Moving

As I was going through my emails today, I saw that I could dynamically link a Wordpress blog with LinkedIn. Since this will make access easier, I am moving my blog postings to http://russskinner.wordpress.com/. Please visit.

More credit card surprises

Sunday's Star had another excellent column by Ellen Roseman. This was the last in a series dealing with credit cards. Its title was "Some final thoughts on credit cards." (It is available online at http://www.thestar.com/Business/article/541945".)

Among the lesser documented features of credit cards she addressed:

-The holds various merchants will put on your credit card. Most people are aware that there is a hold when they charge a hotel room or a rental car, but might be surprised to learn that if you pay at the pump for your gasoline with a credit card, there may well have been a hold of $100 put on your card. The difference between your purchase and that $100 may not be removed from your account for a couple of days. (This isn't the way she put it, but I think is what she meant to say.)

-Such a charge (or series of charges) could put you close to your credit limit. If the hold hasn't been removed by the time the next charge is processed, you could face a fee for going over your limit, or for having had a charge refused. (These fees range from $10 to $35.)

-If you have a credit balance on your credit card (for some reason, you have given them more money than you owe), you may be charged a fee. She lists five issuers (including Scotiabank) that will charge you from $5 to $10 for this situation. (Sears MasterCard, meanwhile, will ding you $25 for an inactive balance.)

-And one set of charges that I have been unable to summarize, so I will quote her:

"Beware of new charges for purchases of wire transfers, money orders, traveller's cheques, bets, lottery tickets and casino gaming chips.

"Some card issuers treat these transactions as cash advances, charging interest from the first day until they're paid off.

"Some treat them as purchases, but add fees ranging from $2.50 in Canada and $5 outside Canada at CIBC and RBC to 1 per cent of the amount at MBNA (with a minimum of $7.50 and no maximum)."

It's hard to play a game if you don't know the rules. Look for further postings as I come across more instances of articles addressing these issues.

Also, I have a free report available addressing 11 other things your credit card issuer would just as soon you didn't know. If you are interested in a copy, let me know.

A circumstance to be avoided

In cleaning out some old newspapers, I came across entry in the Sunday Star from June 22nd. It has a weekly feature on "The Week's Best Invented Words," which included this one credited to the Washington Post:

CASHRTATION, n.: "the act of buying a house, which renders the subject financially impotent for an indefinite period."

(As a licensed mortgage professional, I can assist in avoiding this condition.)

Another credit crunch nugget

This is also from the Washington Post article mentioned 2 posts ago:

"Gonzalez of American Express said that in a typical year, fewer than 20 percent of its customers have their [credit] lines [a/k/a/ credit limits] adjusted. Of that proportion, 80 percent usually have credit increases, while 20 percent have decreases. In mid-2007, that shifted to a 50-50 ratio."

Some good news from the credit crunch

In checking out the Washington Post version of the story mentioned in the previous post, I came across this paragraph:

"Fewer consumers are now getting courted. According to Mintel Comperemedia, a marketing research firm, 1.34 billion credit card direct mail offers were sent out in the third quarter, down 13 percent from the previous quarter and 28 percent from a year earlier."

Those figures are for the States, but it is a tell-tale sign of the changes. (The previous paragraph mentioned that credit-score cutoffs for direct-mail offers have been raised.)

Another article on credit card changes

Yesterday, the Star reprinted (in part) an article from the Washington Post detailing some of the consequences of the credit crunch on credit card users in the U.S. While some of the details are probably U.S.-specific (at least at this point), there are consequences that many people overlook.

Before I get to those consequences, among the steps the article set out as being followed by U.S. credit card issuers:

$ - credit limits being cut (in one case with the explanation, "your total debt is too high relative to your payment history with us and other creditors.")

$ - rates and fees being raised. (One example given: average late fees on all cards have gone up by about 10% in the last year. Elsewhere, I have seen mention that being late twice will see your fate go up to 24.9% from 18.9%. While this looks like a 6 % increase, it is actually an increase of 6 percentage points. If you do the math, you will see that 24.9 is 131.8 % of 18.9. And don't forget, you are paying your credit card with after-tax dollars, so you've had to earn $1.40 or so to have the $1 to pay to the credit card company.)

$ - suspending zero-per-cent balance transfer offers

$ - shutting down inactive accounts.

Sadly, one of the people who had seen her credit limit lowered and rates raised had been in good standing until she withheld payment due to a dispute with a merchant. (Of course, the article only gave her side of the situation, but I have spoken to consumers here who have similar tales of woe.)

Now, I mentioned consequences earlier. To quote from the article (in the Post): "Reducing credit lines, in particular, has wreaked havoc on many consumers by affecting their debt utilization ratio, which is the percentage of available credit they are using. A high debt utilization can lower a credit score, which then makes it tougher to get credit or at least get credit under favorable terms." If you owe $2000 on a $5000 credit card, you are utilizing 40% of that card's available credit. If for whatever reason that credit limit were reduced to $2500, the utilization is now 80%, and you will see your credit score suffer. (Actually, in the U.S., there is now a credit-score-hit at 20% utilization. See earlier posting.)

The bottom line: it's now more important than ever to handle your credit responsibly.

(For those who wish to read the article, it's available at the Star website: http://www.thestar.com/article/538612. The original article is available at the Washington Post, which requires free registration: http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111500216.html. If you have time, read the original version -- some of what the Star cut is quite interesting.)

Change in treatment of credit card usage

A few weeks ago in Business Week there was a short item explaining that, in the U.S. anyway, the point at which credit card utilization is penalized has moved from 35% to 20%. (And I don't think people realized that it was as low as 35% originally.)

I haven't been able to verify if this change has also been made in Canada, but would be surprised if it doesn't come north if it hasn't already.

A lot of people prefer a particular credit card, whether for points or cash back. There is no problem with that; I just hope you aren't hurting your credit score.

Check your credit card terms

I was reading Ellen Roseman's blog and saw mention that a reader's new Visa cardholder agreement says that the cardholder is liable for “unauthorized purchases made until loss or theft of the card is reported.”

I had my card compromised once, and didn't know it until I was called by customer service. (I would have noticed only when the statement arrived, how many dollars later.)

Ellen Roseman's reader's (partial) solution is to lower their credit limit. That has its own problems (see next posting), but I thought I should pass on this change. (As part of our goal of educating consumers.)

The blog is at http://www.ellenroseman.com/?p=235 ; the entry is by JH, Nov. 10/08.