Credit Card Update August 26
SECURITY FLAW COULD EXPOSE CREDIT CARD DATA
If you have a credit card account with Bank of America or Chase, two of the nation’s largest banks, a major security flaw has been exposed that could make your information vulnerable to an Internet crook–or even a nosy neighbor. Consumer advocate Edgar Dworsky of ConsumerWorld.org, who discovered the flaw, says anyone who knows your phone number and has the last four digits of your Chase or BofA credit card number might be able access your account. Here’s the flaw Dworsky uncovered: when you call a bank’s automated credit card account information system, the computer uses caller ID to compare the number you’re calling from with the one on the account (usually your home phone). At BofA and Chase, if the phone number is a match, the verification process is streamlined. Rather than requiring the entire credit card number to be entered, the caller can usually access the account with only the last four digits. In some cases, a zip code is also required. Identity theft isn’t the only threat here. This same technique could also allow unauthorized people to collect information about your charitable or political donations, religious or other organizations you belong to, even charges you’ve made for medical problems.
Story by Herb Weisbaum for MSNBC
BANKS TEST MAJOR CHANGES IN DEBIT PROGRAM DUE TO NEW LEGISLATION
New interchange regulations for debit cards go into effect October 1, but many banks are already adjusting to this loss of revenue by creating new fees and eliminating rewards programs. Wells Fargo announced last week that it will test a $3 monthly fee for debit card users in five states: Georgia, Oregon, New Mexico, Nevada and Washington. Customers can avoid the fee if they don’t use their debit card or sign up for designated checking accounts. Wells Fargo is also eliminating its debit card rewards program for all customers on October 8. Wells Fargo is not the first bank to make changes, nor will it be the last. In June, SunTrust bank launched Everyday Checking that charges customers $5 per month for debit card use. Regions Bank will add a monthly $4 debit fee to certain accounts in October. In addition to testing a monthly fee for debit card users in northern Wisconsin, Chase ended its debit card reward program for all customers in July. Banks generally give consumers a way to avoid these fees, but they may require a higher minimum balance or a broader banking relationship. The customers who can’t afford to carry a higher minimum balance are the ones who will end up paying the fee.
MERCEDES-BENZ, AMERICAN EXPRESS OFFER CO-BRANDED CREDIT CARDS
Mercedes-Benz is taking customer loyalty to a new level by teaming with American Express to offer its own co-branded charge cards. The Mercedes-Benz Credit Card and Platinum Card make their debut today. The credit card–with
an annual fee of $95–offers a variety of perks including 1,000 miles waived at lease-end while the Platinum Card–with an annual fee of $475–offers such features as a $1,000 certificate toward the purchase or lease of a Mercedes-Benz and access to airport clubs and resorts. This is only the sixth time American Express has teamed with another company to offer a co-brand card. Other partnerships include Delta Airlines and JetBlue. The cards already have a potential customer base of about 3 million Mercedes-Benz drivers in the U.S.
Story by Jeff Bennett for the Wall Street Journal
BUSINESS CREDIT CARDS LACK MANY PROTECTIONS
After the financial crisis in 2008, banks tightened lending to small businesses to cut their financial risk. But many businesses still need a line of credit to continue to operate. Credit cards have become an important
source of capital for many small business owners. According to a report by the Federal Reserve, 83% of the 27 million small businesses use credit cards. 64 percent used small business cards, while 41 percent used personal credit cards. While credit cards provide a helpful financial lifeline, business cards do not have the same protections as consumer cards and there are many hazards that should be avoided.
IN FED’S MOVE ON CAPITAL ONE DEAL, A TEST OF DODD-FRANK
Capital One is the latest bank accused of being “too big to fail.” A proposed $9.2 billion purchase of the online bank ING Direct would make Capital One the fifth-largest bank in the United States with more than $200 billion in deposits. But before this acquisition can be completed, it requires clearance from the Federal Reserve, Capital One’s chief regulator. The Dodd-Frank Act requires that the Federal Reserve weigh the systemic risk of the combined company. If the risk outweighs the benefits of the transaction, the deal must be blocked. The Fed has yet to decide what constitutes a systemically risky acquisition. So its decision on Capital One could have a broad impact on what Dodd-Frank means for the nation’s biggest banks. The Federal Reserve should be particularly careful. It needs to put forth a definition that ensures that the banking system is adequately monitored under the current definition for systemic risk. The rules it makes for Capital One could govern the entire banking system going forward. For these rules will naturally extend to other Dodd-Frank provisions that allow the Fed to break up banks that pose a similar threat.
Story by Steven M. Davidoff for The New York Times
NEW CAPITAL ONE CARD OFFERS MORE CASH BACK
Capital One launched a new credit card this week, Capital One Cash. It has an annual bonus award offer that may give cardholders more cash that the average cashback reward cards. It offers 1% cash back on every day purchases
and a 50% anniversary bonus on cash earned on purchases in the previous year. It also gives a one-time $100 bonus once you spend $500 in the first three months. The card has no annual fee, rewards do not expire and there are no restrictions on the amount of cash that can be earned. The card also has a 0% APR for the first twelve months on both purchases and balance transfers.
CITI RENEWS CREDIT CARD DEAL WITH SHELL
Citi said Thursday it has inked a multi-year renewal of its U.S. credit card deal with Shell Oil. Citi has issued Shell branded credit cards since 1999. Shell has more than 14,000 Shell-branded stations in the U.S., more than any other company.
Story by the Associated Press