Card Issuers Don't Care, And They're Proving It

Chuck Jaffe

BOSTON -- Lisa in Boston is at wit's end. A few years back, she consolidated all of her outstanding debts -- including her remaining student loans -- onto a low-rate credit card that promised a rate of roughly 5% for the life of the loan.
She has steadfastly paid the bill down, always on time, but seldom over the minimum because, she said, "I can't afford that much more than the minimum."
Recently, Lisa got a notice that Chase Card Services is raising her minimum monthly payment to 5% from 2%. That will raise the monthly amount due on her outstanding $14,000 balance from $280 per month to $700 per month -- enough to make Lisa tight on the rest of her bills.
Joe in Tulsa, Okla., is equally frustrated. He has worked hard over the years to pay off his credit card bills, but because his work in the oil business can sometimes be spotty, he has always wanted to have available credit to get him through the lean times. When Joe recently paid off the bill on his Bank of America card, his "reward" was a note informing him that the credit limit on his account was being reduced sharply.
These types of stories are legion nowadays. Consumers are feeling the squeeze as credit-card issuers dig in to survive tough economic times and prepare for new operating rules.
No credit due
Last week, this column looked at why the rules changes -- though a step in the right direction -- are not necessarily going to help consumers. What Lisa and Joe have in common is that they, like millions of consumers affected by their card issuers' new playbook, want to know what they can do about it. See story on new credit card rules.
In a word: Nothing.
When you feel like you have gotten the short end of the stick, or a raw deal, trying to negotiate with a credit-card issuer is a bit like dealing with the Internal Revenue Service, only without the IRS' charm. Arguing with a card issuer over the way they have treated you -- or mistreated you, more likely -- is like fighting City Hall or working with a nasty boss: resistance feels futile.
That's particularly true right now. With credit-card issuers feeling the pinch and narrowing credit lines or cutting off customers -- including many who have made timely payments and managed balances properly -- I went looking for the right way to handle complaints with credit-card issuers.
I started this search after hearing from many consumers after writing about the new law. The common lament was that if the card issuer has a cold -- and they do, which is why they are cutting risks, even though that means hurting good customers -- the consumer gets the flu.
"Card issuers just don't care right now," said Credit.com's Gerri Detweiler, author of "The Ultimate Credit Handbook."
"It used to be that you could use the threat of taking business elsewhere, but these days I think that some of the card issuers actually want that," she said "You can go up the chain of command when you don't get anywhere with customer service, then maybe find the name of an executive -- or the top executives -- in the annual report or on the company's Web site and write a letter and send documentation. In the past, that would help to resolve things, but today it's entirely possible that they'd ignore it and never bother to respond."
Complaining up the ladder from the customer service rep, going to investor relations (if you are a shareholder), writing the big boss, filing complaints with the Better Business Bureau or Federal Trade Commission all feel good, but they may not resolve the problems in the account.
"I advise people to write to the president of the company, the comptroller of the currency, and to write their senator or Congressional representative," said Linda Sherry of Consumer Action. "But I haven't been telling them that complaining that way will restore their minimum payment, or their larger credit limit."
Tight squeeze
One thing every consumer should recognize is that the lenders moves are sometimes made with ulterior motives. Lisa called Chase, for example, and was offered the chance to keep her minimum payment at 2% of the outstanding balance, so long as she agreed to an interest rate of roughly 8% instead of the lower rate she was promised for the life of the loan. And Joe quickly was offered the chance to have his credit limit restored or even raised -- but with a balance transfer deal.
Close the account, and you take an exposure off the books for the issuer -- they want that -- while hurting your own credit score (though someone with good credit will see their score bounce back quickly). Opt out of the term changes -- part of the new law that went into effect last week requires a card issuer to provide 45 days notice before altering terms, and allows the customer to say no to the changes -- and the lender will freeze the account. Your terms will stay the same until you pay off the debt, but the credit line is shut off.
And if you think the lender was hard to deal with as an active customer, try getting a fee waiver or complaint addressed when you have refused its terms and conditions and put the account on lockdown.
While President Obama's planned consumer protection agency for financial issues may help someday, the truth is that it may not be able to resolve the growing rift between card users and issuers. After all, government officials put the new rules in place, and it's already clear that they'll be of minimal help.
"With credit card relationships, there are a million shades of gray, and you'd like to say 'This is how to complain and win,' but you can't," said Greg McBride, senior financial analyst for BankRate.com. "Closing your account and taking business elsewhere is a great option, unless you are in the market for a car loan or mortgage in the next six months and you're afraid of torpedoing your credit score, or you're the guy who is worried about losing a job and who wants whatever credit line they can keep as a back-up plan."
McBride added: "You may not use the card very often or you may do everything right, but a seldom-used account or an account where there is a lot of available credit -- even when everything is paid on time -- represents a risk exposure to a card issuer, not an opportunity to boost their receivables. If you are not an opportunity, you're their risk; you may not see it that way, but that's the logic you are facing."
The easiest way to avoid the problem, of course, would be to pay off the debt. Only when you have zeroed the balance and can manage payments without running up debt anew can you deal with credit card issuers on your own terms, rather than theirs.
Copyright © 2009 MarketWatch, Inc.

5 Strategies to Lower Your Rent Now

When it comes to lowering their monthly housing payments in the down economy, renters have homeowners beat.
Refinancing a mortgage requires plenty of paperwork, a stellar credit score and weeks of effort. But property owners faced with profit-sucking vacancies and cash-strapped tenants are increasingly willing to negotiate. According to a recent survey from rental property marketplace Rent.com1, 68% of landlords reported lowering rents or giving one or more months free to retain tenants.
Try these five strategies to cut your bill:
Research the market
Learning what other people in your building and neighborhood are paying for comparable properties can help you figure out whether you’re overpaying, and how much room you have to negotiate, says Steven Cohen, the president of consulting firm The Negotiation Skills Company, which helps clients negotiate for better deals. Ask other renters what they pay, check similar property listings on Craigslist2, and get a local comparison on RentoMeter.com3. Cohen’s daughter Abigail tried that tip and found that others in her neighborhood on New York’s Upper West Side were paying an average 20% less than she was for a studio apartment. She brought those figures to her landlord and ended up with a new lease this summer for $1,550 instead of $1,850 -- an 18% discount.
Play up qualifications
“If you aren’t a good tenant, you won’t have a strong case,” says Peggy Abkemeier, the president of Rent.com. “The landlord may not want to make concessions to get you or keep you in the unit.” Point out that you’ve always paid on time, have kept the property in great shape and haven’t had any complaints from neighbors. Renters hunting for a new place have less leverage here, but they can benefit from a reference from a previous landlord.
Take on a roommate
Obviously, the more people sharing your space the less rent you’ll pay. But landlords may also offer a break to fill under-housed units. When Eric Woodbury and two friends were apartment hunting in Medford, Mass., in July, one property manager offered them a three-bedroom unit for $2,000, or roughly $667 apiece. Or they could move into a $2,200 four-bedroom where one tenant was already in place, cutting the per-person rent to $550. “That was a big selling point for us,” he says.
Look beyond rent
If your landlord stands firm on the monthly rent, ask about other possibilities to cut costs. For example, you might negotiate for more utilities to be included or a discount on extras like storage space or parking. Rent.com found 38% of landlords were willing to reduce security deposits, and 8% relaxed pet policies (which typically include an extra security deposit).
Track vacancies
Turning over an apartment can cost a landlord thousands in upgrades, marketing and lost rent, Abkemeier says. If your building or community is looking more and more like a ghost town, you have plenty of leverage to negotiate. “I see and hear people moving out of my building all the time,” says Iris Karasick of New York City. Karasick already negotiated the rent on her one-bedroom on the Upper East Side down $100, to $2,155, earlier this year, and says she hopes the vacancies might help push it below $2,000 this fall. “I’m sure they’d rather have a good tenant in the apartment than have to hunt for someone new,” she says.

1. http://www.rent.com/

2. http://www.craigslist.org/

3. http://www.rentometer.com/

URL for this article:http://www.smartmoney.com/personal-finance/real-estate/5-strategies-to-lower-your-rent-now/

Deal of the Day by Kelli B. Grant

Win at the credit scoring game

To get the best deal on a loan, you need some new strategies to bump up your score - and keep it there.

(Money Magazine) -- Borrowing money today requires impressing an increasingly hard-to-please crowd. With creditors of all kinds more cautious than ever, you need an A+ application to land the best terms -- and that means an A+ credit score, the number lenders use to judge your risk of default.
The most commonly used credit scoring system, called FICO, rates people from a very risky 300 to a pristine 850. And right now we're in the middle of a credit score crunch: "You need a 750 or better today to have the same treatment you got with a 700 two years ago," says John Ulzheimer, president of consumer education at Credit.com.
John D'Onofrio, CEO of Autoloandaily.com, seconds that: "Two years ago a 680 was enough to get a great car loan rate. Today it's often the minimum to qualify at all."
Think you're still in the clear? Don't be so sure. Lenders have been making changes that could cause your score to slip from excellent to average. Improve and protect your number with these strategies:
Learn your score. You have three FICO scores, based on your credit reports at the three credit bureaus: Experian, Equifax, and TransUnion. The numbers tend to be in the same ballpark, so pony up $16 to get one representative score at myfico.com. You can get an estimate free at Creditkarma.com. But the FICO score gives you a better sense of what lenders see.
Scout for mistakes. Your scores are only as good as the information they're based on. And a third of people who've pulled their reports have found errors, according to a Zogby poll. That's good reason to read your report.
When you buy your FICO score, you'll get a copy of the report it was based on. Get gratis histories from the other bureaus via annualcreditreport.com (you're entitled to one free from each bureau every 12 months).
Spot an error? Request a correction, following the instructions on the bureau's website. Let's say the size of a credit line was misstated or an account was mistakenly marked delinquent. Getting the error fixed could raise your score as much as 200 points, says Ulzheimer, who has also worked for Equifax and FICO.
Never, ever be late. As you'll see in the pie chart on the right, the biggest chunk of your credit score comes from your payment history. Just one late payment can shave 100 points off a 750-plus credit score, says Ulzheimer. Lenders can't tattle on you to the bureaus until you're 30 days past due, adds credit expert Gerri Detweiler. But don't risk it. For all your bills, enter recurring due-date reminders on your computer calendar.
Missed a payment? Get back on track within the next 30 days, and you should "get back the lion's share" of points lost, Ulzheimer says. More than 90 days late? The damage can stick for years. If it was a one-off lapse, call your issuer and plea for a good-will adjustment to your credit report. (It's a long shot.)
Remember the magic 20%. The second-biggest factor in your score is how much you owe vs. how much credit has been extended to you. The part of this that's easiest to finesse is your credit card utilization rate, or your total card balances compared with your total credit limits, as well as each card's balance relative to its limit.
Example: If you've charged $5,000 on cards and have $50,000 in credit, your rate is 10%. For the best score today, 10% is ideal, but you can probably creep up to 20% and keep a high rating.
Unfortunately, with banks lowering credit limits and canceling unused cards, it's harder to maintain such a low percentage. In the previous example, if your available credit is cut to $20,000, your rate shoots to 25%. That could sink your score by as much as 50 points, says Ulzheimer. The lesson: Know your limits, watch for changes, and stay under 20% on each card and in total (0% if you'll be applying for a loan soon).
Already above 20%? Paying down debt is the obvious way to lower your utilization rate, but another strategy is to apply for an additional credit card to increase your overall credit limit. That may cause you to lose a few points in the short term -- so don't do it if you're about to apply for a mortgage -- but it should pay off in the long run.
Keep oldest cards in play. As noted, credit issuers these days are eagerly canceling cards that are not in use. Besides reducing your limit and increasing your utilization ratio, having an account closed can hurt you in another way, especially if it's among your older ones.
See, 15% of your score rides on the length of your credit history. The longer you ably manage revolving debt, the better you look. So don't cancel your oldest cards. And don't let them get canceled on you: Move a recurring charge to each so they stay active.
Already ditched or been ditched? A new card (see previous) can help with your utilization rate, but there's little you can do to help the "history" component of your score, except to keep other old accounts in use.
Accept fate on the rest. There are other factors involved in your score, but they're not so easy to manipulate. For example, 10% is based on how well you manage a mix of credit types, such as mortgages, car loans, and credit cards. But you don't want to go out and, say, finance a car just for a score boost; besides, you can easily get 750-plus with just a few well-tended credit cards.
Along the same lines, 10% is based on "new credit," but the effects of a new application can be positive or negative, depending on your history.

By Carla Fried, Money Magazine contributing writer August 24, 2009: 5:06 AM ET
Find this article at: http://money.cnn.com/2009/08/24/pf/credit_score.moneymag/index.htm

New Credit Card Laws

This newsletter has previously discussed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. This set of provisions has recently merged with the Credit Cardholders’ Bill of Rights. On May 22, President Obama officially signed the CARD Act and the new regulations will take effect in February 2010. This set of laws is a major milestone for the credit card industry and may be instrumental in ending deceptive practices that affect consumers. Below is a brief outline of some of the changes that will take place under the CARD Act.
What will change?
According to the Center for Responsible Lending, a non-profit research organization, the following new laws are definite and may benefit consumers.
• Applicants under the age of 21 will not be able to get approved for a credit card unless they obtain a co-signer or show they have sufficient income.
• Creditors will be required to give cardholder’s 45 days notice before changing rates. After a new account is opened, rates will not be able to be increased during the first 12 months. Promotional rates must last six months. Card companies can still raise rates in the event of delinquencies, but must lower the rates if the cardholder stays current for a period of six months.
• Bills must be mailed at least 21 days before the due date rather than the current 14 days. Early morning deadlines will also be banned.
• Over-the-limit fees can only be applied if the consumer consents to over-the-limit transactions.
• Card companies must apply payments above the minimum payment to the highest interest rate balance.
How may this affect the credit card industry? The Motley Fool (www.fool.com), a financial education site, indicates that credit card issuers may cut back on certain benefits in order to recoup lost revenue from these new laws. For example, grace periods and cards without annual fees could become obsolete. Credit card perks and reward programs could also be eliminated. As many consumers have also experienced, creditors may continue to lower credit lines to reduce risk. It may also become more difficult for applicants to obtain credit, especially those with weak credit histories.

Credit Card Stats:

A recent study of the 12 major credit card issuers determined that all violated one or more rules that would now violate the CARD Act. Below are some findings:
• 93% of issuers could raise the interest rate at any time
• 72% of cards included offers of low promotional rates which issuers could revoke
• The median penalty rate of 27.99% would add charges of $100 and $180 annually for every $1,000 in revolving purchasing debt.

What to Expect As New Rules on Credit Cards Take Effect

Credit-card users get new protections this week, the first of a series of federal actions that constrain card issuers from changing terms on customers.
Starting Thursday, banks must comply with parts of the recently passed Credit Card Act of 2009 by mailing bills at least 21 days before their due dates and providing at least 45 days' notice before making a significant change to their rates or fees. Currently, banks are generally required to mail billing statements at least 14 days in advance and provide a 15-day notice of altered fees or rates. The new rules also will bar banks from increasing fees and rates without warning when a consumer misses a payment or exceeds a credit limit.
Consumers also will be allowed to avoid future interest-rate increases and pay off any outstanding balance over time under the original rate terms. Currently, if a consumer gets hit with a penalty rate, for example, they aren't given the option to reject the rates.
The bulk of the legislation's key provisions will take effect in February 2010, including limits on interest-rate increases on existing balances. The following July will see the introduction of new disclosure rules, drafted and approved by the Federal Reserve Board and other banking regulators.
In anticipation of the legislation, major card issuers have been raising interest rates and fees, reducing credit lines and closing accounts. Banks say the changes also are being driven by the weak economy, which has resulted in higher losses and funding costs. Earlier this month, for example, American Express Co. notified its Blue, Optima and co-branded credit-card customers that it was raising interest rates by an average of two to four percentage points. Other changes to these cards, which take effect with customers' October billing statements, include higher rates and fees for cash advances and late payments. American Express also eliminated fees for customers who exceed their credit limits, months before the legislation clamps down on a host of card fees.
Favoring Variable Rates
Other issuers, such as Bank of America Corp., J.P. Morgan Chase & Co.'s Chase Card Services and Discover Financial Services, recently converted customers' fixed rates to variable ones. The changes will make it easier for issuers to bump up the rates they charge without notifying customers. By contrast, banks must currently notify fixed-rate card holders of any change in rates.
Banks are also paring back their rewards programs. Citigroup Inc., for example, has started adding annual fees to some of its rewards cards, such as the Citi Diamond Preferred Rewards card. Under the Discover More Card rewards program, customers can earn an additional 5% back on purchases in categories that rotate quarterly; for the third quarter, however, the cap on purchases that qualify for the cash-back bonus was lowered to $300 from $400. Meanwhile, Chase last fall scaled back the bonus opportunities on its no-fee Chase Freedom cards. For Chase Freedom card customers wanting to earn a fixed 3% bonus for spending in the grocery, gasoline and fast-food categories, Chase now levies a $30 annual fee.
While the new legislation will help eliminate sudden rate increases and force more disclosure, the banking industry has said the restrictions will reduce available credit. The cost of borrowing also will rise, companies say, since they will have to be more careful about giving credit. Average interest rates on credit cards rose slightly to 14.43% through May, according to the Federal Reserve, although rates are still below historical levels of 18% and 19% that were typical 20 years ago.
According to Consumer Action's 2009 credit-card survey, which looked at 39 cards from 22 financial institutions, rates and fees began climbing this spring. The advocacy group said more credit cards now come with minimum cash-advance fees and higher balance-transfer and foreign-transaction fees.
"There's no question that issuers are taking advantage of this window before it closes to make as many changes as freely as they've been accustomed to," said Ruth Susswein, Consumer Action's deputy director, national priorities.
Changes to card terms are causing some consumers to alter their spending patterns.
After Bank of America raised his 7.9% fixed rate to a 13.9% variable rate last spring, Mark Nilles paid off his remaining balance, shopped around for another card and canceled his BofA card. In the future, the Arvada, Colo., hydrologist said he plans to rely on savings or shorter-term, fixed-rate loans instead of credit cards to pay for one-time expenses.
"It made me reassess everything that I was doing credit-wise," said Mr. Nilles.
More Fudge Room
For now, consumers should check their statement due dates to make sure they're getting the required additional time to pay their bills. Some people may want to adjust any automatic debits coming out of their checking accounts to make sure they're not paying their bills sooner than they need to, said John Ulzheimer of Credit.com, a consumer-education Web site. "This gives you a little more of a fudge period," he said.
Consumers are likely to find better credit-card deals if they also have a checking account at the bank. Under Chase Card Services' Chase Exclusives program, for example, Chase Freedom card holders who also have checking accounts at the bank can earn up to 10% more points on their spending.
The bank also rolled out a new credit card, "Slate From Chase," that automatically refunds the 12th month's interest charges each year if customers enroll in the bank's AutoPay program from a Chase checking account.
Meanwhile, for a limited time, Citi is offering some customers an additional 2% cash-back bonus on qualified spending on Citi credit cards if customers also have a banking relationship at the company.
By JANE J. KIM

Write to Jane J. Kim at jane.kim@wsj.com

Article from http://online.wsj.com/article/SB10001424052970204044204574358612543642536.html

Be cautious about giving info to census workers.

With the U.S. Census process beginning, the Better Business Bureau (BBB) advises people to be cooperative, but cautious, so as not to become a victim of fraud or identity theft. The first phase of the 2010 U.S. Census is under way as workers have begun verifying the addresses of households across the country. Eventually, more than 140,000 U.S. Census workers will count every person in the United States and will gather information about every person living at each address including name, age, gender, race and other relevant data. The big question is - how do you tell the difference between a U.S. Census worker and a con artist? BBB offers the following advice:
• If a U.S. Census worker knocks on your door, they will have a badge, a handheld device, a Census Bureau canvas bag and a confidentiality notice. Ask to see their identification and their badge before answering their questions. However, you should never invite anyone you don’t know into your home.
• Census workers are currently only knocking on doors to verify address information. Do not give your Social Security number, credit card or banking information to anyone, even if they claim they need it for the U.S. Census. While the Census Bureau might ask for basic financial information, such as a salary range, it will not ask for Social Security, bank account or credit card numbers nor will employees solicit donations.
Eventually, Census workers may contact you by telephone, mail or in person at home. However, they will not contact you by e-mail, so be on the look out for e-mail scams impersonating the Census. Never click on a link or open any attachments in an e-mail that are supposedly from the U.S. Census Bureau.
For more advice on avoiding identity theft and fraud, visit www.bbb.org

Debt Settlement = Results

Many consumers receive results from debt settlement companies. According to the Association of Settlement Companies (TASC), consumers seeking to manage their debt have higher success rates when using credible debt settlement companies rather than credit counseling services. TASC, the non-profit watchdog organization for self-regulating the debt-settlement industry, gathered the information from various sources, including the Consumer Federation of America and National Consumer Law Center, the Executive Office for the U.S. Trustees and testimony by credit counseling companies.
With both shorter program durations and lower budgeted monthly payments, debt settlement programs frequently see higher success rates and fewer dropout rates. Other differences between credit counseling and debt settlement are:
• Debt settlement companies do not receive any fees, contributions or other forms of compensation from any entities other than the debtor client. Meanwhile, credit counseling companies get money each month from their customers, plus they receive "contributions" from credit card companies and "fair shares" from banks.
• Debt settlement programs are typically 36 months or fewer. Credit counseling programs are usually 60 months or more.
• For consumers that complete programs, the total cost of a debt settlement program is usually about half the cost of a debt management program offered by a credit counseling company.
• Debt settlement programs achieve individualized and customized results depending on a consumer’s circumstances and needs. Credit counseling payment plans are fixed payments over a length of time.