This is a guest post by Mike, the founder of CreditCardForum.
When you think of credit card rewards, the first thing that pops in your head is probably “cash back” or “airline miles.” But those are only a couple of the different types. These days you can find rewards programs for almost anything, including ones to boost your retirement savings.
Google has up till now presented free (organic) search results accompanied by sponsored results. The credit card comparison it now offers in the UK represents a significant departure. As is noted in the footer:
Actual rates and other information may vary. Sponsored results shown only include participating credit card issuers. When you click on a card’s “Apply Now” link, the information you entered on this page will be shared with the issuer.
This new Google initiative is drawing the inevitable adverse criticism from the competition. Here is how Moneysupermarket.com describes the additional values it brings to such credit card comparisons:
moneysupermarket.com’s successful formula comes from helping customers find the right card for them, with the option to search the whole credit card market, whilst providing help and support, such as independent reviews, to guide the customer’s decision making process.
In this latest move Google has abandoned its successful search model which comes from showing customers a combination of whole of market results, ordered by what is most relevant, plus sponsored results based on how much the advertiser pays. In this test they are simply listing cards that are prepared to pay to advertise, regardless of whether they are a great deal for customers. We are disappointed that Google has chosen to only feature sponsored products in this solution with nothing to support customers.
As well as seeing just a fraction of the credit card market customers who use this Google tool whilst it is in trial will miss out on at least one fantastic exclusive card coming soon only to moneysupermarket.com.
Paul Carpenter has a different concern about the Google credit card comparison website:
Verticals and niches are, to me at least, all about domain expertise and experience and I rely on brand perception to tell me where to find that. As Google races against Bing to operate in verticals like this, it will be interesting to see whether its brand will resonate outside its core function. I suspect not, and I really don’t know why the tech market is so fetishistic about this stuff. Would you buy Coke jeans, or Marlboro branded microwave meals? Brands that are malleable enough to cross boundaries are vanishingly rare – an honourable exception being Virgin, who work in everything from cruises to space travel.
Clearly this test is very different from search activities that Google has worked on in the past. Whatever the result of this test, it has big implications for where Google will be putting its efforts.
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Credit Card Jungle was how Mike Hogan described the situation in a Barrons article earlier in the year. Even though there are some good business credit card deals to be found, it is very much a case of Buyer Beware.
If you’re among the two-thirds of credit-card holders who carry an outstanding balance, you might have noticed that your interest rate was hiked recently, or your billing cycle shortened. Failure to navigate card providers’ labyrinthine payment terms successfully can earn you one of several consumer-unfriendly fees. These aren’t really new gambits. But they are being pursued with such gusto lately that they’ve generated a record number of consumer complaints.
That word jungle conjures up phrases like Nature Red In Tooth And Claw or Survival of the Fittest. You have got to keep your wits about you, if you wish to stay ahead of those claws. Hogan was describing the situation in the US but you will find similar discontent with the credit card suppliers in the UK and in Canada.
Consumers are often riled by two key hot button issues in most cases:
It all comes down to the small print that is added to credit card contracts and it is not surprising that many feel there are hidden ‘gotchas’ in these contracts.
There is a popular wish for action so it is not surprising that you will find that politicians are now taking up this cause not only in the US but also in the UK and in Canada.
Even if tighter regulations are instituted they will never cover all problem issues. The wise user of credit cards will always do a detailed comparison of what the different credit cards are offering and what may be in the small print.
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The majority of people appreciate the convenience, ease, and flexibility that credit cards can provide. What they have not appreciated in the past were some of the fees that some cards carry. However as the New York Times headline said today Card Users, Take Heart: One Penalty Is Vanishing
The noxious penalty imposed on American Express and Discover consumers who exceeded their spending limit has finally died, quashed by legislation signed in May by President Obama to ease onerous fees for cardholders. In recent days, American Express customers began receiving notices of the fee elimination, which takes effect in October. Discover Card customers will soon get similar notifications.
Such fees are often mentioned in the small print but people often do not do their homework well enough. Credit cards offer flexibility and convenience providing you use and repay the card sensibly and responsibly. The important thing is to compare alternatives and read all the small print.
There are many financial situations where it is important to see as wide a variety of suppliers so that you can learn what is important and what should be avoided. A good example of such a website in Australia is http://www.compare2save.com.au/ For a whole variety of the more serious financial decisions you have to take, you will find that Compare 2 Save has the details on a number of service suppliers. Loans, Bank Accounts, Insurance, Broadband suppliers, Car Hire, you will find the data you need to make comparisons.
In particular they also have details on 8 credit cards you could consider. There are credit cards with 0 percent interest on purchases for a generous period of time or prestige credit cards with additional benefits for those that qualify. … and the list goes on.
You must carefully research and compare different credit cards to find the one that best suits your needs. Not least, read all the small print and make sure you fully understand so that you do not live to regret your choice.
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If you are behind with credit card payments, then you are certainly not alone. Equifax Canada reports that More Canadians are in arrears on credit payments.
More than half a million Canadians are more than three months behind on their credit payments. That represents a 19 per cent rise in the average delinquency rate in the year ending May 31.
In May, a report from the Certified General Accountants Association of Canada showed Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures.
Undoubtedly the same situation exists in the US. The situation is likely to get even worse since Credit Card Issuers Are Raising Rates Ahead of New Law.
Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates. The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May.
The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.
Bank executives had warned that the new law would force them to increase rates and fees because it would keep them from properly managing borrowers’ risk. The argument is that if banks can’t raise rates on riskier customers, they will have to raise rates on all.
Chase is one bank that is increasing Credit Card Payments Ahead Of The Reform.
Chase told the Huffington Post that the changes would apply to less than 1 percent of its approximately 100 million active accounts. “Chase has recently increased the monthly minimum payment on select accounts that have carried balances. Effective August 2009, impacted cardmembers will have their minimum payment increased from 2% to 5% of the statement balance,” said Chase spokeswoman Stephanie Jacobson in a statement. “Tens of millions of Chase customers have taken advantage of our promotional low rate financing over the last five years. Most of these loans have been paid back in less than 24 months. However, there have been a small percentage of customers that have not made as much progress in paying down these loans.”
Chase is not the only lender to take action that will raise costs for consumers since Obama signed the reforms into law in May. USAToday reported Monday that Chase and Bank of America are both raising balance transfer fees, and that Capital One and Citibank have raised interest rates. The Financial Times reported Wednesday that Citi is raising rates on millions of its customers in exactly the way the new legislation is supposed to prohibit.
This in all likelihood means that even more credit card debtors will be behind with their payments. Hopefully the recession will begin to abate in the not too distant future and that will present a light at the end of the tunnel for at least some of these debt-stressed individuals.
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The CBS News headline, U.S. Tightens Screws On Credit Industry, was not unexpected.
With the government cracking down on credit card companies’ ability to increase rates and impose penalties, some wonder just how lenders will make up for the vast amounts of revenue they stand to lose.
And as credit card issuers ponder the ramifications of the proposed rule changes passed by the Senate Tuesday, they may face more bad news.
The Obama administration, trying to rein in abuses exposed by the financial crisis, is considering creation of a regulatory commission to protect consumers of financial products such as credit cards and mortgages, according to administration and industry officials.
On Tuesday, the 90 Senators passed what is being called a credit card bill of rights. This is expected to be signed into law by the end of the week. Under that legislation, lenders would have to give 45 days notice before a rate increase, extend promotional rates for at least six months, place bans on rate hikes on new cards during the first year and deny cards to anyone under 21 unless they can pay off their bills.
In Canada, earlier in the month, Jim Flaherty, Federal Finance Minister, indicated that Credit card regulations could come by the end of the month. Although the lenders may have concerns, their customers will be very supportive of these credit card changes.
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Part of the solution to the recovery from the recession will be to restore confidence in US financial markets. President Obama realizes that is a key task for him and is currently pulling out all the stops in the Confidence Game
The banking system and its willingness to provide necessary credit is critical here. It is unfortunate that the system has been severely stressed over the past months so a variety of initiatives are being pursued. Credit cards, which have exceptional consumer acceptance, are the subject of some good news items and some less good news items. It all depends which side of the bank counter you are on.
Bill Tightening Credit-Card Rules Advances in House is good news for consumers.
The House measure, yet to be approved by the full Financial Services Committee would restrict card companies’ ability to raise rates on existing customers and ban certain controversial practices, such as applying payments to the portion of a borrower’s balance with the lowest interest rate. It would also prohibit issuers from charging interest on parts of the balance that were already paid on time, a practice known as double-cycle billing.
Although central bank interest rates may have gone down, Credit card interest rates are rising marginally. The average annual interest rates charged on three popular types of credit cards inched up.
With such a variety of credit card arrangements, it is not surprising that they are widely accepted and can even lead to a troubling debt conundrum, where debt-to-disposable-income ratio in Canada is now close to 140% when it was about 86% in 1980 according to the Vanier Institute of the Family. The US figures on debt and income are probably comparable.
Credit cards can be a great convenience if used wisely. That can be true even when it may concern credit cards for bad credit applicants. Some of those seeking bad credit credit cards may well have had an unfortunate series of mishaps that forced them to pay out perhaps unexpected medical bills. Or perhaps they wish to consolidate a series of loans that may be at very high interest rates. Finding a source of bad credit loans can be the opportunity to get back on a sound financial footing. The important discipline required as with all credit cards is to ensure the repayment plan is practical and livable within the overall family budget.
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Predatory Credit Card Practices seem to be a hot topic at the moment. A CBC story suggests that Canadians want a credit card ‘bill of rights’.
Canadians feel powerless when it comes to their credit cards — whether the problem is high interest rates, confusing fine print or hidden fees — and they want a consumers’ “bill of rights” to protect them, according to an EKOS poll conducted for CBC’s Marketplace. At this time of widespread financial uncertainty, respondents to a four-day survey conducted Feb. 12-16 were asked, “Would you support a credit card bill of rights that would provide legal protections for consumers in their dealings with companies that issue credit cards?” Eighty-two per cent of respondents answered yes.
The poll was done as part of a larger investigation by the CBC’s investigative consumer program Marketplace (Friday, 8:30 p.m.) into hidden charges lurking on some credit card bills.
There are many causes for concern, with a major one being the credit card loan-insurance schemes. What is often not mentioned in the promotional literature is how expensive credit card balance insurance can be and how little it often pays off. Fully 51 per cent of those polled in the CBC survey who have the insurance said they did not know it only covers the minimum monthly payments if you lose your job or get sick.
The Financial Consumer Agency of Canada is the government’s watchdog over financial institutions. It informs Canadians of their rights and responsibilities when dealing with financial institutions and ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance companies.
In the United Kingdom, this type of credit card balance or loan insurance has caused a huge outcry and investigation. It is often called Payment protection insurance (PPI). A BBC article indicates the UK government has cracked down and Loan insurance is to be restricted
Payment protection insurance (PPI) sales will be banned while customers take out a loan. Such insurance cost borrowers more than £4bn in 2007 and is supposed to repay borrowers’ loans if they fall ill or lose their jobs. Leading providers had faced little competition for PPI and, as a result, had charged persistently high prices. The Competition Commission’s final set of proposals on PPI is the culmination of a four-year campaign by consumer organisations, and then regulators, against the mis-selling of the insurance by banks and other lenders.
This seems to be a topic that is coming up in a number of countries at the same time. President Obama is also promising to Address Predatory Credit Card Practices.
Obama and Biden will establish a five-star rating system so that every consumer knows the risk involved in every credit card. They also will establish a Credit Card Bill of Rights to stop credit card companies from exploiting consumers with unfair practices. Such a Credit Card Bill of Rights will:
- Ban Unilateral Changes
- Apply Interest Rate Increases Only to Future Debt
- Prohibit Interest on Fees
- Prohibit “Universal Defaults”
- Require Prompt and Fair Crediting of Cardholder Payments
It seems clear that such a credit card Bill of Rights will be very well received both in the USA and in Canada. Certainly it would address many of the credit card concerns expressed in that CBC Canadian survey.
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As the Seniors World Chronicle pointed out, if you owe money it is very possible that a debt collector might call and disrupt your dinner.
With card delinquencies rising, debt collectors are jangling more Americans’ phones. Some 4.79 percent of credit card accounts, approaching one in 20, were delinquent toward the end of 2008, according to the Federal Reserve. As recently as 2006, the rate was 3.95 percent, or about one in 25. And when card accounts go delinquent, defined as being 30 days past due, that’s one of the primary triggers for a call from the credit card company.
Consumers willing to talk usually get more favorable repayment terms and, most of the time, end up paying less than the original balance. The card issuer may restructure the debt, or refer the borrower to a consumer credit counseling company to set up a debt management plan. Lenders may also forgive interest and lower interest rates.
Nevertheless you have rights and you can easily find information on the Web on how to stop debt collector calls.
It is important that you know your rights when dealing with debt collectors.
In the US, Federal law protects you from abusive practices by debt collectors. Even so, the Federal Trade Commission routinely receives more complaints about the debt collection industry than any other.
For 2007, the latest figures available, the FTC received nearly 71,000 complaints about third-party debt collectors. Put another way, one out of every five consumer complaints that the agency receives involves debt collection
In the US, debt collectors cannot:
For a specifically Canadian answer on your rights with respect to debt collectors, you may wish to consult the information that the Canadian Bar Association, British Columbia division, provides on its web page on Harassment by Debt Collectors.
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In a time of recession such as we are all undergoing, it is important to use whatever limited cash resources you have in the wisest way possible. It may be that things will go even worse. It also may last longer than the experts are predicting. The wise course is to be ready for whatever comes.
An important factor is to make sure that you are getting the maximum bang for your buck. It is worth looking carefully at even small improvements. An old British saying is relevant here:
Take care of the pence and the pounds will take care of themselves.
The same sentiment is expressed in a Scottish version:
A CNN article this week is worth reviewing since it offers 20 money-savers that add up. They are all worth considering but here are four that particularly caught my eye:
Perhaps you should do a similar review of what you do each day to make sure that you are not inadvertently allowing dollars to leak away without you getting appropriate value for them. It is not a question of being a Scrooge. It is just avoiding needless ways your money may be working less effectively than it could.
By the way, if you are a student then we would recommend Use Your Cash Wisely: 10 Major Money Tips. It’s another good check list of what is important in handling your cash resources well.
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