This is actually a real-life situation where the debtor realized that she wasn’t making much of a headway and contacted the issuer to work out a deal and was offered a 60-month no interest pay-off plan. Is that her best option? Farrell uses the Fed calculator to test the alternatives.

We’ll go back to the Fed calculator and this time you’re going to pay $200 a month. The trick is to keep on sending $200 a month even though the required minimum payment will shrink with time. You ignore that lower minimum charge. By maintaining a $200 a month payment you could eliminate the debt in 4 years and fork over $2,974 in interest charges. That’s not great, but it’s a lot better than 4 decades and more than $18,000 in interest. Send in a consistent $350 a month and the debt’s gone in 3 years and $2,131 in interest; a $300 monthly payment, and its 2 years and $1,668 in interest. Of course, the numbers get better the more you put toward the debt, but the figures are also unrealistic.

(Via PublicRadio.org)

Discover also expects that the first quarter charge-off rate will be approximately 8.5%, up from 8.43% in the fourth quarter 2009. Charge-offs are loans that lenders do not expect to collect and write off their books as losses.

The issuer estimates its 30-day delinquency rate to be approximately 5%, down from 5.31% in the previous quarter. Discover believes that the delinquency rate may have peaked in the fourth quarter of 2009.

Unlike industry leaders Visa and MasterCard, Discover and bigger rival American Express both issue cards and process the transactions. Discover generates revenues from credit card interest and fees it charges its cardholders, as well as from processing fees it charges merchants who accept Discover cards.

(Via BusinessWire.com)

Citibank, for example, is now giving you 20% more miles per dollar on their American Airline-branded cards. Cardholders previously received 1 mile per dollar. Under the new program, you can get 1.2 miles for every dollar you spend. The catch is that not everyone benefits from this upgrade. It is only reserved for good customers.

JPMorgan Chase is doing the same for its British Airways cards. Chase’s cardholders can get 1.25 miles for every dollar spent. The issuer is also ramping up its rewards program on its Marriott-branded cards.

Chase also upgraded its Freedom card. Up until now, cardholders were getting 3% in rewards on purchases made in certain categories. Now that has been upped to 5% for these categories and 1% on the remaining purchases.

(Via CNNMoney.com)

Each issuer allows different features to be customized. CitiGroup, for example, is letting customers choose their own balance transfer interest rate based on how long they think the payback will take.

Discover lets some customers choose between a low introductory interest rate on purchases for a shorter term or a longer term length at a higher interest rate. For example, you could choose 0% for 6 months or about 4% for 12 months.

American Express’ Zync cards allow cardholders to customize their rewards and benefits, ranging from restaurant discounts to extra air miles.

(Via ABC2News.com)

Yet, the fraud concern apparently has not been strong enough to deter Canadians from using their bank cards. On the contrary, credit and debit card use continues to rise in Canada. There are 34 million debit cards in circulation across the country today, according to Interac Association. Last year the number of debit transactions in Canada rose to 3.8 billion from 3.7 billion in 2008 and the value of debit transactions rose from $168 billion to $171 billion. According to the Canadian Bankers Association, in 2009 there were 69.7 million credit cards in circulation in Canada, up from 68.2 million in 2008.

The Interac Association data show that fraud has cost Canadians CA $142.3 million in 2009, up 36.2% from CA $104.5 in 2008. In 2009 238,000 have been reimbursed for fraudulent transactions, up from 148,000 cardholders in 2008.

(Via Interac.ca)

(Via YouTube)

(Via YouTube)

Recurring payment plan exists when a customer authorizes a merchant to automatically charge his or her card account for the periodic delivery of goods or services. In the e-commerce, a recurring transaction is typically an automatic payment for internet services. Because recurring transactions are processed automatically, without the direct participation of the cardholder, they are particularly prone to customer disputes and the resulting chargebacks. You need to be aware of the potential pitfalls and design your sales and order processing procedures with risk mitigation in mind.

Listed below are several best practices you should consider when initially setting up a recurring payment plan.

• Process the initial transaction in the same way as any other card-not-present transaction. For all card-not-present transactions, including the ones set up by phone or mail, submit Address Verification Service (AVS) and Card Security Code (CVV2, CVC2 or CID) requests with the authorization. For internet transactions, also use Verified by Visa or MasterCard SecureCode, where applicable, as an additional way of confirming the cardholder identification.
• Include the recurring plan details in the sales receipt for the initial transaction. The sales receipt for the initial recurring transaction should contain the essential details of the plan your customer signed up for. Include the following information:
  • The phrase “Recurring Transaction.”
  • The frequency of the payments.
  • The period of time for which the customer has agreed to make payments. If the service will be provided on a continuous basis until the customer cancels the plan, this should be clearly noted.
• Keep the recurring plan records on file for the duration of the plan. For each recurring payment plan you set up, keep its records on file for the duration of the arrangement to be provided to the card issuer upon request in case of a customer dispute. Visa and MasterCard allow e-commerce merchants to accept emails as cardholder permission to set up a recurring payment plan and you should keep these emails. Make sure your email service provides an easy access to stored emails.
• Canceling recurring transactions. The following procedures should be followed when canceling recurring transactions:
  • Check customer logs daily for cancellation or non-renewal requests for services paid for with recurring transactions. Comply with these requests in a timely manner and notify customers that their recurring payment plans have been canceled.
  • Promptly process all credits resulting from recurring transaction cancellation requests. If the cancellation request has been submitted too late to prevent the most recent recurring charge from being posted to the cardholder’s account, issue a credit and notify the cardholder.
  • Issue a cancellation number and provide it to your customer.

  
  It is important to understand that your customer does not have to provide an evidence to prove that he or she has submitted a cancellation request. All they have to do is contact you and submit the request, either verbally or in writing. In the case of a chargeback, resulting from processing a transaction after a cancellation request has been submitted, you will have no remedy and the chargeback will have to be accepted. Remember that keeping customers informed promotes customer satisfaction and minimizes disputes. Take full advantage of all communication channels that you have at your disposal.

The law attempts to deal with an issue that has left many students struggling to get out of mountains of debt. According to a study by SallieMae, a leading provider of student loans, the average undergraduate in 2008 had credit card debt of $3,173 and half the students had four or more cards.

“Many college students seem to use credit cards to live beyond their means – not just for convenience – and more than three-quarters incurred finance charges by carrying a monthly balance,” conclude the authors of the study.

The new law restricts the way credit card companies market their cards to young consumers between the ages of 18 and 21 and in many cases parents will have to be involved in the decision.

“The act considers the poor practices that credit card companies use to entice students without allowing the students to realize the full consequences of having a card,” says Yvonne Hubbard, director of Student Financial Services at the University of Virginia.

(Via MSNBC.com)

BofA’s decision, announced yesterday, took some industry experts by surprise, even though the recently enacted CARD Act’s provisions called for an end to overdraft fees, unless cardholders explicitly agreed to be covered by the service. “This is a pretty big step considering how big of a source of revenue this is,” says Curtis Arnold, founder of CreditRatings.com.

Yet, Bank of America seems to be leaving an opening for cardholders who would rather go over the limit than risk the embarrassment of having a purchase denied. The bank will allow customers to link their checking accounts to savings accounts, credit cards or other forms of payments, which could be tapped into, for a fee, when there are not enough funds in the primary account. Customers will be allowed to go over their limit when withdrawing money at an ATM, after they accept a notification for an impending overdraft and a $35 fee.

(Via MarketWatch.com)

According to the report’s authors, the reason for the jump is that U.S. Bank increased interest rates, following the enactment of the Credit CARD Act a couple of weeks ago, as well as the addition of a number of products to the CreditCards.com database.

“The banks are trying to replace the income lost through the restrictions imposed by the CARD Act. Since they can no longer increase the APR on existing accounts at any time or for any reason, they are protecting themselves moving forward by starting all new accounts at a higher rate,” says Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling.

CreditCards.com estimates that someone who borrowed $5,000 on a credit card today and consistently paid $150 per month at today’s average interest rate would have to pay $6,446 to pay off the debt – $299 more than what would have cost six months earlier.

Yet, even as interest rates rise, experts say that the new CARD Act’s regulations benefiting consumers. “Offers may be slightly higher than before, but consumers can count on the price of the offer being the price of that debt,” says, Lauren Bowne, staff attorney at Consumers Union, a San Francisco-based consumer rights group.

(Via CreditCards.com)

The volunteer work must be done for a program participating in the Volunteer Match program, which includes various hospitals, nursing homes, child care and mentoring programs, etc.

Volunteer hours can be tracked within 120 days of the last hour worked. The reward points will be provided through a certificate that must be redeemed online before the expiration date on the front of the certificate. The reward points can also be donated to charities instead.

(Via AmericanExpress.com)

According to the figures released by the FTC, the number one complaint in its New York State office since 2000 involved identity theft. 2009, it accounted for more than a quarter of the 70,000 complaints.

“The bad guys go to great efforts to steal it. They use spyware, they use social engineering, they use phishing and they take that and they sell it. They sell it over and over again and consumers end up losing millions if not billions of dollars each year,” said Leonard Gordon of the FTC.

Fraudulent and abusive debt collection practices came in second on the complaints list. At the city’s Department of Consumer Affairs, deceptive enrollment in overdraft services by banks was the number one complaint, costing New Yorkers a billion and a half dollars.

“For services they’ve never been asked if they wanted, that they’ve never been told how much they cost, they never been told whether they are using them,” said DCA Commissioner Jonathan Mintz.

(Via FTC.gov)

An awards program, the National Financial Capability Challenge, hopes “to increase the financial knowledge and capability of high-school aged youth. It challenges high school teachers and other educators to teach the basics of personal finance to their students, and rewards students, educators, schools, and states for their participation and their success.”

The National Consumer Protection Week, which is currently under way, offers consumers education about credit card offers, bank accounts and other financial instruments.

(Via Consumer.gov)

“As with most events that generate a lot of media and consumer interest, this one also generated curiosity from the spammer community. They wonder how they can leverage this event to steal your sensitive information,” says Sam Masiello, director for Messaging Security Research at McAfee.

The scam will claim the the iPad is free, but you will have to purchase something with your credit card and provide your shipping address, added Masiello. “As the release date for the iPad approaches, more scams such as this are likely to emerge, using email, social media technologies, and common search engine terms for delivery,” he said.

Some scams feature creating a Facebook page to boost their legitimacy and to build a fan base, encouraging everyone to invite all their friends. “Of course, in reality, it increases the number of people who might be taken to the cleaners by the scammers,” said Graham Cluley, senior technology consultant for Sophos.com.

(Via eCreditDaily.com)

What exactly makes travel agencies so risky and unpalatable to processors? Well, the question is more like whether there is a high-risk transaction characteristic that is missing from their sales. Travel operations tend to involve high-ticket, high-volume sales, often exclusively conducted in a card-not-present environment. These are the classical high-risk features, but travel agencies go beyond that. In most of their transactions the service is provided weeks or months after the sales date, which leaves plenty of time for even perfectly legitimate sales to deteriorate into chargebacks. So if you bought a cruise package for the summer, but a family emergency prevented the trip, you would have to cancel the transaction. Yes, you would be allowed to do that, but you would have to pay a cancellation fee. True, the cancellation fee was prominently featured in the contract that you signed, but this doesn’t make it any more enjoyable. You would still go ahead and honor your contractual obligation, but many others would do their best to avoid it, including filing a dispute with their card issuer. And if legitimate transactions can be a source of disputes, what about the fraudulent ones?

Yes, the high levels of fraudulent transactions have not done much to improve the status of travel agencies as one of the highest risk credit card processing types of businesses in the U.S. Yet, many organizations have managed to develop risk management systems that have reduced their risk exposure and have improved their card processing credentials. Crucially, the successful travel agencies have trained their staff in the proper application of these card acceptance best practices on a consistent basis.

The following procedures should be taken into consideration when developing your own set of best practices:

• Set aside large-value bookings for fraud review. Large-value transactions may increase your exposure to fraud and customer disputes. A careful review of such transactions before they are settled can mitigate risk and minimize potential fraud-related losses. For best results contact the cardholders involved in such transactions to verify the booking.
• Track key fraud characteristics. Track known fraud transactions and identify all key characteristics in these bookings. Then store the information in a database that you can use to make risk assessment. The following characteristics should be included:
  • Passenger name, address and telephone number.
  • Cardholder name, address and telephone number.
  • Email addresses, Internet Protocol (IP) addresses and Internet Service Providers (ISP).
  • Transaction times, amounts, airlines, classes of service and travel itineraries.
• Screen high-risk bookings. Screening high-risk bookings can help you detect and prevent fraud before it happens. Make sure that you screen bookings with the following characteristics:
  • Passenger name is different from cardholder name.
  • First or business class tickets.
  • Electronic tickets or tickets not delivered to the billing address.
  • Date of travel is less than six days after the date of purchase.

“The reduction in credit card debt is not because consumers have found a bag of cash under their mattresses and are now paying down their debt,” says Odysseas Papadimitriou, chief executive of CardHub.com. According to a new report his company has just released, consumers are walking away from debt, forcing credit card companies to charge it off and estimates that this accounts to as much as 90% of the recent drop in credit card debt.

According to the Federal Reserve, in 2009 outstanding credit card debt dropped by $93.2 billion to about $876 billion. At the same time charge-offs rose by $83.3 billion. So only about $10 billion of the drop is attributable to consumers paying off their debt, Papadimitriou points out.

“For the first time in my 30 years in this business, the dollar amount of card loans finished the year lower than they started,” says Robert Hammer, chief executive of investment bank R.K. Hammer. “That would mean that consumers have either put their credit cards in a safe-deposit box and only get them out for special occasions or that some are cutting them up and not using them at all. And we don’t think any of that is going on.”

(Via MarketWatch.com)

While card fraud went down, however, online banking fraud was up by 14%, as criminals were able to find increasingly sophisticated methods for stealing account information, the report revealed.

The introduction of Chip and Pin cards in recent years has helped reduce fraud resulting from the use of lost and stolen cards to its lowest level for two decades at £47.9 million, according to the report.

The report also revealed the following U.K. fraud statistics for 2009:

• Retailers’ fraud losses fell by 27%.
• Cash machine fraud was down 20%.
• Fraud on cards that were intercepted in the post dropped by 32%.
• Online banking fraud rose to £59.7.
• There was a 16% jump in phishing attacks.
• Fraud losses on checks dropped from £41.9 million to £29.8 million.

(Via UKPA)

Under the CARD Act regulations that were recently enacted, issuers are required to request cardholders’ permission, before providing (and charging for) overdraft protection for debit card transactions and ATM withdrawals. The requirement was expected to cost issuers billions of dollars in overdraft revenues.

“The majority of our customers who overdraw their account do so with everyday debit purchases,” said Susan Faulkner, senior vice president of consumer banking for Charlotte, N.C.-based Bank of America. “They’re doing this unknowingly, because they aren’t aware that they are about to overdraft.”

(Via CNBC.com)

All of the apps allow users to view account balances, recent transactions and payment due dates. All of them work on the iPhone, with BofA and Discover also supporting Google’s Android and Research In Motion’s BlackBerry.

Chase, USAA, Discover and Bank of America allow users to go beyond viewing account information and setting up payments. Citibank enables mobile users to make transfers between accounts. Discover’s “Paydown Planner” shows cardholders how long it’ll take to pay off their balances based on various monthly payments. USAA enables “eligible members” to deposit checks directly from their phones.

(Via CreditCards.com)

“Many people have the habit of doing online banking at a set time and place – weekends at home (or lunch hours at their desks) – so they don’t see a strong value in using mobile banking services,” Sandy Shen, research director for Gartner Inc. “Banks need to offer more than just simply an extension of their online banking to mobile phone customers.”

Citi was the first big bank to offer mobile payments to its customers, enabling mobile access to statements and balances. Now most of the top credit card issuers offer mobile apps to their cardholders, although the available functionality is fairly limited. A notable exception is American Express, which has not yet produced a mobile app.

(Via FoxBusiness.com)

The Gold Bullion credit card, as it will be called, will in essence be a prepaid card, but instead of cash, you will use your gold?as collateral. The card will be targeting consumers with bad credit who are short on cash and own gold.

The card’s features are not yet known, but because it will be secured by your own gold, it is expected to offer competitive rates. It is likely to carry a low annual fee and a gold storage fee, as well as an additional fee if you add more gold to increase your credit line.

(Via SmartMoney.com)

• Use your cards. Making an occasional purchase with a card that is not your primary payment choice will prevent the account from being closed. You should probably get rid of cards with annual fees.
• Maintain good credit. In order to get the best cards available, you will need a good credit in today’s tight credit environment.
• Weigh rewards against annual fees. Many rewards cards are now charging annual fees, while others may require that you spend a certain amount before collecting the most generous rewards. Consider your spending volume before selecting a rewards card.
• Check out cards issued by credit unions. Most cards issued by credit unions don’t have an annual fee and have lower penalty fees.

(Via USAToday.com)

Both delinquent and charged-off accounts are listed as derogatory items on your credit report and affect your credit score. Delinquent payments will reduce your score, but will not have a lasting effect if you resume making payments on time and convince creditors that the odd late payment was an aberration. That is not to say that you shouldn’t be all that concerned with making payments on time. On the contrary, you should, because consistency and honoring the contract terms will help you get the highest possible credit score and lowest interest when you need a loan.

Charged-off accounts present a much bigger challenge and leave a much more lasting effect on your credit history. A single charged-off account can be enough to prevent you from obtaining any form of credit and can hurt your employment prospects. It remains on your credit report for at least seven years and destroys your credit score. Moreover, you are still responsible for the debt after it has been charged off and the lender or a collection agency can still attempt to recover it. The credit reporting agencies report charged off accounts as “negative accounts,” often listing them under “collection accounts.”

The best way to deal with charge-offs is to settle them with your creditor at the earliest opportunity. Remember that the creditor has already written off your account as a loss, so they will be willing to negotiate and accept a settlement for less than the full amount, as little as 50% or less in many cases. Now that you have negotiated a settlement, how does that reflect on your credit history?

Once you settle your debt, the negative information will not be automatically deleted from your credit report. What will change is that your account will be reported as “paid in full” (even if you had settled for less than the full amount), which immediately improves your credit worthiness in the eyes of your prospective lenders.

The best course of action that you should follow, once you settle a charged-off account, would be to:

1. Obtain a letter from your creditor stating that you have paid the account in full and they are required by law to issue such a letter.
2. Send a copy of this letter to each of the national credit bureaus: Experian, Equifax and TransUnion. Under the Fair Credit Reporting Act (FCRA), the bureaus are required to update your report within 30 days.
3. If the information is still not updated after 30 days, the FCRA requires that the account is deleted from your history, which is the best possible outcome for you.

According to FICO, the maker of the most popular credit score, their scores are comprised of the following components:

• Payment history makes up 35% of the score.
• Amounts owed – 30%.
• Length of credit history – 15%.
• New credit – 10%.
• Types of credit used – 10%.

With that in mind, the following tips will help you improve and maintain your credit score:

• Always make your payments on time, at least the minimum.
• Keep your credit card account balances as low as possible or, better yet, pay them off each month.
• Add new and different types of credit, such as an installment loan, which shows creditors that you can handle regular monthly payments.

I basically believe that most people don’t need more than one credit card for their personal finances. However, if you are self-employed or have some kind of side business you also should have a business card. But for personal use one is enough. So, I don’t see any reason to keep it now that you have gone through all the hard work of paying it off.

Now, not everyone in the financial advice business agrees with me on this approach. A good number might recommend keeping it open since closing the account might nick your credit score. Still, my own sense is that sensible money management is developing good financial habits and carrying an extra credit card around isn’t worth it.

(Via PublicRadio.org)

LeAnna Kruckeberg, 24, of Iowa City has already broken the news to her boyfriend. “Family money stays in the family and should be passed down from generation to generation,” she says. “Why should those businesses that my grandparents and my parents built on good old-fashioned hard work be given to someone who marries into a family? Any inheritance or trust funds should go to my kids and completely bypass my husband.”

Financial experts, such as Suze Orman, support prenaps as a protective measure in case a spouse runs up a huge credit card debt, which could damage both partners’ credit scores. Couples are advised to “sort through issues such as credit card debt, discrepancies in each person’s wealth and the possibility of future inheritances.”

The Harris data show that consumer sentiment is shifting in favor of prenaps. According to the latest survey, 36% agree that it makes smart financial sense, up from 28% in 2002.

(Via USAToday.com)

The immediate effect that a slashed credit line has is that it increases your credit utilization, which is the share of your total available credit that you have used. The higher your credit utilization, the worse its affect on your credit score.

Yet, as blogger Trent Hamm reminds us in a Christian Science Monitor article, “credit limits are not a right.” Issuers base their credit decisions on a range of factors, including, according to Hamm, our shopping patterns. If they are led to believe that our financial circumstances have worsened, they may decide to minimize their risk exposure by reducing your credit line.

The best protection for consumers would be not to rely too much on credit in the first place and to pay off the balance each month. Living within your means is still a good way of handling credit and will ensure that you credit utilization remains low, regardless of what the bank does.

(Via CSMonitor.com)

“The truth of the matter is, if you close a credit card, it probably will not help your credit score, but in many cases, it will have no impact at all on your score,” Watts said.

According to Watts, closing a credit card does not erase it from a person’s credit history. He said credit agencies hold onto that history for about a decade.

What does affect your credit score? According to FICO’s website, payment history represents 35% of a person’s credit score. Amounts owed represent another 30%, while the length of someone’s credit history represents 15%. New credit and the types of credit used represent 10% each.

And what is a good credit score? According to Watts, a good credit score is in the 700 – 800 range, although different lenders use their own scoring systems.

(Via YouTube)

(Via YouTube)

They were among the first to use e-commerce systems to allow consumers to pay by credit and debit cards. “The first part of the Web to make money was pornography,” says Jonathan Coopersmith, a technology historian at Texas A&M.

Although the adult industry is just as vulnerable today to fraud and hacker attacks as other industries, at the beginning “you have a lot of some of the tactics, concepts and business strategies pioneered by the cybersex world that then flowed into the regular online world,” Coopersmith says. “For instance, creating these Web sites where you join for a fee and you have different levels of membership.”

Another cutting edge innovation claimed by the adult industry is the offering of live HD streams, which weren’t available in the early days. “So we put together our own technology to be able to do so,” says Peter Acworth, founder of kink.com. “You know, you go to CNN or anywhere else on the Web, the video you see is going to be significantly lower bandwidth.”

(Via WBUR.org)

Overall, 63% of U.S. consumers said they were shopping online, with their share expected to grow to 78% by 2014. The use of credit cards online is expected to decline from a peak of 54.8% in 2008 to 39% by 2014. Debit cards are expected to account 26% of online sales by 2014.

Online payment services, such as PayPal or Google Checkout, comprised 51% of online purchases in 2009, ahead of gift cards (41%), store-branded credit cards (27%), prepaid cards (17%), online credit services such as Bill Me Later (17%) and store-branded debit cards (16%).

The study reports that 48% of consumers have said they reduced their credit card use in 2009, with debit cards picking up some of the slack. Payment forms offering credit terms also grew their share, with 11% of the respondents saying they used such services because they allowed them to delay payments. The study authors expect the share of alternative payments to grow to 19% of total online payments by 2014.

(Via ResearchandMarkets.com)

The cardholder validation process should be carried out in concurrence with the card verification process, so that the merchant ensures that both the card is authentic and the cardholder is an authorized user of the card. The two validation processes complement each other. They represent the two sides of the same coin and should both be implemented in every e-commerce merchant’s risk management strategy.

The process of validating a cardholder consists of checking the correctness of the provided telephone number, physical address and email address. The following simple verification steps will help you identify errors or potential fraudulent activity:

• Provide separate fields for stationary and cell phones. For landlines, check the telephone number’s area code and telephone prefix of the phone number provided by the customer to make sure that they are valid for the entered city and state. Identify mismatches and allow the customer to re-enter information if desired. For cell phones, call the number provided when it does not match the above mentioned characteristics.
• Use directory services to verify that the provided ZIP code is valid for the provided city and state. Consider allowing customers to override alerts, as information may be valid due to recent updates or wrong data.
• Check the validity of the provided email addresses by sending order confirmations. If the email comes back as “undeliverable,” this can be an indication of a fraudulent activity. At the same time, some customers do not provide valid email addresses for fear they would be used for telemarketing purposes or sold to third-party entities.
• If you have reasons to suspect fraud or unauthorized card use, contact the card issuing bank directly and:
  • Confirm the name, address and telephone number associated with the card number.
  • Confirm whether the cardholder has made a recent address change or added an alternative address.
• Call the cardholder to confirm the transaction and resolve any discrepancies that may still remain. Tell your customer that this confirmation is performed as a protection against fraud.

The validation process should be designed to enhance the fraud prevention tools provided by the credit card companies and associations and by your processor:

• Transaction authorization. All card-not-present transactions have a floor limit of zero, which means that they all require authorization. Always obtain authorization before completing a transaction and take into account the authorization result code.
• Card expiration date. Your website’s payment acceptance forms must have a mandatory field for the card’s expiration date. Direct marketers should have the same field available in their printed payment forms and should insist that customers provide it.
• Card verification codes. Card verification codes are the three-digit numbers that are found in the signature panels on the back of Visa, MasterCard and Discover cards and the four-digit numbers that are found slightly above and to the right of the account numbers of American Express cards. You should always ask the customer to provide this code as a way to prove that he or she is in a physical possession of the card.
• Address Verification Service (AVS). AVS enables merchants that accept card-not-present transactions to compare the billing address (the address to which the card issuer sends its monthly statement for that account) provided by a customer with the billing address on the card issuer’s file before processing a transaction. After comparing the provided address with the one they have on file for their cardholder, the card issuer responds by issuing an AVS response code. Address verification and transaction authorization occur simultaneously and, within seconds, the merchant receives both results.

(Via YouTube)

There are several factors that determine a credit score, which ranges from 300 to 850. FICO, the company that calculates the most popular consumer credit scores, says that five components make up its scores: payment history, amounts owed, length of credit history, new credit and types of credit used.

Even if you are making your payments on time, your score can still be negatively affected if your total debt has increased or your available credit has decreased. The ratio of debt to available credit is known as credit utilization and many consumers have seen it rise since the recession started.

According to a January survey by Credit.com, 13% of the respondents have said their credit limit has been slashed over the past few months, and 11% said a credit card company has closed their account. Another survey, by credit reporting agency Experian, shows that the average credit card balances in the top tier of borrowers are 22% higher than they were a year ago.

(Via WashingtonPost.com)

U.S. consumers reduced their credit card balances for a record 16th straight month, according to the Federal Reserve’s latest credit report, released Friday. The data show that credit card balances fell by 2.3% in January.

The overall consumer debt, however, rose in January by 2.4% to $2.46 trillion after 11 straight monthly declines.

The total amount of revolving debt, mostly comprised of credit card debt, in January was $864.4 billion, down from $866.1 billion in December. In September 2008, the last month that saw an increase in credit card debt, the figure was $975.2 billion, $110.8 billion more than what it is today.

The Fed’s data show that the non-revolving debt, including auto loans and mobile-home loans, rose by 5% in January, from $1,585 trillion to $1,591 trillion.

(Via The Federal Reserve)

Citigroup Inc., for example, let certain customers with cards that carry the American Airlines logo know they now get 1.2 miles for each dollar they spend, up from a 1-mile-for-$1 ratio. JPMorgan Chase & Co. similarly upped the miles-to-dollars ratio for their British Airways card by 25 percent, to 1.25 miles for each $1 spent. Chase also boosted the ability to rack up rewards on Marriott cards. For every $3,000 spent, cardholders will earn a free night in a hotel.

In industry jargon, such upgrades are called “earnings accelerators.” As Citi’s spokesman Sam Wang puts it, they are designed to “place our cards at the top of their wallet.”

Not everyone will benefit from these enhancements, though. Citi’s, for example, will be limited to customers with good track records.

(Via The Associated Press)

Charities can be chosen through the Virgin Money Giving website, which provides donations to hundreds of causes. Virgin Money is the financial arm of Richard Branson’s Virgin Empire. Cardholders can choose from a long list of charities and will be able to divide donations among several of them.

Virgin Money claims that this is the first charity card to allow customers to add gift aid to their donation. Gift Aid is a government program that allows U.K. taxpayers to reclaim basic rate tax on their gifts, thereby increasing the donation amount by 28%.

Charity credit cards generate an estimated £16.7m a year in donations from U.K. cardholders.

(Via Guardian.co.uk)

The rules would mandate that issuers review interest hikes since the beginning of 2009 and require them to “evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.” The problem is that issuers could use different set of criteria when evaluating rate hikes. Such criteria could include unemployment rates, consumer confidence and many others.

“The Fed left a lot of leeway for issuers to determine on their own what to do,” said Nick Bourke, manager of the Safe Credit Cards Project at The Pew Charitable Trusts.

Even if banks do decide that interest rates have been increased excessively, the Fed rules do not specify the exact algorithm that should be used to estimate their reduction. So they won’t have to necessarily reverse them to the original rate.

(Via The Associated Press)

First Premier, the sub-prime lender at issue, said it decided to eliminate its Gold MasterCard following a trial. “We used it as a test, and we are analyzing the long-term viability of this product test,” said First Premier spokeswoman Amy Durbin.

CreditCards.com estimates that someone who borrowed $5,000 on a credit card today and consistently paid $150 per month at today’s average interest rate would have to pay $6,423 to pay off the debt – $293 more than what would have cost six months earlier.

Credit card companies say that consumers have options, if they don’t want to pay these higher costs. “We have communicated these changes in a clear and transparent way,” says Citi spokesman Samuel Wang. “Every customer had the choice to opt out and pay off the existing balances over time at their current rate.”

(Via CreditCards.com)

1. First-time shoppers. Criminals are always looking for new victims. Once they commit a fraud at one merchant, they usually move on to another and never come back.
2. Larger-than-average orders. Stolen payment cards have a very limited life span so criminals need to make a quick use of them. Large-size orders are one way of doing that.
3. Orders for several items of the same kind. Just as with larger-than-average orders, purchasing multiple items of the same kind is a way of maxing out stolen cards as quickly as possible.
4. Big-ticket items. Big-ticket items have high resale value, maximizing the fraudsters’ profits.
5. Orders with overnight delivery. Naturally, criminals do not much care about shipping costs and are more likely than legitimate shoppers to order items with an overnight or another type of a rushed delivery.
6. Orders from internet addresses at free email services. Free email services have no billing relationship with their users, leaving no possibility for verification that a legitimate cardholder has opened the account.
7. International shipping addresses. A substantial number of fraudulent transactions are shipped to international addresses. The Address Verification Service can only work for U.K. addresses outside the U.S.
8. Similar account numbers. There are various software tools for generating card account numbers, such as CreditMaster. These numbers are often very similar.
9. Multiple orders shipped to the same address. Such orders may indicate the use of a stolen batch of cards or of fraudulently generated account numbers.
10. Multiple transactions on one card in a short amount of time. Such transactions may indicate that a criminal is attempting to run up a stolen card’s credit line as quickly as possible, before the account is closed.
11. Multiple shipping addresses. Similarly to the previous scheme, a card may be used multiple times in a short amount of time with the orders going to several shipping addresses.
12. Multiple cards from a single IP address. Such transactions may indicate multiple orders placed from the same computer, even if different names and shipping addresses have been used.

So, if you are late on a minimum payment of $20, your issuer will not be able to charge you a late fee of more than $20. Additionally, the rules would ban issuers from charging “inactivity fees” if you are not using your credit card.

Issuers who have increased interest rates after January 1, 2009 would also be required to “evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.”

The proposed rules would also ban issuers from charging multiple penalty fees based on a single violation and would require issuers to inform cardholders of the reasons for rate increases.

The rules proposed yesterday will be open for public comment for 30 days, and would take effect in August.

(Via FederalReserve.gov)

FICO score components

Financial Times reported today that FICO, the company that calculates the most popular consumer credit scores, is urging U.S. banks to reveal these scores to consumers.

The FICO score, ranging between 300 and 850, is used by 90% of the 100 largest U.S. banks. Mortgage lenders use the scores in more than 75% of all residential mortgage originations, according to FICO.

FICO sells its credit scores to lenders who use them when evaluating consumer credit worthiness. While consumers are entitled to one free credit report a year from each of the national credit reporting agencies – TransUnion, Experian or Equifax – they must pay for their credit scores, because they are not included in the credit reports and lenders have been unwilling to share them.

FICO does provide a trial period during which consumers can view their credit score for free.

(Via FICO.com)

The confusion that the FTC is charged to clear has to do with where these free credit reports are to be found. Websites like FreeCreditReport.com offer “free” credit reports, but only after you pay for something else.

AnnualCreditReport.com is the website that is authorized by the government to provide real free credit reports, but even there consumers are bombarded with ads before they can view their credit files. Beginning April 1, the advertising has to be moved to the end of the process.

(Via WashingtonPost.com)

(Via YouTube)

“In Germany there is a very strong data privacy law, and that comes from the European Union data privacy regulation, where they say every real person and the private information like your name, your address and telephone number has to be protected,” said Joachim Gebauer, a technical manager at VeriSign, a digital security company.

Germany is third in the world in percentage of online shoppers compared to its internet-connected population. It only trails South Korea and the United Kingdom.

About 75% of global online payments are made via credit card, according to a recent survey by Deutsche Bank. In Germany only 44% of online shoppers use such a card. 30% prefer invoicing or direct bank account transfers account for 23%.

(Via DW-World.de)

Fraudsters are shifting their focus away from credit cards, targeting bank accounts instead, according to the report.

“It can only be assumed that in a period when there is a lot more scrutiny paid to applications, and where two out of three credit card applications are rejected, other products are considered an ‘easier target’ and so the fraudsters’ attention has been deflected elsewhere,” the report says.

The data show that credit card application fraud fell by 36% in 2009, although part of the decrease may be due to the fact that lenders tightened their underwriting policies as the financial crisis deepened and processed much less applications than the previous year. The proportion of approved applications was also substantially lower.

(Via CompareAndSave.com)

Getting off the list costs $99, although the fee is waived if the customer didn’t know they were committing “friendly fraud,” said Brien Heideman, founder of BadCustomer.com, which keeps such a customer list for retailers that don’t want to get hit with costly credit chargebacks.

But until they’re denied by a merchant, either online or in a store, many shoppers probably won’t know if they’re on the blacklist and should contact BadCustomer.com to get their name off of it. Getting off the private list can be done online, and it’s a pretty hefty list, with 6 million people on it from the United States and Canada, Heideman told WalletPop in a telephone interview.

(Via WalletPop.com)

The author begins with an advice on how to select a payment processing service provider and mentions several names. She then goes on to review the part payment gateways play in the process and here is where it gets confusing. The article doesn’t explain what a gateway does, while it seems to be suggesting that it is all you need to accept payments online. This is a common misconception and we’ve had to separate the facts from the fiction in many conversations with our clients.

Payment gateway is a service that connects an e-commerce website’s shopping cart with the merchant’s processing bank and transmits transaction information between them. Once a customer places an order, the gateway encrypts the information, routes it to the processing bank and then relays the authorization response (approved, declined, etc.) back to the customer. It serves, for e-commerce stores, the same purpose that a physical point of sale (POS) terminal does for brick-and-mortar businesses.

The payment gateway, however, is just a component (although a vital one) of each e-commerce merchant account, just as the POS terminal is a part of a retail merchant account. Both services facilitate the capture and transmission of transaction information from the merchant to its payment processor. The secure transmission of transaction data is the principal use of a payment gateway. Once the information is sent to the processing bank, the transaction has to be authorized, cleared and settled, in order to be completed. This whole process, from the capturing of information, to the settlement and funding is what a merchant account service provides.

Lagorio also provides pricing information for several major gateways and correctly notes that payment processors use gateways as portals. What she has not mentioned is that processors also typically offer much lower gateway set-up and per-transaction costs than the gateway provider. For example, while Authorize.net would set up an account for $99 and would charge $0.10 per transaction, a processor may set up an Authorize.net account for $50 (or less) and charge less than $0.10 per transaction.

The biggest gap in Lagorio’s review, however, is perhaps the failure to explain what gateway authorization fees are and how they differ from the other per-transaction fees that merchants are charged. The $0.10 per transaction fee mentioned above is a gateway authorization fee. Authorization fees are charged solely for the use of a gateway or a POS terminal. For each bank card transaction, you will be charged an additional fixed fee, which is totally separate from the authorization fee. In her report Lagorio cites several examples, ranging from $0.21 – $0.25. It is important to add that you would be paying these fees, regardless of whether your provider is Authorize.net, First Data or UniBul Merchant Services. These additional per-transaction fees are a component of the “discount fee” that processors charge for processing the merchant’s transactions. The other component of the discount fee is represented as a percentage of the transaction amount. So a typical e-commerce discount rate would be 2.19% + $0.25 per transaction. Discount fees are divided among three participants: the processing bank, the card issuing bank and the card association (Visa or MasterCard). The lion’s share of the discount fees, estimated at about 75% of the total processing fees U.S. merchants paid in 2008, is called interchange fee. It is published annually by Visa and MasterCard and is collected by the card issuer. The association gets a fraction of one percent (about 0.1%), and the rest is collected by the processor.

(Via YouTube)

“We hear a lot about the economic benefit of hosting the Games. This is an immediate proof point,” said Andrew Woodward, head of marketing and sponsorship communications at Visa. “In the same 17 days last year, foreigners spent $55 million here. This year they spent $115 million here. That’s a $60-million economic boost in 17 days. That’s not bad.”

Not unexpectedly, at $61.1 million, American visitors spent the most by far. Following is a list of countries whose fans spent more than $1 million at the Games:

1. $61.1 million – USA.
2. $7.8 million – China.
3. $5.1 million – United Kingdom.
4. $4.3 million – Russian Federation.
5. $3.7 million – Australia.
6. $3.6 million – Japan.
7. $3.6 million – South Korea.
8. $2.8 million – Hong Kong, China.
9. $2.4 million – Norway.
10. $2.1 million – Germany.
11. $2.0 million – Switzerland.
12. $1.6 million – Brazil.
13. $1.4 million – France.
14. $1.2 million – Sweden.

(Via Money.Canoe.ca)

Chase said that the new card will offer the 5% rewards on more categories than before, “with no tiers, no caps, no annual fee.” The program will begin on April 1.

As many issuers are cutting back on rewards in response to the new credit card regulations, Chase is hoping that the new offer will help them attract new customers and increase the spending of existing ones. Or, as Matt Kane, general manager of Chase Freedom, put it, “We’re not looking to have customers spend more money – we just want to them to take the money they are spending today and spend it with us.”

Unlike its predecessor, the new card’s 5% cash-back rewards will be tied to categories that will be based on seasonal spending patterns. In the second quarter, it will be available on home improvement items, in the third quarter, it will be available on summer travel purchases, and in the fourth quarter, it will be available on grocery store, department store and movie purchases.

(Via JPMorgan Chase)

“This proposal addresses two key costs of using a credit card – fees and interest rates,” said Federal Reserve Governor Elizabeth A. Duke. “The rule would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to reevaluate rate increases imposed since the beginning of last year.”

Among the rules under consideration are:

• Banning penalty fees that exceed the dollar amount of a consumer’s violation of the account terms.
• Banning inactivity fees.
• Banning issuers from charging multiple penalty fees based on a single violation of the account terms.
• Requiring issuers to inform cardholders of the reasons for rate increases.
• Requiring issuers that have increased rates after January 1, 2009 to reconsider the increases and, if appropriate, to reduce the rates.

(Via FederalReserve.gov)

While the default rate spiked, however, the delinquency rate continued to decline. The number of cardholders 60 or more days late on payments fell for the second straight month to 4.50%, while those 30 days late declined to 5.72%.

Fitch attributes the lower delinquency rate to improvements at Bank of America, where a larger number of customers negotiated debt modifications with the company.

“Until we see some meaningful improvement in employment numbers, consumer delinquencies and defaults will remain elevated at or near these levels,” said Fitch Managing Director Michael Dean.

(Via Fitchratings.com)

(Via YouTube)

(Via YouTube)

International orders present a number of unique risk factors that U.S. e-commerce merchants do not have to deal with when serving domestic customers, including:

• Fraud. A significant number of fraudulent transactions are shipped to fraudulent cardholders outside of the United States.  You will be limited in your ability to verify your international customer’s identity and address, as well as the card’s validity.  You will also be liable for any chargebacks if you accept the transaction, even if the card issuer approves it.
• Address Verification Service (AVS). AVS can only be used to confirm addresses in the United States, unless a card issuer supports International AVS and then AVS can validate addresses in the United Kingdom, but other non-U.S. addresses cannot be verified.  Without the benefit of using AVS, e-commerce merchants will not be protected from certain types of chargebacks and will have no recourse against them.
• Laws and regulations. The legal environment at your customer’s country may further restrict your already limited remedial options against fraudulent transactions, even if you are able to prove that unauthorized transaction has taken place.
• Language barrier. Linguistic challenges are likely to further complicate the matter.  Restricting your sales to the English-speaking world would be one solution.

Yet, despite all the risks associated with international transactions, the huge advantage of being able to reach out to consumers all over the world has proved irresistible to many businesses. If you choose to join in and test your international capabilities, consider screening high-risk international transactions to limit your risk exposure. The following suggestions will help you build your screening procedures:

• As a first step, identify the high-risk countries that are heavily involved in online fraud. There are many resources you can turn to for help with that, including your payment processor.
• Before going all in, test your international market and track your fraud experience for various international locations.
• Obtain the contact information of the card issuer from your payment processor and contact them to verify the cardholder information for first-time buyers.
• Require the billing address to be the same as the shipping address.
• Review the Internet Protocol (IP) address and identify the computer network source:
  • There are a number of online resources to enable you to quickly determine the IP address country.
  • Match the IP address country with the one provided by your customer. If there is a mismatch, you should investigate further.

Although you are unlikely to ever manage to completely eliminate international fraud, as you accumulate transaction data over time, you will be better able to manage risk and adjust your screening process.

The credit card company fraud call. This caller often hits later at night and says he’s from the senior’s credit card company. He even IDs the last four digits of your parents’ charge card as proof. He’s checking on a possible fraudulent purchase. When the senior denies making the purchase, the caller offers to reverse it immediately. He just needs the three- or four-digit verification code on the back of his or her credit card.

What the seniors should do: Suspect foul play. “Thieves have probably copied the front of your parents’ card, but still need the verification code,” says Mathisen. The seniors should hang up and call their credit card issuers immediately, using the number on the back of the card. They’ll likely learn that the original call was a scam. It’s a good idea to cancel and replace the card, just in case.

(Via Bankrate.com)

Prepaid cards are similar to debit cards, with funds immediately deducted from an existing balance with each purchase. But unlike debit cards, which are linked to a checking account, prepaid cards can only be used for the amount the cardholder has pre-loaded on the account. The cardholder can purchase a prepaid card from a retail location or load an existing card by transferring money from a bank account.

Prepaid cards can be used anywhere bank cards are accepted. The appeal of prepaid cards for consumers is in the number of ways they can be used and in that they do not require a credit check. For instance, aside from gift cards, prepaid cards are used by consumers to teach their teenager fiscal responsibility, and by those without bank accounts.

For credit card companies, prepaid cards are less profitable than credit cards, but they still earn income from processing transactions and fees related to the activation and maintenance of these cards.

(Via BusinessWeek.com)

“The recession of 2009 was a wake-up call for many Americans who were spending beyond their means,” said Peter Pham, CEO of BillShrink. “Now we’re seeing people spend wisely and monitor their expenses carefully so that they can begin building a rainy day fund.”

According to the Federal Reserve, Americans have reduced their debt by $101.2 billion in the last 14 months, in another indication that U.S. consumers are becoming more disciplined with their budgets. Revolving credit, mostly comprised of credit card debt, fell $8.5 billion, or 11.7%, to $866 billion in December, the 15th-consecutive monthly decline, according to the Fed report. Total outstanding consumer credit fell $1.73 billion, or 0.8%, in December to a seasonally adjusted $2.456 trillion.

(Via Billshrink.com)

Ric Struthers, a former MBNA vice chairman, who headed Global Card Services, will leave the bank. He joined Bank of America when the company bought MBNA in 2005 for $35 billion. BofA’s credit card unit posted a $5.6 billion loss last year.

Faulkner has been with Bank of America for 25 years. Since 2007, she has served as Bank of America Customer Segments, Deposits and Payments executive. She will now have offices in both Charlotte and Wilmington, Delaware, the headquarters of the card business.

Card services made up a quarter of Bank of America’s revenue in 2009. Deposits represented 12% of revenue and a $2.5 billion profit for the largest U.S. bank by assets.

(Via BusinesWeek.com)

Following is an excerpt of the article:

Anuj Shahani, director of competitive tracking services for Synovate’s Financial Services Group, told me that the number of credit card mailings is still down 40% from the fourth quarter of 2008. He said the CARD Act, which is a new federal law aimed at better disclosure and banning unfair rate hikes, and the economy were reasons for the decrease in mailings of credit card offers.

He said that because of the CARD Act, there are restrictions on spending for credit card companies. Credit card companies will have to come up with targeting models, and data companies can help them figure out those models, according to Shahani.

“Issuers will have to come up with smarter ways to target the right audience because it is so much more expensive to extend credit,” he said. “I think one of them will be social media.”

Credit card companies are alrady using social media to launch new products. Shahani pointed out that the CitiForward credit card launched in March 2009 on MySpace. He said that in December 2009, American Express launched its new Zync card on social media sites.

Shahani said the credit card issuer’s goal is to find the right audience and go to the right people and that’s where he expects social media would come in.

(Via Mashable.com)

Barclays introduced the first contactless payment card in the U.K. in 2007 and currently has over six million contactless enabled cards issued in the UK. All new Barclays debit cards will have the contactless technology built into the card as standard. For other types of payment the cards still operate as normal debit and credit cards with chip and pin security.

The limit increase to £15 limit is a response to demands from retailers and consumers, according to a spokeswoman for the UK Cards Association.

“The new higher limit gives customers the flexibility of paying for even more transactions quickly, securely and conveniently via a contactless card payment and will lead to more retailers implementing the technology,” said Brian Cunnington of Barclays.

(Via BBCNews.co.uk)

When adjusted for inflation, spending rose 0.3% in January, up from a 0.1% gain in December. Personal income rose by 0.1%, after increasing 0.3% in December, the Commerce Department report said.

The personal savings rate fell to 3.3%, the lowest level since October 2008, from 4.2% in December.

Last week, revised figures showed that the U.S. economy grew by 5.9% in the last three months of 2009 – higher than the first estimate of 5.7%.

(Via Bloomberg.com)

1. Be legally registered within the U.S. Individuals are not allowed to set up credit card processing services. Foreign organizations are also excluded. Applicants must be either legally incorporated as businesses or they must be registered with the local municipality and obtain a “Doing Business As” (DBA) name.
2. Have a physical address within the U.S. Applicants must have a physical office that processors can inspect. Home-based businesses are acceptable.
3. Have a U.S. bank account. The bank account into which you will have your funds deposited must be opened with a U.S. bank.

Provided your organization is qualified to apply for a merchant account, there are a number of requirements that will still need to be met and, to understand why the process is so stringent, you need to understand exactly what is it that you are applying for.

Merchant account is a form of line of credit that a processing bank (member of Visa and MasterCard) extends to the merchant. When you accept a card payment, your processor will “acquire” it, usually at the end of the day, together with your other transactions, and will automatically deposit the payment amount, after subtracting the interchange fee and its own processing cost, into your designated checking account. At the same time it will submit a request for payment to your customer’s card issuing bank. Your processing bank will pay you before it gets paid. Moreover, even after the processor gets paid, your customer has six months to dispute the transaction and, if the dispute is valid, the transaction must be reversed (charged back). If you have gone out of business or cannot cover the chargeback amount, your processor is the one who will take the hit. That is the reason why the application process is set up to establish the credit worthiness of both the applicant organization and its principals. Following is a list of requirements that you will have to meet and documents you will have to provide:

• Application form. The application form will collect information about both your business and yourself, including address (business and personal), social security number, tax ID (if applicable), phone number, email address, web address, bank account info, etc.
• Personal guarantee (for-profit organizations only). A personal guarantee is required from the principals of all privately held businesses. Sole proprietorships often do not require a personal guaranty. Non-profits and public companies are not required to provide a personal guarantee.
• Articles of Incorporation. Unless you are a sole proprietor, you will have to provide a proof that it has been legally incorporated.
• Business license. If your business activity is regulated and requires a license, either a federal or a state one, you will need to provide it.
• Business financial statements. Unless your organization has been formed recently, you will have to provide its financial statements (typically it is required that you produce financial statements for the two years preceding the application date).
• Personal financial statements. Typically requested in place of business financial statements, personal financials may also be requested in addition to them. Personal tax returns for the latest two years are typically sufficient.
• Business and personal credit history. Processing banks will check your business’ Dunn & Bradstreet credit file (if applicable). The businesses’ principals will also have their credit files reviewed.
• Business profile and marketing materials. Merchants are required to provide a description of all products and services they offer, as well as copies of all relevant marketing materials. The product type helps processing banks estimate the business’ risk type. Certain business types of products and services will put the applicant business on the restricted merchant list while others may place it in the prohibited list.
• Processing statements. If you are currently accepting credit cards and are looking for a new service, you will be asked to produce your three latest processing statements.
• Voided check. You will need to provide a voided copy of a check for the bank account into which you will want your money to be deposited. The check must have your “Doing Business As” (DBA) name pre-printed on it. If you have not yet received your permanent checks, you can substitute with a signed bank letter stating your account details.
• Compliance with the Payment Card Industry (PCI) Data Security Standards (DSS). Compliance with the PCI DSS will ensure that customer account information is adequately protected.
• Site inspection. The processor may conduct a site inspection of the applicant business’ offices and warehouses (when applicable). Exceptions to the site inspection requirement typically include:
  • Dentists.
  • Health practitioners.
  • Hospitals.
  • Optometrists.
  • Physicians.
  • Colleges and universities.
  • Publicly held companies.
• Business policies. The merchant’s billing, shipping and return policies will be reviewed to ensure compliance with industry regulations. A representative of the processing bank may also place and then return an order with the merchant, as an additional inspection step.
• Other requirements. In case fulfillment of orders is handled by a third party, information should also be provided about this establishment and a site inspection will be conducted at its premises as well. The Internet Service Provider may also have its physical controls inspected. Other requirements may also need to be met.

The ITRC study shows that for the first time hackers have overtaken human errors as the main cause for a data breach. What that means is that compromised credit card data is more likely to be used for fraudulent purposes than before.

The best way to protect yourself remains to carefully scan your credit card statements, but the PCWorld offers a few more technical suggestions:

• Set alerts for charges above a certain amount. You can get the alerts by email or SMS.
• A free online service called Mint.com can let you view data from all of your credit cards, bank accounts, and investments and loans in one place. You will have to provide your accounts’ user names and passwords, so you will have to really trust the service.
• Check your credit reports regularly. Annualcreditreport.com gives you one free report per year from each of the credit bureaus: Experian, Equifax, and TransUnion. Don’t be misled by “free” services that require that you pay for something else, before you can view your report.
• Consider using virtual credit card numbers, offered by PayPal and some banks. Such virtual numbers can be used only by the company you give them to.

(Via PCWorld.com)

Wyndham did not disclose how many hotels or customers were affected. The stolen information included customer names, card numbers, expiration dates, and data from the cards’ magnetic stripes.

“A hacker intruded on our systems and accessed customers information from a limited number of franchised and managed properties,” the company said in a note on its web site, according to an IDG New Service article on CIO.com. “The hacker was able to move some information to an off-site URL before we discovered the intrusion.”

This is the third data breach reported by the hotel chain in the past year. A year ago Wyndham said that hackers stole tens of thousands of credit card numbers between July and August 2008. A second breach was reported last August.

(Via USAToday.com)

The delinquency rate went up, however. The number of consumers who were more than 90 days late on a payment went up to 1.21% during the final quarter of 2009, which represents a 10% increase over the third quarter. However, the number of delinquencies on a year-to-year basis remained steady.

“It is typical seasonality to see a rise in credit card delinquency during the holiday season, especially since the recession began,” said Ezra Becker, director of consulting and strategy in TransUnion’s financial services business unit. “Consumers use their available cash for holiday shopping and in many cases do not have enough left over to pay their credit card bills from the previous month.”

(Via TransUnion.com)

Not surprisingly, Gen Y members are more likely to use online and mobile services than preceding generations. According to the study:

• 48% of Gen Y with a credit card signed up for the card online, and 36% of those with personal loans applied for the loan online.
• 80% of Gen Y has used online banking within the past month, a higher percentage than any other generation.
• One-third of Gen Y has conducted mobile banking activities in the last month, compared to only 11% of baby boomers.
• 43% of Gen Y plan to perform mobile banking activities in the next year.
• 32% of Gen Y plan to be checking account balances on their cell phone. Additionally, 15% plan to receive and pay bills via their mobile device, representing more than 1.5 million Gen Y households.

(Via MarketWatch.com)

(Via YouTube)

Geico, which Berkshire bought in 1996, is primarily a car insurer. It is growing rapidly, adding 2 million customers in the last three years and 4 million since 2002, making it now the top car insurer in New York, among other places. Geico is perhaps best known for its TV commercials featuring a talking gecko. The insurer spent $800 million of advertising in 2009.

Buffett admits to going forward with the credit card idea against the advise of Geico’s managers. “They warned me,” said Buffett, who is also Berkshire’s chief executive officer. “I subtly indicated that I was older and wiser. I was just older.”

(Via CNNMoney.com)

(Via YouTube)

• Immediately contain and limit the exposure. To protect any further loss of data, you should conduct a thorough investigation of the suspected or confirmed loss or theft of account information within 24 hours of the compromise. The following concrete actions should be taken:
  • Do not access or attempt to access the systems that were compromised. Do not change your log-in details.
  • Do not turn off the compromised system. Instead, unplug the cables that connect it to the rest of your network.
  • Try and save the logs and all other information that can be used as evidence in your investigation.
  • Document all actions that were taken.
  • If you are using a wireless network, change the network access code and the network’s name on the access point. Adjust all systems accordingly, save for the compromised one(s).
  • Remain on high alert for the duration of the investigation and monitor all components of your system.
• Immediately contact all parties involved. All parties involved in the payment processing cycle should be immediately alerted of the suspected or confirmed security breach. Be sure to contact:
  • Your organization’s security group, if applicable.
  • Your organization’s legal department.
  • Your payment processor.
  • The local FBI office.

The Credit Card Associations of Visa and MasterCard have established procedures for handling suspected and confirmed data breaches and will contact you to assist in the investigation. In the event of a compromise, they may dispatch a team to go on-site and help identify security deficiencies, control exposure and discuss the measures that need to be taken to prevent similar events from occurring in the future. Once you have identified the compromised account numbers, you will have to distribute them to the respective credit card companies and associations and your processor will instruct you exactly how to do that. The compromised account numbers will then be distributed to the card issuers who may issue new replacement account numbers. Your processor will also instruct you on any other actions that may need to be taken, including providing an incident report, undergoing an independent forensic review, etc.

Getting rid of credit cards has had “an overwhelming positive affect on our financial life,” says Baker, while admitting that he and his wife had several factors working for them:

• Canceling the credit cards didn’t affect their utilization rate – the share of the total available credit a cardholder has used. If the balance is zero, so is the utilization rate.
• His credit history has “no negative marks.”
• The couple placed a “credit report freeze” on both of their reports, greatly reducing the number of credit checks.

Here is Baker’s assessment on how the couple’s cardless lifestyle has affected their credit scores:

• The length of our active accounts would obviously be affected. Several of our credit cards were 4-5 years old. Canceling them reset the length of our active revolving loans back to zero.
• The type of credit used would be less diverse. We didn’t have a mortgage and now didn’t have any active revolving credit, either. I’ve read that FICO likes to see an installment loan that isn’t a student loan (for example, an auto, jewelry, or personal loan). We’re now lacking that, as well.
• Our overall credit limits were all but eliminated. Previously, we had close to $15,000 in credit card limits. This was obviously reduced to $0 by closing the accounts.

(Via GetRichSlowly.org)

“Know your plastic personality. Disciplined credit-card holders can earn rewards points by using their cards for all their purchases and paying the bills in full each month. Consumers with less self-control may want to use debit cards to make sure that they don’t spend more than they have.”

(Via CBSNews.com)

(Via YouTube)

But does the Act extend the same protections to business cards? No, it doesn’t, say small business advocates. Many believe that credit card companies will try to make up for at least some of the lost revenue that compliance with new regulations will cause by adding fees, raising interest rates on business cards.

“There is a whole revenue stream that has been shut off to credit card issuers. They may look to small businesses to make up that revenue,” says Molly Brogan, a spokeswoman for the National Small Business Association in Washington, D.C. She adds that, in time, “new fee tactics, high interest rates and confusing bills will [likely] get worse.”

An alternative for small business owners may be to start using consumer cards for business expenses, but this option brings about a different set of concerns. Apart from the accounting issues that would be sure to arise from mixing up personal and business expenses, you will have to consider the potential impact on your personal credit history, if something goes wrong with the business. As small business credit adviser Gerri Detweiler puts it, “the credit activity and debt of the business shows up on the owner’s personal credit, which can lower the business owner’s personal credit score.”

(Via The Wall Street Journal)

(Via ABCNews.com)

Following is an excerpt from that interview:

Q: In the months leading up to the new credit card law, banks cut the number of cards by 15 percent and cut the amount of available credit by $1 trillion. Doesn’t that hurt consumers, given the evidence you’ve seen about the growing importance of credit cards?

A: One thing to consider is how much of that trillion dollars was actually used? A lot of those accounts were unused.

Decreasing credit lines was very important for banks to thrive or survive through the credit crunch. We worked with a number of banks to get this exactly right. The banks that got it right operated with a scalpel, not with a butcher blade, because your limits are different from mine, and your need for that line is different from mine. A number of banks got this right. But in the early days, some of them didn’t, and they did things like 25 percent off everybody’s line. That annoyed people.

Q: It wasn’t just annoying. These actions hurt the credit scores of a lot of people, by cutting their credit lines close to their balances.

A: That would result in a drop of about 20 points. I understand the reason for the concern. But there’s lots of statistical evidence that people who are at or near their limits, regardless of how they got there, whether it’s your fault or the bank’s fault, are higher risk. And that’s all that the 20-point drop is saying. But after several months of demonstrating that you’re not tipping over that line, then your FICO score tends to return to its prior level. We think that’s an appropriate way for the scores to react. But I understand why people are concerned about it.

Q: The new credit card law requires card statements disclose how long it will take to pay off a balance by making minimum payments. Do you think this sort of information will matter to consumers? Will it be a game changer?

A: I think so. A year or two from now, it may not be viewed in hindsight as such a big deal, because it will be part of the fabric of doing business. But I think initially, it will be a big change. I’m a big believer in those kinds of disclosures.

Q: Why do you think consumers are so much more aware of credit scores than they were just a few years ago?

A: I think they’ve learned a lesson from this recession. That you can and should be a good financial steward and keep your own financial house in order. There are many things that are needed there, but paying attention to your FICO score is one of them.

(Via The Associated Press)

Apart from adjusting their marketing and sales campaigns to address the cultural uniqueness of each region of their worldwide market, e-commerce organizations must comply with additional requirements. The transaction currency the merchant accepts and the rules governing the currency conversion process is one example. Credit cards and various other non-cash methods enable merchants to accept payments from consumers all over the world, regardless of the local currency. However, whatever type of currency is used to complete the transaction, the customer will see the charge in his or her statement in the local currency.

In order to avoid confusion or misunderstanding, the merchant will have to provide the customer with an estimate of the sales amount in local currency. Be advised that you cannot actually convert transaction amounts into a different currency. This is done by your processing bank and the bank will do in accordance with its own rules and procedures. What you can do is to provide an estimate of the equivalent amount in a different currency and you must label them as being listed for information purposes only. Following is a list of requirements and best practices regarding the management of transaction currencies in e-commerce transactions.

• Provide a full disclosure to customers, on the check-out page of your website, of the country your business operates in and of the currency used for the purchase. Remember that the currency of your settlements is the transaction currency and you cannot convert currencies. The currency must be clearly stated on your website’s payment page, particularly if the currency is not unique. For example a dollar may be an Australian, New Zealand, Hong Kong or U.S. dollar.
• Clearly display all information relating to the Dynamic Currency Conversion (DCC) service on your website, if applicable. DCC gives cardholders the option of either paying for products or services in their own billing currency or in the merchant’s currency. DCC is an optional service that is facilitated by the merchant at the point of sale through support provided by the processing bank or by a third party.
• Require that cardholders indicate whether they accept or decline using the DCC service. This selection can be done by checking one of two boxes, one to accept DCC and one to decline it. When cardholders select DCC and check the appropriate box, all transaction receipt statements should be displayed on the screen and include all required information.

(Via Fox13now.com)

The text messaging service, free beyond text messaging and web access charges, can be accessed at wf.com/text. Customers will be asked to provide their phone number and can begin text banking.

Customers can use the service by sending text messages to 93557 (”WELLS”). Users can see a list of commands by texting “COM.” They can ask to check their account balances (text “BAL ALL”), see if a check is deposited (text “ACT”), see credit card payment information (text “DUE”) and find the address of the nearest Wells Fargo ATM (text “ATM” along with the city and state or ZIP code).

“Through simple and secure text queries, text banking is the fastest, easiest way for customers to see a snapshot of their accounts,” Arah Erickson, VP and head of Wells Fargo retail mobile banking, said in a statement.

(Via NYTimes.com)

(Via MSNBC.com)

One of the consequences of the new law is that credit card companies will be severely restricted in their ability to raise interest rates and consumers will be able to opt out of any changes issuers may want to introduce to their accounts. The issuers have acknowledged that the new regulations have influenced their policy of systematically increasing the annual percentage rates (APRs) on their card offers ahead of the law.

“We understand that customers don’t like price increases, especially in difficult economic times. However, these actions were necessary given the doubling of credit card losses across the industry from customers not paying back their loans and regulatory changes that eliminate repricing for that risk,” says Citi spokesman Samuel Wang.

CreditCards.com estimates that someone who borrowed $5,000 on a credit card today and consistently paid $150 per month at today’s average interest rate would have to pay $6,455 to pay off the debt – $321 more than what would have cost six months earlier.

In addition to raising APRs, many issuers, including Bank of America and Chase have shifted more of their accounts from fixed-to variable interest rates. Cards with variable interest rates track the Federal Reserve’s prime rate, which is at a historical low at the moment. Once the Fed starts raising it (and it cannot go lower than that), variable rates will go higher as well.

(Via CreditCards.com)

The poll’s results show that 92% have taken preventive steps to avoid becoming a victim of fraud – from shredding documents (73%) to shielding a Personal Identification Number (PIN) from prying eyes (62%). However, only 6% change their PINs every few months.

While 82% of Canadians are concerned about fraud and 92% say they take some action to protect themselves, many are still living dangerously: 21% have sent their credit card number via email, 10% have revealed their debt card PIN to someone and 7% actually have written down their PIN and carry it somewhere in their wallets.

“Despite the overwhelming number of Canadians who are taking preventive action, there is still room for improvement,” says Andrea Phillips, Vice President, Payments, TD Canada Trust.

(Via TD Canada Trust)

(Via ABC7News.com)

(Via WKYC.com)

• Increase of fees. Card issuers will introduce new fees and increase existing ones to make up for some of the losses they will incur from complying with the new regulations.
• Fewer rewards. Reward programs will suffer, particularly for cardholders who don’t carry a balance.
• Increase of merchant fees. The fees merchants are charged for accepting card payments are likely to increase and to be passed to consumers.
• More difficult approval. Issuers have already tightened up their underwriting policies and the new law will require them to keep it this way, particularly for younger consumers.
• Penalty rates are likely to increase. Although the CARD Act protects consumers from arbitrary rate increases, the protections do not extend to cardholders who are late on payments or don’t pay at all.

(Via CSMonitor.com)

• In the case of retail sale and credit receipts, a space for the description of products or services that are sold by the merchant to the customer and their cost, in sufficient detail to identify the transaction.
• Sufficient spaces for:
  • Customer’s signature.
  • Card imprint and the merchant or bank identification plate imprint.
  • Transaction date.
  • Authorization number (except on credit slips).
  • Sales representative’s initials or department number.
  • Currency conversion field.
  • Merchant’s signature on credit receipt.
  • Description of the identification document supplied by the cardholder on cash disbursements and retail sale slips for certain unique transactions.
• A note clearly identifying the receipt as a retail sale, credit, or cash disbursement and the receiving party of each copy.
• On the customer copy of the receipt, the words (in English, local language, or both): “IMPORTANT – retain this copy for your records,” or words to similar effect.

The merchant can include other relevant information on the receipt, provided it is not inconsistent with these rules. It is recommended that each retail receipt identifies the organization that distributed the receipt to the merchant.

Card account number truncation. Since 2005 it is also required that all sales receipts generated by newly installed, replaced or relocated point-of-sale terminals, whether attended or unattended, display only the last four digits of the account number. All preceding digits must be replaced with fill characters that are neither blank spaces nor numeric characters, such as “X,” “*,” or “#.” The last four digits provide the customer with enough information to identify the card that he or she used in the transaction.

General truncation consideration. Typically, the truncation of a greater number of digits, when compared to the total number of digits in the personal account number (PAN), increases the effectiveness of the procedure. However, it can also make it more confusing and difficult for cardholders to reconcile transaction receipts to their monthly card statements. There are several considerations to take into account when developing your own procedures for truncating account numbers:

• A truncation of the routing bank account number (BIN) alone, while helpful, may not prevent duplication of the PAN. It is possible to observe the card in use in order to obtain card issuer identification.
• Truncating the check digit and several other digits does not improve PAN security. Without the check digit, calculation of several missing digits within the PAN, especially if the routing BIN also is truncated, is substantially more complicated and time consuming.
• Truncating a small number of digits, when compared to the total number of digits in the PAN, makes the procedure less effectiveness. It is possible to reconstruct a few missing digits by trial and error.
• Truncating a greater number of digits, when compared to the total number of digits in the PAN, increases the effectiveness of the procedure.

Electronic signatures. Processing banks that are using Electronic Signature Capture Technology (ESCT) must ensure the following procedures are implemented:

• Adequate electronic data processing (EDP) controls and security measures are established, so that digitized signatures are recreated on a transaction-specific basis. Processors may recreate the signature captured for a specific transaction only in response to a retrieval request for the transaction.
• Sufficient controls exist over employees with authorized access to digitized signatures maintained in the processor’s or merchant’s computers. Employees and agents should be allowed to access the stored, electronically captured signatures only on a “need to know” basis.
• Digitized signatures are accessed and used in compliance with applicable industry regulations.

(Via TheDailyShow.com)

The report shows that in 2009, 0.3% of consumers with FICO scores in the 760-789 range defaulted on real estate loans, compared to 0.1% who defaulted on bank cards.

“We’re identifying lending industry situations in FICO Score Trends that to our knowledge have never been seen before,” said Dr. Mark Greene, CEO of FICO.

The data also show that repayment behavior across the financial services industry has shifted from the past. In 2008-2009, bank card accounts were just 1.6 times more likely to become 90 days delinquent than were mortgage loans.

The report indicates that lenders have tightened their lending standards in 2008 and 2009. In 2005, nearly 46% of consumers who opened a new mortgage had a FICO score less than 700. In 2008 the percentage dropped to just 25% of the newly booked mortgage population.

Another report – from TransUnion – showed similar data. According to the credit reporting agency, the number of consumers delinquent on mortgage payments but current on credit cards increased 68%.

(Via Credit.com)

(Via YouTube)

Moody’s reported that the January charge-off rate was 11.15%. The last time the charge-off rate topped 11% was in August, when it was 11.5%. Charge offs were at 7.74% in January 2009. Banks typically charge off the balance on cards that are 180 days past due.

Moody’s expects the charge-off rate will climb for a few more months, topping out around 12%. Charge-off rates tend to mirror unemployment, which topped 10% in October and has remained near that mark.

Moody’s also reported that the early stage delinquency rate, or rate of payments that are behind by 30 to 59 days, fell to 5.96% in January, the first month below 6% since September. The amount of a cardholder’s balance paid dropped to 17.53% in January after increasing in December.

(Via InsideARM.com)

(Via CNNMoney.com)

The new requirements have produced a range of reactions. Daniel Grant, a student at CSUB, wishes somebody told him about the dangers of credit cards when he got his first card at the age of 18. “Too young, definitely too young. I was inexperienced, didn’t know what I was doing, I didn’t handle it the proper way but now I’m older and much wiser,” he said.

“I hate to say we need to create legislation or regulations to protect us from ourselves, but I often feel that young adults, which college students are for the most part, have often not had the life experience or sophistication so they may make choices in retrospect are not the best choices,” adds John Emery, dean of CSUB’s School of Business and Public Administration.

Another student – Isaiah Ramos – has stayed clear from getting a credit card. “I don’t want to put myself up in any debt that I can’t pay off,” he said.

(Via Turnto23.com)

One of the provisions of the Credit CARD Act of 2009 requires the FTC to prevent “deceptive marketing of free credit reports.” Beginning April 1, all “free credit report” offers must provide disclosures to help consumers distinguish truly free from offers that require a purchase of some additional service.

Consumers are entitled to one free credit report every 12 months from each of the major credit reporting agencies – Equifax, TransUnion and Experian. The reports can be ordered online on www.annualcreditreport.com or by calling 877-322-8228.

(Via MarketWatch.com)

MO / TO merchants must verify the cardholder’s identity and the validity of the transaction, to the best of their ability, and here they have an advantage over their e-commerce counterparts. While e-commerce payments are processed, and must be verified, within seconds, MO / TO merchants have much more time to investigate the provided information. With that in mind, your fraud prevention procedures should include the following actions:

• Obtain an authorization. Avoid using a $1 authorization to verify if the account is in good standing.
• Obtain the card expiration date. Include the expiration date in your authorization request. An invalid or missing expiration date can be an indicator that the person does not have the actual card in hand.
• Obtain the card security code. Card security codes are the three-digit numbers found in the signature panels on the back of Visa, MasterCard and Discover cards and the four-digit numbers found above and slightly to the right of the account numbers of American Express cards. Card security codes were introduced as an additional tool to help ensure that the customer is in a physical possession of the card at the time of the transaction.
• Use the Address Verification Service (AVS). AVS verifies the validity of the billing address provided by your customer by comparing it to the one on file with the card issuer.
• Submit the authorization request with the billing address and security code. The authorization response will include the result codes for both.
• Perform transaction screening. Transactions should be screened, either internally or using third-party tools, for questionable transaction data or other potential warning signs indicating “out of pattern” orders. Transactions with higher risk characteristics should be reviewed for fraud.

When you identify a transaction with high-risk characteristics:

• Make a Code 10 call. Code 10 is a voice authorization request that alerts the card issuer to the suspicious activity. The issuer’s voice authorization center representative will ask you a series of questions to determine whether or not the transaction is fraudulent and provide instructions on how to proceed.
• Call your customer. Call your customer at the number they have provided and ask for additional information, e.g., bank name on the front of the card.
• Confirm the order with your customer. Send a confirmation note to your customer’s billing address, not to the shipping address.

Implementing these suggestions into your fraud prevention procedures will help substantially reduce fraud and the number of customer complaints that lead to chargebacks. It is important that, whenever you get to contact a customer for additional details, you are courteous and polite. Do not tell them that you are attempting to verify the validity of a transaction. If the customer refuses to provide additional information, simply state that this is a standard procedure that your business always takes for such types of transactions to protect cardholders from fraud. Always report suspicious activity to your processing bank.

Are you passionate about the world of credit cards and how it impacts our daily lives? Do you have the skills to write about it?

If the answer is yes to these questions, you might be the right person to become UniBul Merchant Services’ blogger. You’ll be the blog guru at a company that is growing fast and intends to be growing even faster.

As our blogger, you will be responsible for reviewing the daily credit card news on our blog. You will be free to figure out how to do this. We get our information online, from trustworthy news sources, such as The Wall Street Journal, The New York Times, Bloomberg, Business Week, etc.

You will be expected to publish five new posts a day, each comprised of 2 – 3 short paragraphs and 100 – 150 words, with matching photo.

Here are a few more specific qualities we expect:

• You must be an experienced and successful blogger (must have at least two years of blogging experience).
• Proven strong written and verbal communication skills.
• Ability to quickly respond to news developments.
• Webcast, video experience is a plus.
• Active, robust accounts on Twitter, Facebook and LinkedIn.
• You get things done.
• You’re a quick learner.

If this interests you, check out the blog you will be writing for – gist.unibulmerchantservices.com – and email your resume and cover letter to gist@unibulmerchantservices.com.

The new law does not regulate, however, the way the disclosures should be posted on the issuers’ websites. The result is that banks have opted to consign the new information to the downloadable monthly statements, instead of providing it on the cardholders’ account summary page.

Bank of America, Chase, Citi and other big issuers have stated that they are educating customers via mail and e-mail about the new statements. Capital One will be showing cardholders banner ads about the new disclosures for at least the next few months when they log on. At Bank of America, the full statement is two or three clicks away once you’ve accessed your account.

(Via NYTimes.com.com)

(Via YouTube)

As part of new credit card law, banks are required to provide some critical new information on monthly statements. The idea is to spell out for cardholders the costs of carrying a balance.

Here’s a look at the new information you’ll find on your statement.

• How many years it will take to pay off your balance if you make only minimum payments.
• How much you’ll end up paying in interest and principal if you only make minimum payments to pay off your balance.
• How much you need to pay each month to wipe your balance clean within three years.
• How much you’ll save in interest if you pay off your balance in three years instead of making minimum payments.
• A toll-free phone number where you can get information about credit counseling.

(Via The Associated Press)