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Credit card balances grew in December for the first time since August 2008, an indication that consumers may be feeling better about their personal finances and the economy in general.

The latest Federal Reserve Consumer Credit Report released Monday showed that revolving credit, which is primarily credit card debt, increased in December at an annual rate of 3.5%, the first increase in 27 months. The total credit card debt outstanding on December 31 was a seasonally adjusted $800.5 billion, an increase of $2.3 billion from November.

Credit card debt has declined 18% since August 2008 when it was $974 billion.

Credit card balances started dropping after the financial collapse. Consumers and issuers both contributed to this decline. Cardholders reduced their use of credit cards and some turned instead to using debit cards. Issuers also reduced their own lending risk, slashed credit limits on millions of existing accounts and closed riskier accounts. During this time, issuers also raised interest rates to make up for the revenue they lost during the recession and from Congressional regulations. In August 2008, the average credit card rate was 12.04% according to the LowCards Complete Credit Card Index. Today, the average rate is 14.08%.

Some financial experts see this latest increase as good news for the economy. Rising credit card use could mean the economy is improving for some households, that consumers have survived the worst of the recession, and they were ready to shop during the holidays. It certainly helps explain the strong holiday shopping numbers that retailers enjoyed.

While this could be seen as a positive sign for the economic recovery, consumers still need to be extremely cautious with their credit card balances. Interest rates are very high and will likely increase. If you don’t pay off your balance in full on time each month, your personal finances will start to suffer. That type of spending and improper use of credit is what led to so many economic problems two years ago.

Link to the latest Federal Reserve Consumer Credit statistics:

http://www.federalreserve.gov/releases/g19/Current/

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The Treasury Department is now testing the distribution of debit cards instead of paper checks for tax refunds to low income individuals.

This week, 600,000 low income individuals will receive letters inviting them to have their tax refund deposited to the MyAccountCard Visa Prepaid Debit Card.

The Treasury Department is converting to debit cards for several reasons. For the government, they are less costly to mail than checks. For the recipient, they provide a safer, faster and more convenient way to distribute money than checks. Many low income individuals do not have bank accounts and the cashing of these refund checks can be costly. Cards are expected to be in the hands of consumers six weeks earlier than a check. The government hopes the distribution of these cards cuts down on the costly refund anticipation loans than many low income consumers receive.

The government has already switched to debit cards in other areas with federal benefits like Social Security. The Treasury says that more than 1.7 million workers receive their wages on payroll cards and many of these do not have bank accounts.

The card is accepted wherever Visa debit is accepted and can be used for online purchases. It does not charge for point-of-sale transactions, online bill pay or cash back at participating retail stores. ATM withdrawals are free at more than 15,000 ATM machines nationwide. However, there is a $2.50 service fee for out-of-network ATM withdrawals, and a 50-cent fee for balance inquiries at out-of-network ATMs. There is a $4.95 fee to replace a lost or stolen card or to get an additional card.

The Treasury is testing different offers and this has led to some initial controversy. About half of the 600,0000 people will be offered a card with a $4.95 monthly fee; the other half will be offered a card with no monthly fee. The results of this test will affect the nationwide rollout.

The card is available only to those who receive a letter from the Treasury. The letter will explain the fees and how to sign up and use the card. There is no credit check required.

The card offers benefits that can help users manage their balance. Free account updates are available online or by phone anytime. Free balance alerts can be sent to your mobile phone (your wireless carrier may charge text messaging rates).

The Treasury says that consumers have zero liability if a card is lost or stolen or used fraudulently. The cards are insured by the Federal Deposit Insurance Corporation (FDIC).

U.S. Treasury press release on debit cards for tax refunds:

http://www.treasury.gov/press-center/press-releases/Pages/tg1021.aspx

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January is the busiest month for new credit card applications. Issuers will flood consumers with numerous offers promoting new credit cards, especially cash-back cards.

Credit card mailings are up significantly from last year. U.S. consumers received approximately 1.2 billion offers for new credit cards in the third quarter of 2010, compared to just 391 million in the third quarter of 2009, according to Mintel Comperemedia. Consumers with good or excellent credit scores are still receiving the most attention. Much of this is due to credit card offers promoting reward programs. Eight in ten offers are for rewards cards promoting points, miles or cash rebates, up from six in ten offers in 2008.

Cash-back promotions on purchases have become increasingly popular as consumers are saving more and spending less. Cash-back credit card offers accounted for 41% of all rewards offers in the third quarter of 2010, compared to 28% a year ago. Issuers responded to this new frugality by promoting rewards that offer better returns on “everyday items.” Forty-five percent of offers mentioned the word “groceries” somewhere in the promotional copy in 2010, up from just 20 percent in 2008 (Mintel).

Credit card issuers know that rewards are an effective way to attract cardholders or to increase usage. While these can be a nice bonus for people who pay off their balance and take advantage of the rewards, credit card companies use reward offers to increase card spending that may result in cardholder’s debt in the future.

A new paper by the Chicago Federal Reserve reveals why cash-back cards are important to credit card issuers. The paper found that consumers spend more and accumulate more debt with a cash rebate card. The study used a 1% cash-back card and found that the average cardholder received $25 per month in cash-back rewards using this card. However, the average spending increased by $68 per month and average debt increased by over $115 per month in the first three months after the cash-back reward program started. Cardholders also reduced payments by $38 within those first three months.

Issuers offer cash-back reward cards expecting an increase in spending. They also want consumers to pay with the card for all purchases instead of using cash, check, debit cards or other credit cards. Issuers make money from the interchange fees as well as the finance charges that grow when cardholders carry debt.

Attractive Cash-Back Credit Cards
Cash-back cards, like all reward cards, are good for consumers if and only if you pay off the balance on time each month. These cards typically have a slightly higher interest rate, and interest charges quickly outgrow any cash rewards. Here are some of the most attractive cash-back cards:

Chase Freedom $100 Cash Back
Consumers earn 5% cash back in quarterly bonus categories such as gas, home improvement and department stores (remember to sign up each quarter). Cardholders will also earn a 1% rebate for each $1 of net purchases. There are no spending tiers or earning caps, and cash rebates never expire. Cardholders will receive a $100 cash back bonus after spending just $500 within the first three months of the account opening.

Discover More $100 Cash Back
Consumers earn 5% cash back bonus in gas, restaurants, movies and
travel–up to the total purchase dollar amount specified in each program. Earn 1% unlimited cash back bonus on purchases after your total annual purchases exceed $3000; purchases that are part of your first $3000 earn 0.25%. No yearly limit on the amount of rebates that can be earned and rebates do not expire. $100 Cash-back bonus after you make $500 in purchases within your first three months.

PenFed Visa Platinum
Earn 2% cash back on supermarket purchases. Earn 5% cash back from gas purchases paid at the pump. Earn 1% cash back from all other purchases. $50,000 limit each year.

True Earnings From Costco and American Express
Cash rebate varies by where you make the purchase: 1% on general purchases, 2% for travel-related purchases, 3% on restaurant purchases, 3% on gasoline purchases up to $3,000, 1% thereafter. Earn unlimited rebates. $25 statement credit with first purchase.

Blue Cash from American Express
Earn unlimited cash back on eligible purchases. For the first $6,500 of eligible purchases, the rebate is 1% for everyday purchases and 0.5% for all other eligible purchases. For eligible purchases over $6,500, the rebate percentage is 5% for everyday purchases and 1.25% for all other eligible purchases.

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In 2010, the Federal Reserve has introduced a number of new credit card rules and guides to help protect and educate consumers. The latest, a Consumer’s Guide to Credit Reports and Credit Scores, was published last week.

This guide describes some basic information for consumers on credit scores, such as what a credit score is, where it can be used and why it is critical for consumers to protect their credit history. The guide is part of the final rules in the Fair Credit Reporting Act (FCRA) that go into effect on January 1, 2011. FCRA was passed seven years ago in 2003.

The FCRA will require lenders to inform consumers when negative information on credit reports causes a higher interest rate on a loan.
This notification also applies if a consumer is denied insurance or employment because of information in the credit report.

Once a consumer is negatively affected by a credit report, the lender, insurance company, or employer must send a notification providing the name, address, and phone number of the credit bureau that provided the credit report that was used to make the decision. The consumer can get a free credit report from this credit bureau, but it must be requested within sixty days after receiving the notice. The Fed hopes this will encourage consumers to review their credit reports and correct inaccurate or incomplete information.

The new Consumer’s Guide to Credit Reports and Credit Scores was created to help consumers understand the notices and new information they may get from lenders under the FCRA.

Why does this matter?

Your credit report identifies who you are, where you live, and summarizes your financial story. It reveals more to lenders and businesses than you probably tell your closest friends. It provides details of current and some past loans including mortgage, credit card, and student loans. It shows how much you owe, the terms, and your history of making payments. It also lists any liens, court judgments and bankruptcies, and companies or persons who have recently requested a credit report.

People are surprised when they discover how deeply and broadly credit reports can affect their lives. Every consumer needs to understand how their actions affect their credit report.

Lenders use credit reports to make lending decisions and set interest rates. Employers can look at credit reports during the interview process; landlords use it to screen renters. Utility companies use them in applications for service. A bad credit report can make it difficult for you to get a job, an apartment or even government benefits.

While most of the information in the Federal Reserve’s Guide has been outlined in other measures, it is a message that is beneficial due to the weight of the Federal Reserve seal. It not only tells how to get a copy of your credit report from the three credit bureaus, but also how to correct errors in credit reports.

However, even the powerful Federal Reserve can’t provide some of the answers that will clear up the darkest mysteries and frustrations of credit reports–how many points does a negative action affect the credit score? How long does this drag down the score? What real steps can a consumer take to significantly rebuild and recover?

New financial reports show that credit cards are becoming profitable once again. But is this a recovery or an illusion?

Most of the major banks and credit cards reported a jump in profitability during the third quarter. New monthly numbers also show that credit card delinquencies and defaults continue to improve in 2010, boosting revenue for the issuers. This is good news for cardholders and issuers, but these improvements do not fix the problems of losses from regulations, the slow pace of recovery, and the projected declines in revenue in the long term.

A significant amount of this profitability posted by credit card companies in the third quarter came from issuers reducing the funds previously set aside to cover bad loans because charge-offs and delinquencies are falling. This indicates that banks are more confident that customers will be able to make payments on loans in the future.

This drop in delinquencies and write-offs will stop some of the bleeding, but it is not enough for long-term recovery and healthy growth. To move forward, banks and credit card issuers must find a responsible way to ease lending standards, increase lending and encourage consumer spending. They must also navigate through tougher regulations that will continue to drain away revenue.

Here are earnings, defaults and delinquencies from the major issuers:

American Express
Third-quarter profits jumped 71% because cardholders spent 14% more than an year ago. Overdue payments continue to fall, so American Express can cut the money it set aside for bad loans.

“Lending volumes, however, remained below pre-recessionary levels as cardmembers continued to manage their finances carefully and pay down outstanding debt. While this translated into lower net interest income, it also helped to improve our overall risk profile,” said Kenneth I. Chenault, chairman and chief executive officer.

Charge offs dropped from 5.5% in August to 4.7% in September.

The delinquency rate increased from 2.4% in August to 2.5% in September.

Bank of America
Bank of America, America’s largest bank, lost $7.3 billion for the third quarter, a surprise to many analysts. It took a previously announced one-time $10.4 billion writedown in its credit cards unit to prepare for new rules and regulations. The bank says new legislation, like the Durbin Amendment that limits interchange fees on debit cards, could eliminate its debit card revenue.

In its earning statement, the bank says it is changing the way its consumer bank does business by providing customers with incentives to do more business with the bank instead of generating revenue through penalty fees such as overdraft charges. It plans to “begin testing new offerings in December that will provide customers choices on how to pay for their banking services and reward them for using certain products or bringing more balances.” It expects these changes to generate additional revenue.

Bank of America continues to have the highest charge-off rate. Charge-offs dropped from 11.73% in August to 9.99% in September.

Delinquencies dropped from 5.71% in August to 5.68% in September.

Capital One
Net income more than doubled to $803 million from $394 million a year ago. The company said in a statement that “continued improvement in credit loss and delinquency performance in the portfolio was the primary driver of the third-quarter allowance release.”

Charge-offs increased from 8.19% in August to 8.38% in September.

The delinquency rate dropped from 4.56% in August to 4.53% in September.

Citi
Citi reported earnings of $2.2 billion during the third quarter as loan losses continue to decline. Citi’s losses from bad loans fell 30% during the third quarter to $7.66 billion.

Charge offs dropped from 11.18% in August to 8.99% in September.

Delinquencies dropped from 4.95% in August to 4.93% in September

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Credit cards have become an easy target for Congressional grandstanding and regulations, but beneath the widely-criticized rates and fees lie many good benefits that are usually hidden in the fine print. Credit cards can provide valuable purchase protections and insurance that are unmatched by cash and debit cards.

Yet, more consumers are forgoing these benefits and choosing debit cards instead of credit cards for payments. Total payment volume for debit cards surpassed credit card volume for the first time in 2009 and will continue to expand in 2010, according to a new report from Javelin Strategy & Research. 56% of consumers said they had used a credit card in the past month, down from 87% in 2007. The study predicts that figure will drop to 45% by 2020.

Many consumers are switching to debit cards, but there are times when using a credit card is your best choice for payment, especially for tickets and large purchases. Since insurance and purchase protections vary by card and issuer, it is a good idea to research these when comparing credit cards.

Here are some of the extra benefits offered by many credit cards:

Car Rental Loss/Damage Insurance
With a number of issuers, using your credit card can cover damage incurred when renting a car, so you may not have to pay for the extra insurance coverage that car rental companies try to sell. To be safe, be sure to check the description of this coverage in your Cardmember Agreement. You must be the primary renter and use your card for the rental. To be covered by the car rental loss/damage insurance, you must decline the collision damage waiver (CDW) or similar option when you are reserving and picking up your rental car. Coverage applies for the first 30 days, and is in excess to your other sources of insurance. Coverage may not be available in some countries.

Typical exclusions include: items stolen from inside or outside the vehicle; person not designated in the rental agreement/contract as an authorized driver; loss that occurs while driving under the influence of drugs or alcohol; racing or reckless driving; blowout or tire/rim damage that is not caused by theft or vandalism or is not a result of a vehicle collision causing tire or rim damage.

Price Protection
Price protection helps a consumer get the best price you can find on the products you buy. Many issuers will refund the price difference if you find a lower price on the same item from the same manufacturer within a designated time period (typically 60 days). Issuers will set a refund limit. For example, Citi refunds the price difference up to $250 per item.

Standard exceptions include: internet purchases or advertisements; items subject to rebate or manufacturer’s coupon or a refund; items sold at “going out of business sales or “close out” advertisements; and customized items. Price protection does not cover airline and transportation tickets, travelers checks, cash or its equivalent.

To get the price protection, save the printed advertisement and contact the program administrator for claim forms and filing procedures.

Purchase Protection
Purchase protection protects eligible purchases against accidental damage or theft for up to 90 days from the date of purchase. It can repair, replace or reimburse for up to the amount charged. For example, American Express coverage is limited to up to $1,000 per occurrence, and up to $50,000 per cardmember account per policy year. It is in excess of other sources of indemnity.

If a retailer will not accept a return within the first 90 days of purchase, some cards, like Chase Sapphire, will reimburse you for the cost of the item purchased on your card.

Extended Warranty Protection
This protection extends the length of the free repair period under the original manufacturer’s U.S. warranty up to one additional year. The warranty must be three years or less.

Capital One doubles the original warranty time period and duplicates the coverage of the original manufacturer’s warranty up to a maximum of twelve months on most items you purchase. If you fail to properly register the original warranty as required by the manufacturer, the Extended Warranty will only double the actual warranty time period that you received from the manufacturer.

To receive Extended Warranty Protection, you must submit the store receipt, the credit card receipt and a copy of the manufacturer’s warranty.

Common Carrier Lost Luggage Coverage
If you purchase your common carrier tickets with your credit card, lost luggage coverage will cover you and your dependents for permanently lost, stolen, or damaged bags while checked with your carrier. Coverage is
secondary to the carrier’s liability and applies after that coverage has been exhausted.

Coverage varies by issuer. Citi’s coverage for checked bags is up to $3,000 per occurrence per covered person, up to $10,000 total. American Express’ coverage is up to $1,250 for lost, stolen or damaged carry-on baggage, and up to $500 for checked baggage. This is in excess of the Common Carrier’s liability and includes up to $250 of coverage for high-risk items, such as computers, jewelry and electronics.

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If you had a credit card account with Citibank between May 5, 2002 and May 24, 2010, and your interest rate was increased as a result of a default or delinquency, you could get a payment from a class action settlement.

A proposed class action settlement has been reached in a lawsuit brought against Citibank involving increases to the interest rate on Citibank credit cards due to delinquency or default. (Note: the name of the case is Hoffman v. Citibank (South Dakota), N.A., Civil Action Case No. SACV 06-571 AJG [MLGx]).

Plaintiff Laura Hoffman filed a lawsuit in California against Citibank, alleging that it improperly raised interest rates due to delinquency or default without providing prior notice. Citibank said that cardholders were given notice in their credit card agreements and denied all allegations of wrongdoing and liability.

According to the notice from the Honorable Andrew J. Guilford, United States District Court Judge, the proposed settlement reportedly provides that Citibank will establish a settlement fund of $10 million. The court is scheduled to hold a class action settlement hearing on December 13 to decide whether the settlement should be approved.

Citibank settlement class members may receive a check for the lesser of $18 or an equal share of the settlement fund after payment of settlement costs. These costs include attorneys’ fees and payment to the plaintiff. Any amounts left over will be paid to charity.

All Citibank credit card customers who had their interest rate increased as a result of a default or delinquency during this eight-year period may be eligible to take part in the settlement. To be entitled to a payment from the settlement fund, you must mail in a claim form by February 11, 2011. Claim forms are available at http://www.casenosacv06571.com or by writing to: Hoffman Claim Form Request, PO Box 44007, Jacksonville, FL 32231-4007.

You may download a copy of the Notice of Proposed Class Action Settlement and Hearing at:

http://www.casenosacv06571.com/docs/notice.pdf

Further details of the case can be found here:

http://www.judicialview.com/Court-Cases/ADR/Citibank-Credit-Card-Class-Action-Waiver-Conscionability-Considered/Opt-Out-Provision-May-Enable-Arbitration-Provisions/4/5135

The Federal Reserve released a monthly report on Wednesday that shows credit card debt continues to decrease at a significant rate.

Revolving credit, which is primarily credit card usage, fell for the 17th consecutive month in February, declining at an annual rate of 13.1%. The $858.1 billion in revolving credit represents a $100 billion decrease since the fourth quarter of 2008.

Consumers seem to be taking some steps to reduce their credit card debt,  some of it out of necessity, some voluntarily. Cash and debit cards are being used more often, and charging less on their credit card is possibly due to the APR increases they have seen. Significant actions by the issuers have also contributed to this decrease.

Nearly 42% of consumers are using more cash than they were a year ago,  according to a survey by the consulting firm Market Strategies International. A study by BIG Research in January showed that 30.5% of the respondents said they would pay with cash more often, up from 23.0% a year earlier.

Debit card usage is increasing. According to their annual reports, MasterCard’s debit card usage in this country increased 10.5% in the fourth quarter of 2009 versus year ago levels, while Visa reported a 17% increase.

But the actions of issuers have also helped decrease credit card debt.

To protect themselves from future risk, credit card issuers have closed accounts, cut the credit limits on millions of customers, and have become much more selective on which customers receive approval on a credit card.

There are signs that steps taken by issuers to reduce risk may be working. Bank card defaults fell to 4.39% in the fourth quarter from 4.77% in the prior quarter, according to a report released this week by the American Bankers Association.

The drop in defaults is not by accident. In a recent letter to shareholders, Jamie Dimon, CEO of JP Morgan Chase, said, “the industry as a whole reduced limits from a peak of $4.7 trillion to $3.3 trillion. While we believe this was proper action to protect both consumers and card issuers, doing so in the midst of a recession did reduce a source of liquidity for some people.
Ultimately, however, the change may make the card business a more stable and better business.”

He also said that in the future, Chase will have to reduce risk in light of the new regulations and they will “no longer be offering credit cards to approximately 15% of the customers to whom we currently offer them.”

He admitted that Chase reduced limits on credit lines and canceled credit cards for customers who had not done business with Chase over an extended period.

Link to Jamie Dimon’s letter to JP Morgan Chase shareholders:

http://media.ft.com/cms/1d11280c-3d20-11df-b81b-00144feabdc0.pdf

Link to the latest Federal Reserve Consumer Credit statistics:

http://www.federalreserve.gov/releases/g19/Current/

The Federal Trade Commission’s amendment to the Free Credit Reports Rule takes effect this Friday. This requires much clearer disclosures in ads for “free credit reports.”

This provision is needed because consumers have been confused and misled about where to get a free credit report.

The federally mandated free credit reports are available only at AnnualCreditReport.com, but many other websites advertise free credit reports. Beginning Friday, any other website that advertises free credit reports must have a disclosure at the top of every page that tells consumers how to get these free credit reports. The statement must say:

“This notice is required by law. Read more at FTC.GOV. You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the only authorized source under federal law.”

The amended Rule takes effect for print and Internet ads on April 2. The wording of the disclosures for television and radio advertisements will take effect on September 1.

The FTC amendment is needed because some credit reporting agencies and other companies have taken advantage of the awareness of “free credit reports.” They advertise free credit reports to lure in consumers and then sell products and services like credit scores and credit monitoring. This has created confusion for consumers who are only looking to receive their credit score at no cost.

On Google, all of the advertised listings for the term “free credit report” are for companies that charge for these additional services. Some of the top organic listings for this keyword lead the consumer to freecreditreport.com. According to SmartMoney, Experian, the credit report agency that owns freecreditreport.com, spent $70.7 million in 2007 and $19 million in just the third quarter of 2008, an increase of 28% over the same period in 2007. A vast majority of that money, roughly $14 million, was spent on television ads.

Adding to the confusion, the law requires credit bureaus to provide a free credit report to consumers, but this does not include your credit score. Some credit bureaus try to sell credit score or credit monitoring services as you order your free credit report. These promotions have led some consumers to believe they must purchase these products to get the credit reports.

Other websites claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” but these are not part of the legally mandated free annual credit report program. “Free” is usually temporary because it means free trial. If you forget to cancel during the trial period, you will automatically roll over to the pay service and the company will start charging fees to your credit card. This could be as much as $14.95 to $29.99 a month.

At CreditCheckTotal.com, the trial period is seven days after you order your free credit score. If you don’t cancel the membership during the trial, then you are enrolled in their credit monitoring program. Membership costs $22.95 per month. You may cancel at anytime but you may not be eligible for a refund for your membership fees.

The new rule also requires that consumer reporting agencies cannot advertise products and services on AnnualCreditReport.com until after consumers receive their free annual file disclosures. It restricts other practices that may interfere with the free disclosure process.

The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies (Experian, Equifax, and TransUnion) every 12 months. You can request your free report online (AnnualCreditReport.com), by phone (1-877-322-8228) or by mail (P.O. Box 105281, Atlanta, GA 30348-5281). You can request all three reports at once or one at a time.

Every consumer should take advantage of these free credit reports. It helps you to know what your creditors see about you and to uncover any suspicious activity. If there are mistakes, you have the knowledge to repair the mistakes. It is a good idea to stagger the free report you are entitled to from each of the three agencies every four months so you can monitor your credit throughout the year.

If you have paid for what you thought was a free credit report, you
can file a complaint: https://www.ftccomplaintassistant.gov/

The statement from the Federal Trade Commission can be found here: http://ftc.gov/opa/2010/02/facta.shtm

The Credit CARD Act will take effect in two weeks and one of the major
provisions is the restriction on marketing credit cards to young adults
under 21.

Currently it is easier for a college student to get a credit card than to
get up for class. College students use credit cards to pay for everything,
just like their parents. Once this new law takes effect, many college
students will have difficulty getting a credit card.

Beginning February 22, issuers are not able to offer free merchandise
to lure students to sign up for a credit card on college campuses, at
college sponsored events (like sporting events) or within 1,000 feet
of the campus. In addition, the CARD Act bans credit cards to people
under 21 unless there is an adult co-signer or the young adult can show
proof they have the income to pay the debt.

The regulations leave ‘sufficient income’ open to interpretation.
Some issuers will just want to know that your monthly income is more
than your minimum payment due. However, students need to assess
their own situation. If you are struggling to pay for your own food,
housing, transportation and education bills, you can’t afford to
carry a balance on a credit card.

Credit lines will also start out low. If there is no co-signer, credit
lines will be $500 or 20 percent of the student’s annual income. If
the student has more than one card, the credit line from all credit
cards will be up to 30 percent of the annual income.

College is a good time for students to learn how to correctly use
credit cards and build up their credit score. However, many students
are unprepared for the responsibility.

A 2009 Sallie Mae study showed that college students used credit
cards more than ever before. 84% of college students have at least
one credit card, up from 76% in 2004. The average amount of debt
carried by college cardholders is $3,173 which represents a 46%
increase over the 2004 figure of $2,169. The average student
has 4.6 credit cards.

Only 17% of college students pay off their entire balance each month
and 1% had parents or other family members paying the whole balance.
The remaining 82% carried balances and paid finance charges each month.

Parents must educate their students about using a credit card. One-third
of students rarely or never discussed credit card use with parents, and
nearly all undergraduates would like more information on financial
management topics.

Parents can make the co-signing for a credit card a very teachable
moment. Tell your student how to deal with credit cards and the pitfalls
that exist. Explain how to read the monthly bill and how important it is
to pay the balance in full at the end of each month. Give them real-life
examples of the credit card mistakes you have made so they can avoid
making the same mistakes.

Options for Credit for College Students

1. Co-sign.
The student can apply for a card with an adult co-signer. If the
student is unable to pay off the account, the credit card issuer will
demand that you pay off that debt in full.

The loan will be reported on the student’s credit report. If it is paid
on time and more than the minimum, it will help increase credit scores.
However, adding your name to someone else’s debt is a very serious
financial step because this mixes your credit record to your child’s.
If either the student or parent defaults, mistakes become community
property and everyone suffers because the co-signer has committed to
make good on this account. Delinquencies will show up on both credit
reports.  The only way to get your name off of the loan is to pay off
the loan.

As a cosigner, your liability for the loan may keep you from getting
other credit because creditors will consider the cosigned loan as one
of your obligations.

2. Authorized user.
This is almost like an apprenticeship to teach your student how to
use a credit card. You give your student authorized permission to
use your credit card by adding him/her to the account. The student
can receive and use a card with his/her name on it without being
legally responsible for repaying the credit card balance.

The account is considered the same for credit scoring as if it were
owned by the authorized user. If you have a good credit score, your
student will benefit from that. However, if you have a couple of late
payments or get into trouble, this will also affect the authorized
user. Authorized users can be removed with a letter or phone call
to your issuer.

3. Open a Checking Account with a Debit Card.
A checking account with a debit card is a good first step toward
learning how to manage credit. While debit cards have their own fees
and downfalls, college students can get into far less trouble paying a
$30 overdraft fee than running up a significant credit card balance
and it does not pull down your credit score.

4. Prepaid cards
Opening a prepaid card may be the easiest option for students, but
their fees are higher. Make sure the card reports payment activity
to credit bureaus (many secured and prepaid cards do not).
AccountNow prepaid Visa reports to all three agencies. The
processing fee is $19.95, the monthly fee is $4.95 and there is
a $0.50 transaction fee per transaction.

Prohibiting promotional offers and marketing on campus will help
reduce impulse applications. If your student is qualified to apply for
a credit card, help them research credit card offers to find the
best card with the lowest rate. Use the Terms and Conditions to
compare cards and to explain the fine print.

A study released yesterday by the Center for Responsible Lending gives new
data to show that credit card issuers have instituted a number of “hidden”
price changes since debate first began on credit card reform.

The study entitled “Dodging Reform: As Some Credit Card Abuses are
Outlawed, New Ones Proliferate” says that these practices have affected
over 400 million credit card accounts. The study says that the CARD Act
and other regulations have had some success limiting the costly traps of
yesterday and today, but issuers have found new ways to raise fees and
revenue. It also shows how minor and almost unnoticed changes can
make millions of dollars for issuers.

Here are the practices that were examined in the study:

* “Pick-A-Rate” pricing. This affects variable rate credit cards that are
tied to the prime rate. Rather than having the interest rate on your credit
card rise and fall based on fluctuations in the prime rate, some issuers are
tying your variable rate to the highest prime rate published within a 90 day
time period. Hence, increases in the prime rate would take place
immediately but declines may not be instituted for several months.
The study says this can result in APRs that are 0.3% higher than
traditional pricing and that it is currently costing consumers
$720 million annually. If the practice becomes standard among
all issuers, the cost to consumers may reach $2.5 billion per year.

* Variable rate floors prevent interest rates from going beneath the
starting APR, but those interest rates can go up.

* Changes in the minimum finance charge. If you have only a penny in
finance charges, you can get charged a minimum amount of up to $2.

* How balance amounts are categorized has led to much higher late fees.
The study says that 9 in 10 consumers now pay the highest late fee due
to this compression of balance categories.

* More issuers are now instituting inactivity fees where consumers are
charged a fee for not using their credit card account.

* Growing use of fees by expanding the definition of international
transactions and charging higher balance transfer/cash advance fees.

None of these practices were included in the Federal Reserve 2008 rules or
the CARD Act of 2009 but usage has grown since these regulations were
passed. Consumers can expect more of this to come in 2010 because issuers will continue to
find new ways to make additional revenue.

Here is the link to the study:

http://www.responsiblelending.org/credit-cards/research-analysis/final-crl-dodging-reform-exec-summ-12-10-09.pdf

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A new study confirmed what cardholders and Congress already knew: credit card issuers are in no hurry to implement the regulations of the CARD Act. Instead, some of the most harmful practices are even more widespread.

Today, the Pew Charitable Trust released “Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect”. The study examined almost 400 credit cards advertised by banks and credit unions offered in July 2009 and December 2008.

The study found that 100% of the credit cards continue practices that will be outlawed by the CARD Act. The lowest advertised interest rates have increased by more than 20% in the past year. None of the 12 largest banks currently issue cards that would meet the requirements of the CARD Act.

Experts make the observation that a credit card issuer could gain a distinct competitive advantage by the early implementation of the provisions of the CARD Act; instead, it seems that issuers are turning their back on the public outcry for reform and instead want to raise rates as much as possible before these interest rate provisions go into effect in February 2010.

The Pew study found that cardholders have not benefited from the historically low interest rates, even though the Federal Funds rate is almost 0%. The lowest advertised rates increased by more than 20% from December 2008 to July 2009 while the highest advertised rates increased 13% during that time period. Discover had the biggest jump in the lowest advertised rates, going from 9.99% to 12.99%. Bank of America had the largest increase in the highest advertised rates, increasing from 14.99% to 18.24%.

The report is also one of the first credit card comparisons between banks and credit unions. It confirms that credit unions offer lower rates and lower penalties than banks. The findings from the Pew study include:

* Advertised rates were 20% lower at credit unions. These rates ranged from 9.9% to 13.75% annually at credit unions, compared to 12.29% to 17.99% annually for banks.

* Penalty charges at credit unions are less frequent and less severe than at banks. Credit union penalty interest rates averaged 17.99% compared to 28.99% at banks. In addition, these penalty interest rates at credit unions were less likely to last indefinitely; one-third would terminate after three to 12 months of on-time payments. They could last indefinitely at banks, even after on-time payments.

Members of a credit union who are looking for a new credit card are advised to look at those offered by their credit union, comparing those cards to others on the market.

Today, the House Financial Services Committee approved the creation of a Consumer Financial Protection Agency (CFPA) by a vote of 39 to 29. This is the first step in creating a new regulatory agency that will protect consumers. The CFPA is an important piece of the Obama administration’s plan to tighten lending regulations and help prevent future financial failures.

With this bill, states have more authority to regulate large national banks using their own stronger consumer protections on interest rates and fees. Alternatively, it would also allow federal regulators to exempt banks from state laws on a case-by-case basis.

The CFPA would enforce provisions in the CARD Act that protect consumers from sudden rate increases on unpaid credit card balances. It would also create rules that would make credit card terms more transparent and easy to understand.

Consumers need some type of protection right now. This week, many Citi customers received a large rate increase to 29.99% for no apparent reason. Cardholders are angry because issuers have significantly increased their rates, seemingly with no cause and no change that customers can request. A cardholder’s only option is to accept the changes or close the account; however, new cards are harder to come by as many issuers have reduced their risk of loans and are very selective about the new cards they issue.

The new agency would take some of the consumer protection duties from the Federal Reserve and oversee financial lending such as credit cards, payday loans and terms on savings accounts. Those exempted include retailers, lawyers, real estate brokers, accountants, auto dealers, cable companies, and credit, mortgage and title insurers.

The CFPA does not include two of the priorities of the Obama administration. It leaves out the requirement that lenders offer standardized “plain vanilla” products. It also does not include the requirement that banks take reasonable steps to ensure that customers understand what they are receiving.

The House is expected to vote on this in November, although the future of the agency will be determined by the vote in the Senate in 2010. Banks are strongly opposed to this bill and are lobbying Senators to dilute or reject it. Some legislators also oppose the idea of creating a new regulatory body.

On September 29, the Federal Reserve proposed 841 pages of rules designed to protect consumers from costly credit card practices. These proposed rules represent the second stage of the Federal Reserve’s implementation of the Credit CARD Act signed into law by President Obama in May.

In this document, the Federal Reserve requires credit card issuers to include a number of new disclosures beginning with the February statements sent to their customers:

* Issue a warning about the hazards of only making the minimum payment. Paying only the minimum payment increases the interest you will pay and the time it takes to pay it off. This warning must be placed in a table and shown in a prominent location.

* Disclose the total cost and the time it will take to pay off the entire balance if you only make the minimum payment.

* Disclose the monthly payment amount required to pay off the balance in 36 months and the total cost of paying off the balance in that three-year period.

* Disclose the fee and the penalty APR that the cardholder could receive after a late payment. Issuers must also include the earliest date on which the late fee can be charged.

* The due date must be the same numerical day and month for each billing cycle. This predictability makes it easier for cardholders to make their payment on time. If the due date is on a holiday and a mailed payment arrives on the day after the holiday, the payment is to be considered on time.

* Prohibits fees for making a payment, except payments involving expedited service.

* Credit card issuers must provide contact information for at least three debt counseling services that have been approved by the U.S. Trustees.

The Federal Reserve consumer tested these disclosures to help make them easier for cardholders to understand. Issuers are required to use specific language in these warnings.

The Federal Reserve develops and administers regulations that carry out major federal laws that govern consumer credit protection, such as the CARD Act, the Truth in Lending Act, or the Equal Opportunity Act.

Yesterday, the Federal Reserve released the monthly Consumer Credit report for August that shows credit card debt is down for the eleventh consecutive month. It declined at an annual rate of 13.1% to $899.44 billion, a drop of $9.9 billion, which was the largest decline since February.

One factor in this decline is the decrease in credit card limits. Credit card companies slashed the limits for almost 58 million cardholders during the 12-month period that ended in April. But consumers also appear to be cutting back in charging items on their credit cards.

These are concerning trends for credit card issuers. Several other recent reports reinforce these concerns:

* Delinquency Rates
In August, credit card delinquencies were up again for several major issuers. Bank of America delinquencies increased to 14.54% from 13.21%. Citigroup delinquencies increased to 12.14% from 10.03%. Discover delinquencies increased to 9.16% from 8.43%.

* Third Quarter Earnings
Banks will release their third quarter earnings next week. Some analysts are expecting an 11th consecutive quarter of lower profits.

* Consumer Response
In a recent Consumer Reports survey, more than one-third of consumers polled said they’ve paid off and closed a credit card account since January 2008. Of those who did, more than half said this was in response to the actions of the banks such as raising rates, imposing fees and cutting limits.

* Further Rate Increases
Another issuer is significantly raising rates before the CARD Act provisions go into effect. Wells Fargo & Co. is currently notifying some of its cardholders that it will raise interest rates by three percentage points beginning November 30.

Experts say these numbers are not good news for credit card issuers struggling to regain profitability by raising rates and fees. Cardholders are angered, causing many to cut back on their credit card spending, while others have reacted by closing their accounts. Increased payments have forced some into delinquency, leaving the issuer with unpaid balances that they cannot collect, thus continuing the cycle.

Congress passed the Credit CARD Act in May, but it gave issuers and banks almost one year to implement the major provisions of the bill. Since then, issuers did exactly what they threatened to do—raise rates and fees on a broad group of cardholders. Consumers and elected officials are not happy about this, and members of Congress plan to introduce a bill to accelerate the effective date of the bill from February 22, 2010 to December 1, 2009.

The CARD Act is not the first governmental attempt to make changes to the credit card industry. US lawmakers and judges have had mixed success in using laws, regulations, and court rulings to change the industry and protect consumers. Have these been helpful, or have they caused more harm than good?

Governmental laws, regulations and court cases have shaped the credit card terms that we have today. These include:

* Truth in Lending Act (1968)
Requires uniform method for calculating the cost of credit and publicizing credit terms, including the APR, so consumers can compare credit offers. The advertised terms must actually be available. It bans the unrequested issuance of credit cards, restricts cardholder liability for unauthorized use, requires fair and timely resolution of credit card billing disputes, and puts a $50 limit on cardholder liability for unauthorized charges. (Prior to this ruling, credit card issuer mailed active credit cards out in mass mailings, which created problems with identity theft and fraud for consumers.)

* Fair Credit Reporting Act (1970)
Protects consumers against incorrect or misleading information in credit files maintained by credit reporting agencies. Credit bureaus must investigate disputed charges and correct the incorrect charges. If the disputed charge cannot be resolved, the consumer can request the inclusion of their side of the story. Amended in 1996 to regulate collection, dissemination and use of consumer information.

* Fair Credit Billing Act (1974)
Gives cardholders the power to fight improper credit card charges. Mandates how creditors are to respond to billing errors. Accounts must be handled promptly and fairly.

* Equal Credit Opportunity Act (1974)
Prohibits discrimination in credit transactions. Requires creditors to grant credit to qualified individuals without a co-signature by the spouse. Credit histories on jointly held accounts must be maintained in the names of both spouses. Requires that issuers must provide in writing the reasons that credit was denied. Credit card applicants must be notified within 30 days if the loan has been approved or not. If the application is not approved, the issuer must give the applicant reasons for the decision in writing.

*Fair Credit and Charge Card Disclosure Act of 1988
Requires that applications that are solicited by phone, sent through the mail or any other way made available to the public, contain the key terms of the contract. These must include information about rates, fees, grace periods, etc.

* Fair and Accurate Credit Transaction Act of 2003
Addresses the growing problems with identity theft. Credit and debit card receipts may not include more than the last five digits of the card nor the expiration date. Gives consumers the right to get a free credit report each year from the big three reporting agencies. Increases the accuracy of credit reports and established national standards in regulations of credit reports.

* Credit CARD Act of 2009
Provides better protections to consumers by prohibiting some unfair practices used by credit card issuers. Also improves disclosures that cardholders receive. Protects against unexpected interest changes and unfair payment allocations, forbids two-cycle billing, mandates that cardholders must receive a reasonable amount of time to make payments, and limits the fees of sub-prime cards.

Significant Court Rulings

Before 1978, 37 states had usury laws that capped rates and fees on credit cards. At that time, the rate for most cards was about 18%. Two court cases invalidated these usury laws and opened the door to the high rates and fees that we have today. These ruling have given issuers the freedom to charge default rates that can be over 30%, $39 late fees and 5% balance transfer fees.

* Marquette National Bank vs. First of Omaha Service Corp in 1978
Marquette held that national banks could charge credit card customers the highest interest rate allowed in the bank’s home state, instead of the customer’s home state. As a result, major banks moved to states such as South Dakota and Delaware because these states had no usury ceilings on interest rates and they could export these rates to the other states.

* Smiley vs. Citibank in 1996
In 1996, the Supreme Court ruled that credit card companies could lift the cap on fees, which, like interest rates, used to be regulated at the state level. Late fees were $16-$20 before Smiley. Now, they are as high as $39.

The major provisions of the Credit CARD Act do not go into effect until February 2010. Meanwhile, cardholders have been encountering some of the negative consequences resulting from the bill while waiting for the benefits. Even after the bill goes into effect in five months, the benefits for cardholders may be outweighed by an acceleration of interest rate hikes and increases in fees that have already taken place. Despite complaints from consumers, these rate and fee increases are helping issuers get financially healthy once again.

Experts suggest that this acceleration is made possible through loopholes that still allow areas of unhampered rate and fee increases. Since January, LowCards.com has tracked the changes made by eight credit card issuers and has recorded over 50 changes in interest rates, fees, rewards or terms, and suggests that issuers will continue to try to increase their revenue in these ways until the CARD Act goes into effect.

Raising balance transfer fees is a current trend among issuers. For several years, a 3% balance transfer fee was the industry standard. In June, Bank of America shook the status quo and raised the fee to 4%. Chase raised their balance transfer fee to 5% in August and Discover announced this week that they will follow with a 5% fee.

Rate increases or minimum payment increases have added to consumers’ financial difficulties this year. Because negotiating a lower rate is usually not possible, many users transfer their balance to a card with a lower option. But, balance transfer fees, combined with the interest on the fee, can cause strain among cardholders.
For example, transferring $5,000 with a 5% rate transfer fee, combined with the interest, could mean a $250 fee plus interest.

Even after the CARD Act is in full effect, issuers are expected to continue with rate and fee increases and aggressive changes because they benefit the issuer. For example, Discover’s net income rose to $577.5 M in the third quarter, up from $180.M in the same period last year. Discover has tripled its net income by, among other things, increasing interest rates on some cards, adding a 2% foreign transaction fee (May 2009), and shifting some fixed rate cards to variable rate cards. The increase in balance transfer fees from 3% to 5% and an increase in the cash advance fee from 3% with a $5 minimum to 5% with a $10 minimum in January 2010 will add to their revenue base.

Discover is certainly not the only issuer making significant changes as consumers await the implementation of the Credit CARD Act. These changes demonstrate how other issuers are increasing their revenues:

* APR changes. Examples: in October, Bank of America offers the BankAmericard Basic Visa Card. It is advertised as a simpler card with one-page of terms and conditions. The APR will be 14% plus prime which would currently make the APR 17.25%. In May, Capital One increased the cash advance APR from 22.9% to 24.9%.

* Reward changes. Example: American Express reduced the amount of cash you can earn on some of their cards to 1.25% on most purchases, down from 1.5%.

* Minimum payment changes. Example: in January, Chase increased the minimum payment from 2% of your balance to 5% on a number of their accounts.

* New fees. Example: Citi began charging a 3% fee for all transactions made outside the United States in US dollars. Previously, the fee was not added when foreign transactions were made in US dollars. (Feb. 2009)

* Annual fees. Example: in August notifications, Citi began informing some of its cardholders that they will be charged an annual fee of $30 to $90 unless they spend at least $2,400 per year.

Thursday, September 17, 2009
Consumers May Suffer from Increasing Credit Card Default Rates

While some Washington politicians claim the economy is recovering nicely, credit card default rates indicate consumers are still facing very significant struggles.

The default rates reported by some of the country’s major credit card issuers were up again in August. Two issuers, Bank of America and Citigroup, showed their highest default rates since the onset of this current economic crisis.

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The credit card industry is undergoing a major transformation in 2009 as a result of the Credit CARD Act and significant policy changes by issuers. Credit card loans are much more expensive as issuers make changes to bring in the most revenue possible through interest rates and fees.

This is not a new development but part of the evolution of credit cards. It is interesting to look back at the history of credit cards to understand the piece of plastic that has become the worldwide method of payment.

Until the 1950s, people paid cash for most products and services. There were a few local attempts at credit cards. Some individual stores and gas stations offered charge cards. A few major retailers and hotels offered credit to their most valuable customers. But carrying around multiple cardboard cards or paper identifications was cumbersome and inconvenient. These were useful only at one location or a limited geographic area. Early users liked the ease of purchasing with credit, but it took time for banks and retailers to develop a convenient system with widespread acceptance.

Now, fifty years later, credit cards are the primary form of payment and are accepted almost anywhere in the world—from McDonalds to the Internal Revenue Service, to paying your mortgage and most monthly bills.

According to the Federal Reserve, demand for credit increased with the growth of urbanization and mass production of consumer goods. One of the main limits of growth was the lack of sufficient information to judge the credit worthiness of a consumer, so many potential customers couldn’t get credit. This changed with the emergence of national credit reporting agencies. Credit agencies introduced a better assessment of risk that helped to make credit cards more widely available to all groups.

Here are some important dates and developments in the evolution of credit cards:

* In 1946, Jon Biggins of Flatbush National Bank of Brooklyn invented Charge-It, the first bank credit card between bank customers and merchants.

* In 1950, Diner’s Club was created as a charge card and became the first credit card that was widely used. Frank McNamara, a manager of a small loan company in New York, aimed this card as an easy form of payment for salesmen who used it for travel and to entertain clients. This was a new service and McNamara had to solicit subscribers and restaurants to participate. The cards were made of paper stock, and charged no interest. Cardholders paid a $3 annual fee, and the companies who accepted the card had to pay 7% per transaction. It soon became a nationwide network.

* In 1958, American Express offered its own charge card for travel and entertainment expenses. In 1959, it upgraded from cardboard cards and created the first credit card made of plastic.

* In 1959, the revolving balance was allowed. Cardholders no longer had to pay their bill in full at the end of each cycle.

* In 1966, Bank of America introduced the first general purpose card, the BankAmericard. Because of restrictions, banks could not operate across state lines. Despite this obstacle, Bank of America wanted to find a way to expand, so it licensed the BankAmericard to other banks outside its area of operation. Business grew and became complicated and difficult to manage. Bank of America spun off BankAmericard into a separate entity that became the Visa network (name change to Visa occurred in 1976).

* Success brought competition. In 1966, a national credit card issuing system was created when credit-issuing banks joined together to make the InterBank Card Association. This became MasterCard.

The bank card industry grew. Banks that issued cards had to choose to join either the Visa association or the MasterCard association. Later, banks were able to join both associations and offer both types of cards. Joining Visa or MasterCard associations offered standardization and a processing system that reduced the costs for banks and allowed for growth of the credit industry. The cost of credit card processing is complicated and expensive and is still criticized and challenged by retailers.

* In 1968, Congressional regulation of the credit card industry began with the Truth in Lending Act. This required issuers to disclose all terms and conditions. Later, Congress banned mass mailing of active credit cards to people who hadn’t requested it.

* In 1970, 16% of all families had a bank-type card. 37% of those families carried a balance. The mean balance was $839 (Federal Reserve).

* In 1978, the Supreme Court (Minneapolis v. First of Omaha Service Corporation) ruled that banks could charge any rate allowed in the bank’s home state and could charge this rate in any other state. Until then, banks could only charge up to the rate that was allowed in the cardholder’s home state. To take advantage of this change, major banks moved credit card operations to states like South Dakota and Delaware because they removed caps on interest.

Removing the interest cap gave issuers the opportunity to set rates as high as they wanted. This was a boost for banks because, at that time, the rate of inflation was higher than what they could charge for interest. This change transformed credit cards into a profitable business. At this time, issuers also added the clause that gave them permission to “change rates at any time, for any reason.”

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This week, Albert Gonzalez was charged with involvement in the biggest case of credit/debit card data theft in United States history. Federal prosecutors allege that he was part of a group of hackers that seized access to 130 million credit and debit accounts. This startling number is a good reminder of the importance of protecting account information.

According to a Javelin Research study released in February, the number of identity theft victims in 2008 increased 22% over 2007 levels to 9.9 million adults in the United States. The total annual fraud (the amount criminals were able to obtain) increased only 7% in 2008 versus a year ago to $48 billion. Surprisingly, the average fraud amount decreased by 12% to $4,849 and the consumer costs of fraud dropped by 31% to $496 per incident in 2008, down from $718 the previous year.

According to experts, the cost of fraud is dropping because consumers and businesses are catching and resolving fraud more quickly. They also say that this indicates people are paying more attention to their accounts and credit reports, and are faster to report suspicious activity. Consumers are encouraged to contact issuers regarding any suspicious or incorrect account activity.

While cases like the Gonzalez arrest get the headlines and scare the public, the Javelin study says that low-tech methods of theft, such as stolen wallets, checkbooks, credit and debit cards, are still the most likely methods of fraudster attacks.

Although fraud and identity theft are now everyday risks and can’t be eliminated, advisors suggest taking steps to protecting yourself. Issuers often send account information in plain white envelopes, which could be easily missed. Experts say to contact the bank or issuer to verify the authenticity of the notice and avoid scams, and advise cardholders to ask about free monitoring services to notify them of suspicious account activity.

Here are some tips from the FTC and FBI to guard against fraud:

* Sign your cards as soon as they arrive.

* Carry your cards separately from your wallet in a zippered compartment, a business card holder, or another small pouch.

* Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.

* Keep an eye on your card during the transaction, and get it back as quickly as possible.

* Void incorrect receipts.

* Open bills promptly and reconcile accounts monthly, just as you would your checking account.

* Report any questionable charges promptly and in writing to the card issuer.

* Notify card companies in advance of a change in address.

* Be cautious when responding to special offers (especially through unsolicited e-mail).

* Be cautious when dealing with individuals and companies from outside the country.

* The safest way to purchase items via the Internet is by credit card because you can often dispute the charges if something is wrong. Make sure the site you are using is a secure site.

* If you bank online, don’t use the “automatic sign on” for bank or credit card sites.

* Never provide your credit card number or other personal information on the phone, unless you are able to verify that you are speaking with your trusted financial institution or a reputable merchant.

* Don’t give your account number to anyone who sends you an email or calls you on the phone.

* To make sure store or restaurant employees aren’t skimming your card, keep an eye on your card as they swipe your card for payment. The devices used for skimming are sometimes disguised to look like cell phones.

* After the purchase, check to make sure you were handed back the right card.

* If you are traveling to a foreign country or making a large purchase with your card, notify your credit card issuer in advance so your account won’t draw attention for possible fraud.

* Cover the keypad with your hand when entering your PIN at an ATM. There may be cameras or someone watching as you enter this information.

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