy your benefits for a year.

Anyhow, get your free credit monitoring while it lasts. It's good for Experian monitoring only. And you will also have access to your Experian PLUS score. The offer is good starting today and ends February 28, 2009 (or until 10,000 subscriptions have been given away). If you want access to all three credit bureaus, the cost is $19.95 (no thanks). Good luck.

Here is what you'll receive as part of your free credit-monitoring:


American Express: "We Can Yank From Your Bank Automatically" Clause? Not Quite

The Consumerist has a story on its site suggesting that American Express has added an ominous clause that allows it to yank money automatically from our banks as part of the Electronic Funds Transfer (EFT) section of our credit-card agreement. Not so fast, Consumerist. The new disclosure is much ado about nothing.

From the Consumerist story (story link here):

AMEX just sent out some new changes to terms of service for some customers, and one of them has us scratching our heads in particular. There's various increases in APRs and fees, but then under "In Case of Errors or Questions About Your Transactions" they're now adding "You authorize us or an agent to debit your Bank Account for this amount." What scenarios would qualify under "errors" or "questions"? Don't like the sound of agreeing to let anyone make withdrawals on my bank account without myself pulling the lever.

Let's get to the bottom of this.

If you go to the "In case of errors or questions" portion of the ETF section of your American Express agreement, you'll find that the new language doesn't change anything. The change takes place in the final paragraph of the ETF agreement. The new language must be inserted after the third sentence.

These are the three sentences that come before the new sentence that American Express wants us to insert:

If we determine that there was no error, we will send you a written explanation within three business days after we finish our investigation. Upon your request we will provide you with copies of the documents that we used in our investigation. If we have provisionally recredited your Bank Account during the investigation and determine that there was no error, we will notify you of the date on which we will redebit your Bank Account, and the amount to be redebited.

Those are the three sentences. American Express is saying that if it has already RECREDITED your account -- but later finds out that it was in error -- it will take the money back. It will notify you of the date in which that redebit will take place. That's the old disclosure.

Now add this to the disclosure: "You authorize us or an agent to debit your Bank Account for this amount."

See what I mean? Totally a nonstory. All that American Express is doing is saying that you agree to let them redebit your account. Customers had already been doing that. Indeed, American Express has always notified customers of the date in which this redebit would take place. And this new sentence does not change that. American Express MUST still notify you and tell you what date the redebit will take place. It was just implicit that American Express customers would authorize American Express to "debit your bank account for this amount." American Express's new disclosure just makes something that was implicit -- explicit.

There is no story here. I enjoy the Consumerist (and Ben Popken), so I'm not taking a shot at the site or its author. Just pointing out that the Consumerist and its readers have nothing to worry about regarding the new American Express disclosure.

It's much ado about nothing.

Please let the Consumerist know.

Editor's Note: Turns out that the Consumerist has written a follow-up story, citing my work. Ben Popken (an all-around good guy) has posted the story here (link).

Related Articles:

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit

Bloomberg has written what I'd call a must-read piece. If you want to see just how much exposure (risk) our government has taken on with these bailouts (the latest one has the acronym of TALF), you should run, not walk, to read this story. The numbers are mind boggling -- and daunting.

From the story:

‘They Got Snookered’

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.

“It’s unprecedented,” said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. “The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer.”

President Franklin D. Roosevelt’s New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government’s current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office, now called the Government Accountability Office.

Read the rest of the story here (link).

Related Articles:

Citibank To Raise Interest Rates On

The background: About ten days ago Citibank confirmed that it would be raising interest rates on some of its credit-card customers. A Citibank spokesman confirmed the rate hike, but didn't specify how many customers would be impacted by the increase. According to a Wall Street Journal source, the rate hike was expected to impact less than 20% of Citibank's card portfolio, or about 11 million customers. The spokesman was certainly given an opportunity to dispute that 20% figure, but didn't. We were also told that customers who are impacted should expect to see an interest rate increase of about 3 percentage points -- on average (story link here).

Need to write an opt-out letter to Citibank? Use this one (link here)

The setup: I have been a Citibank cardmember for nearly seven years. I have never been late. I have never been over my limit. I rarely use more than 2% of my Citibank limit during any given month. My current balance at Citibank is $0. I pay my balance in full every month. My Equifax FICO score is currently 786. I pulled it this morning (specifically for this story). Across all of my credit cards, I have less than 1% utilization. Indeed, I currently have $877 in outstanding balances on all of my cards combined. I pay all of my bills in full each month. My Bankcard Industry Option FICO score, meanwhile, was recently at 808. If you're not familiar with the Bankcard Industry Option FICO score, read my story about it (story link here).

The deal: I received a letter from Citibank on Monday. In it, I found a change in terms -- and a right to opt-out notice. Citibank, it says here, is increasing my variable APR for purchases. I will be priced at prime plus 8.99%, with a minimum of 14.99%. As of October 1, 2008, according to Citibank, this purchase rate would have been 14.99% (if the rate increase had been in effect at that point). That would be more than double my current rate of 6.65%. Turns out that I happened to pull my Equifax FICO score on October 1, 2008. That day, my FICO score was 777.

Also, and this is important: The Citibank letter says that these "changes will be effective for all billing periods beginning on or after December 3, 2008. The changes will be effective whether or not you receive a billing statement." I was curious about this statement, so I called Citibank this morning. I wanted to know what happens to those who wait up until January 31, 2009, to opt out. Will they be assessed the new rate until the time they opt out?

The Citibank Opt-Out Decision -- Everything You Need To Know (link here)

According to Citibank, here's how it works. Your current rate will stay in place all the way until January 31, 2009. However, if you do not opt out by that time, Citibank will retroactively charge you for interest from the December 3, 2008, date. Got that? Rates stay the same until January 31, 2009. After that, if you don't opt out, Citibank is going back and grabbing the accrued interest from December 3, 2008.

Now, to my point. I wrote a story about ten days ago detailing Citibank's proposed rate hikes (story link here). Since then, a boatload of readers have left comments (in the comments section of that story) telling me about their high scores and perfect payment histories with Citibank (see comments here). Given that Citibank has allowed all of its customers to believe that less than 20% of its customers would be receiving a rate increase, I found it fascinating that so many people were showing up on my site telling me that they have high FICO scores, perfect payment histories, no balances, and risk profiles that you wouldn't think would warrant a rate hike. Many of these customers, you'd think, would fall into the 80% of the customers who would not be seeing a rate increase. After hearing so many of their stories, I wrote a story late last week (link here) questioning the 20% figure being bandied about in the press. Indeed, I do not believe that Citibank is telling the truth about how many people are receiving interest-rate increases. As such, I said as much.

Last week I was convinced that more than 20% of Citibank's customers were receiving rate hikes. But I also said that I didn't believe that every customer was receiving one. Therefore, this rate increase was affecting more than 20% but less than 100%.

Now hear this: I believe that Citibank is completely full of it. Given my risk profile (very little risk), given my utilization (nearly nonexistent), given my fairly long history with Citibank (almost seven years), and given how well I have handled my accounts during the past 20 years, I am willing to bet that Citibank is perpetrating a total scam on its customers. Rather than fessing up, and simply doing what Nordstrom recently did with its rate increase (story link here), Citibank has decided -- it seems -- that it wouldn't go down well if it told everyone that a rate increase was being implemented on every one of its customers. Therefore, it has allowed a "source" to float the 20% figure in the press. And while I am talking about rates, we've been made to understand that the average rate increase would be 3 percentage points. I have not met a single person who has had an increase of 3 percentage points or less. In fact, nearly everyone has seen a substantial jump. I'm calling B.S. on that part of Citibank's story as well.

I'm calling Citibank out. Citibank, why don't you go on the record and tell all of your cardholders just how many people are being affected by this rate increase. Stop hiding behind your anonymous source. Citibank's customer-service representatives have been telling customers that this rate hike is being implemented across the board. Citibank, is this rate hike across the board? It's certainly looking that way.

I don't have to opt out of Citibank's rate increase. I carry no balances. This APR hike doesn't hurt me. However, I can't trust Citibank. How can I? My score is not far from 800. If anyone was safe from this rate hike, it should have been someone like me. Or people like those who have been leaving message after message (day after day) on my blog. I should have listened to my mom when she said that you can't trust bankers. She nailed that one.

Editor's Note: I have now written a follow-up story to this one. Please read it (story link here).

Less than 20% of Citibank's customers are seeing a rate increase? Something smells, Citibank.

I think I, and all of my readers, know what it is.

Related Articles:

Cartoon Of The Day: No. The Fed Will Not Give You $20 Billion

I can point to one of my own stories for this cartoon of the day. Michael Ramirez, the Pulitzer Prize-winning cartoonist from Investor's Business Daily, really nails this one. The little kid should have changed his name to Citigroup before asking. May have yielded better results. I'm guessing the little one wasn't too big to fail (story link here).

I wish that Ramirez would do more economic/credit/Wall Street cartoons. Sigh.

Michael Ramirez, Investor's Business Daily November 25, 2008

Related Articles:

Monday, November 24, 2008

Credit Crunch for Consumers -- As Card Issuers Hike Rates, Consumers Are Forced To Work Harder To Protect Credit

The Wall Street Journal out with yet another story about the headwinds currently facing credit-card customers. Pay particular attention to the comments about people carrying balances on their cards. It's an ironic situation. Card companies are going after people who carry balances. These card companies are trying to get customers to pay their balances down quickly. If that's the goal of the card companies, though, it represents a sea change in their thinking. After all, up until recently, card companies loved customers who carried balances and paid interest every month. My, how things have changed.

From the story:

Amid rising unemployment and higher delinquency rates, credit-card issuers are cracking down, particularly on the balance-carriers. "Given the current environment banks are starting to get very scared of the backlog of debt they're owed from their current borrowers who have carried balances," said Greg Larkin, a New York-based senior analyst with Innovest Strategic Value Advisors.

"They're trying to purge them from the roles of people that owe them money," he said. "Banks right now want to prove their balance sheet is healthy, that their borrowers pay them back on time."

It's a delicate balance (pun intended) to say the least. If card companies push too fast, too hard, they run the risk of pushing consumers over the edge. Given the poor decisions I've seen coming from these card companies of late, let's just say that I am not holding my breath that they'll get it right this time around.

Read the rest of the story here (story link).

Related Articles:

Builders Make Plea for Federal Aid -- Another Bailout Request

With all of the Citigroup news, I'm not sure if everyone caught this or not. The home builders are looking for a handout, too. It would be a $250 billion package aimed at propping up housing prices. The proposal is called "Fix Housing First." Why of course it is. What else could it be called? "Enrich Home Builders At Taxpayer Expense" probably wouldn't go over too well. Anyhow, the Wall Street Journal has a story on it.

From the story:

Builders are promoting the campaign with full-page newspaper advertisements, but face an uphill battle, with critics suggesting the proposal is too expensive and that it too heavily promotes home purchases rather than addressing loan modifications for delinquent homeowners.

The effort aims to stop the adverse feedback loop gripping the market. The cycle begins when falling home prices prompt some borrowers to default, leading to foreclosures. That further depresses home prices, hitting the banks that hold mortgage-backed securities, causing them to pull back and freeze credit. That in turn causes the economy to slow.

"The basic asset that is underlying all the financial problems that we're experiencing is highly unstable, and it's causing an ongoing hemorrhaging in the financial system," said David Ledford, who oversees housing finance and policy for the National Association of Homebuilders. "It's starting to snowball."

Read the rest of the story here (link to story).

Related Articles:

U.S. Agrees to Rescue Struggling Citigroup

After a long weekend of negotiating, the government agreed Sunday to a bailout of Citigroup. The deal calls for a cash injection of $20 billion. The deal also calls for a backstop of more than $300 billion in troubled Citigroup assets. Under the arrangement, Citigroup would be on the hook for the first $29 billion in losses stemming from those assets. After that, the Federal Deposit Insurance Corp., the Treasury Department, and the Federal Reserve would shoulder any remaining losses.

From the U.S government press release:

The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital.

As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC's mortgage modification program.

A copy of the term sheet can be found here (link).

The joint press release from the U.S. government can be found here (link).

Related Articles:

That Money Isn’t Leaving the Vault

Banks took advantage of a taypayer-funded bailout. The belief was that banks would use the bailout funds for consumer and small-business lending. It was a great idea in theory. Not so much in practice. We shouldn't be surprised, says the New York Times.

From the story:

At the time, the Federal Reserve Board and three bank regulatory agencies said: “The agencies expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers, and other creditworthy borrowers.”

Alas, that admonition wasn’t accompanied by any real requirements to lend. When the Treasury gave taxpayer billions to the banks, it attached no strings. So is it any surprise that lending is tight?

Reports from institutional and individual borrowers across the country indicate this. Nervous lenders are demanding that even healthy loans be paid back. Banks and other financial institutions, meanwhile, are reducing exposures to borrowers and doing whatever they can to discourage the assumption of further debt.

It's no wonder taxpayers are frustrated by the situation. They didn't get what they bargained for. “The banks that have taken the taxpayer’s money ought to be part of the solution, but they are acting like war profiteers,” Mr. Rowe told the New York Times. “If I were in charge, I would haul them all down to Gitmo, put them in a room and say, ‘You have used the taxpayer’s money to pervert our objectives. It is morally wrong and we are not going to stand for it.’”

You can read the rest of the story here (link).

Related Articles:

Friday, November 21, 2008

Chase Pulls Out of Affiliate Marketing Channel -- Just How Bad Is This Credit Market?

This afternoon I received two emails from Chase. One email notified me that I was being removed from its affiliate marketing program. The second email notified me that Chase is, effective immediately, pulling itself out of the LinkShare affiliate marketing channel. From what I've been able to glean, Chase is pulling out of all of its affiliate channels. Chase says its decision is based on "current market conditions." Just how bad are things right now for Chase and its credit card unit?

(Editor's note: the following paragraph was added to the story at noon eastern on November 22.) This exit, meanwhile, follows on the heels of a memo directing all affiliates to remove "instant approval, instant decision" applications from the marketing channel. Why were these ads pulled? It turns out that they were drawing in weaker-than-expected applicants. Said Chase: "We have found that these categories do not generate quality applicants for Chase." That notification was sent on November 17. Now you have Chase exiting the channel completely. I don't think we can be read too much into the timing of both announcements, however. Instant decisions don't often allow for the most thorough underwriting. At this point in the cycle, I can see why Chase would want to put an eyeball on every application it gets.

In the meantime, here is a copy of the notification Chase sent today:

As far as I know, none of the other credit card companies that participate in the affiliate marketing program have pulled out. This seems like a drastic move, quite frankly. If Chase is pulling out of the channel, that means it doesn't want new customers applying for credit through Web sites such as In essence, then, Chase has decided that it will only be offering credit cards through its own Web site. It stands to reason that Chase's decision to pull out of the affiliate channel will result in fewer applications -- and less loan growth -- for the credit-card giant.

I don't have anything more to offer at this point. I'll be keeping my ears and eyes open for further developments.

Related Articles:

Citigroup On The Ropes -- Credit Card Customers Feeling The Pain

That giant sucking sound you hear is Citigroup's stock price getting sucked down the toilet. This morning, shares were trading below $4 a share, reaching a 16-year low. Citigroup, according to the Wall Street Journal, is now mulling its options, including a possible sale of the company. The fallout from a Citigroup failure is unknown, but it's fair to say that it would be devastating. In the meantime, however, Citi's credit-card customers already appear to be taking a hit because of Citigroup's trouble.

A week ago, Citibank said that it would start raising interest rates on a percentage of its credit-card customers. While Citibank did not place a number on how many cardholders would be impacted by the change, a source told the Wall Street Journal that less than 20% of Citi's customers would be impacted. Customers, meanwhile, could expect an interest rate increase of about 3 percentage points on average (see story here). Although my evidence is clearly anecdotal, I don't believe that Citi's interest-rate hike affects less than 20%. Indeed, I have heard from a good number Citi cardholders, many of whom -- you'd think -- would be unaffected by Citi's interest-rate hike.

"I just got a notice today regarding my 21-year-old Citi card. I have never carried a balance on this card, have a credit score of 785 (I checked FICO today) on the report they checked and (pay in full) on this and all my other cards," a reader wrote on my blog Thursday. "Never late anywhere on anything, nothing negative ever on my reports." If Citibank is targeting fewer than 20% of its customers, one must wonder exactly how this reader got caught up in this mess. My reader continues: "The notice said that as of 11/28 they are raising my rate from 8.99% to 16.99%. I guess I thought I was immune and was really shocked." Given this reader's profile, I'm shocked as well. This isn't the kind of customer that should be seeing rates get nearly doubled -- especially if Citi is targeting less than 20% of its customers.

Another reader, meanwhile, had just recently paid off a Citibank balance -- but to no avail. "I have a Citi Platinum Select MasterCard and I recently received a rate increase notice in my monthly statement. I have been a Citi customer for 4 years and my rate has always been 8.9%," this person wrote. "The increase will take my purchase APR to 14.99%. My FICO score is 740 and I have never had a late payment to a creditor in the 17 years I've had credit. I have carried a balance on this card in the past but I just paid this card off last month."

Yet another reader, with FICO scores above 750, could not escape Citi's rate increase. "I have (a) Citi World Platinum MasterCard (like Visa Signature CL is not reported). I found a note in my latest statement - We are increasing ... with a minimum APR of 18.99%. I had 11.99%. I always pay in full and my last FICO score was 750+." See what I mean? If my reader accounts are true, and they have no reason to lie, especially when they're posting anonymously, it calls into question what Citibank is saying publicly.

One Citibank customer, who has carried Citi plastic for 15 years, wrote what a lot of my readers are beginning to think: "I suspect that they are going to increase the rates across the board. I can't understand how I could be one of their best customers yet be one of the 20% to have the rates increased," this reader wrote. "I think they are trying to pull a fast one on all Citigroup customers. Why should I be paying for their bad financial choices?" Good question. Anyone else buying what Citibank is selling?

To be sure, I did hear from some readers who probably did deserve to see their rates climb somewhat. Many of these readers are carrying balances. "I have a Citi Platinum and mine was raised from 6% to 14.99%. This is really frustrating as I have a $3,800 balance (my only debt)," an anonymous poster wrote. "I always pay on time, usually early. I have a good FICO score (around 750) and only one other credit card (with no balance)." I can understand Citi's rationale for upping rates on customers who carry a balance, but Citibank more than doubled the rates on a customer who, according to the post, has a FICO that's near 750. What I don't know is what that $3,800 balance represents in terms of utilization.

With the exception of a few readers (one of whom had been out of work for about six months -- and had been using a Citibank card to make ends meet), most of the comments came from people who likely should have seen their rates move up by three or four percentage points -- at most. In many cases, though, Citibank lifted rates more substantially, with many receiving new rates that were twice as high as previous rates.

Anecdotal evidence, yes. But I've heard from enough readers to think that Citibank's rate increase is affecting more than 20% of its customers. What's more, I'm finding it difficult to believe that the average rate increase is only about 3 percentage points. I couldn't find a single reader who had received an increase of 3 percentage points or less.

Editor's Note: I have now received a rate-hike notice as well. Read my story about it (link here).

Shares of Citigroup ended the day off 94 cents, or 20%, falling to $3.77. Whether Citigroup continues to exist as an independent company remains to be seen. For now, though, it has a slew of credit-card customers that are irate, unhappy, disappointed, and, in some cases, shocked by the interest-rate hikes they've received.

Between my email -- and the messages I've seen on my blog -- I'm wondering what's really going on at Citigroup.

Given the company's plunging stock price, all I can say is stay tuned. (Editor's Note: the U.S. government agreed to rescue Citigroup on November 23, 2008. You can read the story here -- link to story.)

Related Articles:

FHA-Backed Loans: The New Subprime

BusinessWeek's Chad Terhune and Robert Berner have an excellent story on FHA-backed loans. According to the subheading, "the same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more." Great. Just what we need. In addition to laying out the situation, BusinessWeek does a sweet job of nailing a few scumbags along the way.

As a former investigative reporter, let me just say that it was a nice read. I used to compete against Chad Terhune back in the day, when he wrote for the southeast edition of the Wall Street Journal. He's a great reporter. What's more, it's nice to see BusinessWeek getting back to these kinds of stories again. They've been missed.

From the story:

But Premier didn't just close down. Since it declared bankruptcy, federal records show, it has issued more than 2,000 taxpayer-insured mortgages—worth a total of $250 million. According to the FHA, Premier failed to notify the agency of its Chapter 11 filing, as required by law. In late October, an FHA spokesman admitted it was unaware of Premier's situation and welcomed any information BusinessWeek could provide.

You'd think the government would have had Premier on a watch list. According to data compiled by the FHA's parent, the U.S. Housing & Urban Development Dept. (HUD), the firm's borrowers have a 9.2% default rate, the second highest among large-volume FHA lenders nationally.

Now, members of the Cugno family have started a brand new company called Paramount Mortgage Funding. It operates a floor below Premier's headquarters in a three-story black-glass office building Jerry Cugno owns in Clearwater. In August 2007, only weeks after Premier sought bankruptcy court protection, the FHA granted Paramount a license to issue government-backed mortgages. "I am the only person in the country who really understands FHA," Cugno says with characteristic bravado.

I love these kinds of stories. You've got investigative reporters on one side and sleezy characters on the other side.

Enjoy the rest of the story. It's really well done. Read it here (link).

Cartoon Of The Day -- Not Feeling Any Love From Our Credit Card Companies

It's been a long week. Many of us have seen our credit-card interest rates hiked for no good reason. Fees are increasing. Customers are seeing their credit limits slashed -- if the account isn't outright closed.

Calling customer service, in response to some of these changes, yields nothing. Sorry. Times are tough all over. We're just passing the costs on to our customers, these card companies say. That's what you can expect to hear when you call to find out about the many changes that are taking place. If you didn't already know, you should now: these credit card companies don't care about you. They're in it for the money -- not your love.

I think today's cartoon captures the essence of what these card companies think of us (click cartoon to enlarge).

Fat Cats Classics

Related Articles:

Thursday, November 20, 2008

Easing the Headache of Paying Bills

I do not use bill-pay services. Instead, I pay all of my bills by visiting the sites of my various creditors. As a result, I am not qualified to analyze and evaluate the various bill-pay products on the market. But I do have Mary Pilon, a Wall Street Journal reporter, so it's all good. Indeed, Pilon tests Quicken Bill Pay, PayTrust and MyCheckFree to see how well they perform. Because I have never used these products, I was curious to see what Pilon and the Journal thought of these services.

From the story:

There certainly seems to be a market for such services. A 2007 survey from Harris Interactive and the Marketing Workshop found that those surveyed pay on average 11.5 bills a month. Seventy-four percent of surveyed households pay at least one bill online. And on average, respondents said they spend about two hours a month dealing with the logistics of paying bills.

Pilon then sets out to review the services one at a time.

You can read the rest of her story here (link).

Cartoon Of The Day -- Back To The Good Old Days

With all of these card companies jacking up interest rates and hiking fees (story link here) and reducing risk and actually doing what appears to be some real underwriting, is anyone yearning for the good old days of, say, 180 days ago? I'm not as cynical as some, but I do get the impression that people wish that credit card companies and banks would just go back to their lax ways. It was a whole lot easier for everyone.

Hat tip Bob Wang for emailing me the following cartoon (click to enlarge).

Bruce Tinsley -- November 20, 2008

Related Articles:

Anyone Having Printer Issues?

I hope you guys don't mind my diversions from time to time. You come here for credit information and what do you find? A post about printers. I'm trying to find a connection between printer issues and credit. I'm drawing a blank. No matter. This is my blog and I think I know my readers well enough. If I thought you guys would kill me, I wouldn't post some of the stuff I point to. So, here's today's diversion.

Some of my readers have been having printer issues. Am I wrong? I recently had to replace a printer. The old workhorse finally keeled over. I couldn't figure out what went wrong with the printer. I chalked it up to age. But now I'm kind of wondering again. Indeed, after seeing the video below, I am very seriously reconsidering the age angle.

What do you think? (Hat tip Cosmo for sending me the video.) Be sure to turn the volume up.

By the way, I just figured out the connection between the printer and credit. I used my Nordstrom card to buy the new printer. Enough said.

10 Credit Questions and Answers at (November 20, 2008)

As I have said before, I can see how my readers find I don't collect any personal information, but I can see search terms that people use to find the site. This information is like the center of Lifesavers candies. Or doughnut holes. Rather than letting them fall by the wayside, I figure that I should put these search queries to good use.

Here are the game rules: I will edit search queries for syntax purposes. Otherwise, I will leave them alone. I'll also phrase queries in the form of a question whenever possible. By request, these Q&As are published whenever I have received 10 questions (through Google, Yahoo, and AOL searches).

Q: Macy's credit card flex vs. revolving?

A: These are actually one and the same. Macy's credit-card employees refer to the Macy's store account as both a "flex" and "revolving" account. The terms are interchangeable. If you called a Macy's representative and used the flex language, the customer-service representative would know exactly what you're talking about.

Q: Does lowering your credit limit help your credit score?

A: It certainly won't help your score. And for good reason. Reducing your credit limit really just means that you have less credit. It also means that if you have balances on those cards, your utilization ratio will move higher (that's bad). There is an inverse relationship when it comes to credit limits and utilization. Assuming you have a balance, your utilization ratio would go higher if your limit goes lower. If your limit is increased, your utilization ratio would go lower. That's why it's never smart to lower your credit limits. It may not hurt you (because you don't carry high enough balances to matter), but it certainly won't help you, either. For more information on utilization, please read my previous story on the topic (story link here).

Q: Is it legal for a retailer to ask for drivers license when using credit card?

A: Legal and illegal have no role in this question. It's a non-issue. Merchants sign an agreement with MasterCard, VISA, Discover, and American Express. The agreements stipulate that the merchants should not ask customers for identification when the card is properly signed. Does that mean merchants won't violate the terms of their agreement? Of course not. Merchants pretty much do what they please these days -- merchant agreement be damned. I wrote a story about merchant agreements and identification. Read it here (link).

Q: Credit score impact after a credit card replacement?

A: Two years ago I had my BMW VISA compromised. BMW closed the account and sent me a replacement card. Impact on my credit score? Nada. Nothing. No impact. It simply gets reported as lost or stolen. The card company then issues a new card with the same history that your previous card had. Thus, if your stolen card was opened in 2000, your new replacement card will show the same history on your credit report.

Q: Citibank request credit line increase link gone?

A: That's standard practice for Citibank. It does that from time to time. My credit-limit request button disappears from time to time. If you've recently received an increase, that could explain the disappearance. But there doesn't seem to be any rhyme or reason for its appearance and disappearance. It comes and goes. By the way, when it does show up again, don't expect an increase to be waiting for you. I've been suckered into hitting the button after it reappeared only to be greeted with the form (the form that you fill out if you want an increase). No thanks. If you do fill out of the form, you'll get a hard inquiry for your trouble.

Q: What FICO scores do I need to get various credit cards?

A: Most credit cards don't operate that way. FICO is just one aspect of your credit application. You could have a 745 FICO score but still get turned down because of too many new accounts reporting on your credit report. Or you could get turned down with a 769 score because you have too many recent inquiries. See? That's why credit-card companies don't grant cards by FICO alone. The sooner that consumers realize that FICO is just a part of the overall process, the better. Utilization ratios, new accounts, inquiries, income, age of credit history, these all play a part.

Q: Does being an authorized cardholder get reported to credit bureaus?

A: Most card companies do report authorized user information to the credit bureaus. But I always suggest that people call to make sure. It doesn't take but five minutes of your time. Read my story on authorized users (link here).

Q: Is citibank shutting down accounts?

A: Citibank is mostly just increasing interest rates on customers for now. But I am sure that some customers have recently had their accounts closed as well. In fact, I know that Citibank has been closing inactive accounts. If you haven't used your Citibank card in a while, I would advise that you do. You don't want to get the account closed because of inactivity.

Q: Sears MasterCard closed my account -- can I reopen it?

A: Maybe. You should give them a call and see why the card was closed. If it was closed because it was inactive, you'll have a shot at getting it reopened. If, however, your card was closed for a different reason, you might have a more difficult time. Still, give Sears a call and see what it says. Good luck!

Q: Is USAA having trouble with the credit crisis?

A: USAA has been very quiet during this crisis. I haven't heard too many stories about USAA. I can tell you, though, that my search traffic (the Google searches that readers use to find my stories) has seen a slight pickup in USAA credit-limit decreases. There aren't enough yet for me to think that it's widespread. But I am keeping my eye on the situation.

For now, seems as though USAA is doing pretty well. Update December 16: I understand that some USAA customers have been receiving credit-limit decreases. When you log onto your account at, you'll get a notice of the decrease. You'll also see a note that says a letter is being sent to you. Just FYI.

READER ALERT: For more credit questions and answers, the entire 10 Credit Questions & Answers index can be found here (link).