The latest on charging with your thumb, late fees and interest rates, bad service and more
Could this be the beginning of the end for the plastic credit card?
Citibank is testing a biometric system in Singapore that allows holders of its Clear Platinum cards to make purchases without having to swipe, or even carry their cards with them.
They simply put their thumb on a new type of scanner being installed at stores, clubs, restaurants and move theaters. The fingerprint identifies the customer and charges purchases to their account.
Interest.com's weekly survey of credit card companies found average interest rates are:
- 14.56% for standard variable-rate cards. The rate has held steady for four months, but it had declined sharply over the previous three months. It is down one-quarter of a point from 14.8%, where it had held for an 11-week stretch beginning Nov. 15, 2006. It is, however, up more than a point-and-a-quarter from two years ago.
- 13.88% for all variable-rate cards (standard, gold, platinum). That's the same as last week, but higher than 13.86%, where it had been for the previous two months. However, it is lower by almost one-tenth of a point than it at the outset of 2007.
- 13.44% for standard, fixed-rate cards. This rate is unchanged over the last 14 weeks, but it is up from 13.36%, where it had held for the previous month. It is also quite a bit higher than the 13.16%, where it was stuck for eight weeks beginning in mid-November.
A new report says the average late fee for credit card accounts has soared to $28 and penalty rates have reached an average of 24.51%.
San Francisco-based Consumer Action looked at the terms of 83 cards issued by 20 banks, including the top 10 U.S. card issuers. It found:
- The average annual percentage rate was 14.53%, up from 12.61% percent when the survey last was done in 2005.
- Penalty rates, which are usually charged on balances after a customer makes a late payment, ran as high as 32.24%, up from an average of 24.23% in 2005 and 21.91% in 2004.
The average late fee has more than doubled from $13 in 1995 and $27.46 in 2005. Some card issuers charge as much as $39 per incident.
The Raleigh (N.C.) News & Observer tells a particularly horrifying story about how Capital One has treated 2nd Lt. Steven Wilson and his wife, Angela, while he's been deployed in Iraq.
The Wilsons weren't even behind on their payments. Steven Wilson was simply trying to close an old credit card account.
Capital One repeatedly botched that request in an almost unimaginable variety of ways, charging the Wilsons' a monthly fee and late fees when Angela Wilson refused to pay.
Frank Abagnale, the former con man who was portrayed by Leonardo DiCaprio in the 2002 film "Catch Me If You Can" says identity theft insurance is a waste of money.
"As far as I'm concerned, the entire idea is really a scam," he writes in his new book. "The insurance is cheap because the losses to the victim are usually small. They put restrictions on how much you can claim in lost wages -- for instance, $500 a week for four weeks."
The insurance gives you a false sense of security, and some consumers end up buying coverage that's already included in their homeowners' policies, "giving them two worthless policies," Abagnale says.
Several small restaurant chains have begun testing devices that allow diners to swipe credit cards right at their tables.
Why? Because restaurants are about the only place employees are routinely allowed to take your credit card away for several minutes, giving them the chance to copy all of the information, even the security code on the back.
As a result, restaurants have become a favorite target for identity theft and the credit card companies are demanding they do something to improve security.
Just last week, federal prosecutors in New York busted an identity theft ring that had used waiters in 40 restaurants from Florida to New Hampshire to steal credit card numbers since November 2005.
Ever heard of interchange fees?
They're the percentage of each transaction that Visa and MasterCard collect when you sign for a purchase using a credit or debit card.
The fee varies with type of merchant, transaction and card, but averages close to 2% for most transactions and grossed $36 billion for the credit card companies in 2006, up 17% from 2005.
You don't know about that cost because they never show up on your monthly statements and their rules prohibit retailers from showing the charge on sales receipts.
But stores think interchange fees are too high and have raised such a stink about them that nine states are considering new laws that would prohibit charging interchange fees on sales tax to requiring full disclosure of the fee's rules to merchants and consumers.
"For years, Visa, MasterCard and their banks have gotten together to fix interchange fees in secret in violation of federal antitrust law," says Mallory Duncan, senior vice president and general counsel at the National Retail Federation, "and their non-negotiable rules make it virtually impossible for merchants to tell customers just how much they are actually paying."
A new study projects that 8.4 million Americans had their identities stolen and fraudulently used last year, down from 8.9 million in 2005.
The report by Javelin, Inc., is based on a survey of 5,000 consumers. It found the median amount taken with pilfered identities has remained fairly constant at $750. But the out-of-pocket cost to the average victim rose from $431 to $535 over the past year.
The most targeted individuals are the wealthiest ones, earning $150,000 or more a year. And the time it takes to detect identity fraud has decreased 29% percent from 84 days in 2006 to 60 days now.
The number of vending machines equipped to take plastic payment is increasing slowly but surely, from 2% of all machines in 2004 to 3.2% in 2005 according to Automatic Merchandiser Magazine.
Why would pop or sandwich machine owners go to the expense of installing credit card scanners on their machines?
Because we'll spend more, of course.
USA Technologies, which develops such devices, followed sales at 1,100 vending machines from July to September. It found consumers spend 32% more per transaction if they pay with a credit or debit card. And the higher the price, the more likely customers were to swipe their plastic than root around in their pockets for quarters and dimes.
Paying your taxes with a credit card might seem appealing, especially if you get frequent-flier miles or other rewards.
Indeed, almost 2 million taxpayers used their credit cards last year, a 36% increase over 2005.
But it's an expensive option. For starters, you'll be charged a "convenience fee" of 2.49% to 3.93% of the payment. So if you owe $500, you'll pay at least $12.45. If you don't pay your card off when the bill comes, then you can add interest charges onto that.
We continue to make more and more use of our debit cards.
And why not? If you follow our "7 rules for owning a debit card" you can enjoy some real benefits without any of the fees or other nasty surprises.
A survey of 55 banks by Pulse EFT Association says active cardholders made an average 16.1 transactions per month in 2006 -- 10.6 in which they signed for purchases and 5.5 using their personal identification number or PIN.
That's a 20.3% increase over 2005 for signature debit transactions and a 15.7% increase for PIN debit transactions.
It often seems gift cards are more trouble than they're worth.
One example of what a hassle they can be comes from blogger LA Money Guy whoe discovered a $50 Benihana gift card from his parents had only been credited for $25. It took several phone calls and e-mails to work it out with the restaurant chain.
Then the Chicago Tribune tells about a teen who received a $50 Visa gift card for her birthday. After buying $1 worth of popcorn at 7-Eleven a drug store refused her card because there was no money in the account.
After many frustrating, unanswered phone calls the family asked the Tribune for help. It finally got an explanation: When the computer system approves any purchase at a convenience store that sells gas it automatically deducts $50 until the store reports exactly how much was spent. That took three days in the case of the Chicago teen.
Of course, she had never tried to use the gift card after it had been mysteriously declined.
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