Source: SMH
New York’s new masters of the universe are enjoying a golden age - thanks to increasingly exotic and risky credit derivatives. Stuart Washington reports. NEW YORK’S Central Park is a verdant green, and dappled sunshine plays on happy family picnics, Frisbee throwers and New Yorkers just lying around. But the city’s investment bankers, lawyers and traders have no time for walks in the park. They are focused on an entirely different kind of green: money, and lots of it. [more]

Did you know that USA consumer debt has grown by over 2 TRILLION Dollars since 1957? Did you know this equates to owing the company store for every man, woman and child in the United States - $33,000! Did you know that this year USA INTEREST on national debt will EXCEED the annual deficit?

Read Hugh Simpson’s explanation that includes a simple example to show you just how bad things are for every American. And he’s right, if those figures don’t wake you up, you’re dead. Either way, that is.

Source: The Age (AU)
There is a palpable fear spreading throughout the barbecue belt as growing numbers of working families — classic “Howard battlers” — reach the limits of their capacity to service their borrowings. Paradoxically, it is this fear that could prove either the Coalition’s greatest strength, or its greatest weakness.

Households now owe a staggering $160 — and counting — for every $100 of disposable income, up from about $50 in the early 1990s. Reserve Bank figures show that families are now siphoning a record 12 per cent of their disposable incomes into interest payments. That’s up from just 6.9 per cent five years ago, and well above the ratio that prevailed in the early 1990s, when official interest rates hit 17 per cent. Now, evidence is emerging that growing numbers of Australians are struggling to service their debts. It is resulting in growing bankruptcies, credit agreements and, evidence suggests, mortgage defaults and evictions. [more]

Source: WTHR
Indianapolis - MasterCard is warning its member banks about a rash of thefts from the bank accounts of card holders, some here in Central Indiana. Kristin is good about checking her checking account. “I check the account online every day.” And good thing. When she logged on Tuesday she found it had insufficient funds.

“I was like, what’s going on?” Kristin said. Kristin has a MasterCard debit card and her bank, Sky Bank, blames a security breach. “We were notified very late last week that a member merchant of Master Card had a data breach and account numbers were compromised,” said Mike Newbold, Regional President of Sky Bank Indianapolis. If it sounds familiar it’s because it’s a little like the case last year when a hacker got into customer financial records at TJ Maxx and its affiliated stores. The crooks quickly bought merchandise and gift cards from major national retailers like Wal-Mart. This breach may not be as big as that one but look where someone was spending Kristin’s money with her stolen debit card data.

Kristin shows us her online bank statement. “Well they were Wal-Marts.” In two days, $2,000 in charges were rung up in California Wal-Marts. “Only the last charge was declined,” Kristin said, “and that was today for $700.” And that’s because the crooks had pretty much emptied out her account. “It really makes you realize how vulnerable you are,” Kristin said. She wishes her bank warned her Master Card accounts were targeted. The bank says it just learned of the group of cards that could be vulnerable in the last 24 hours. It urges we all be vigilant. If you have online access Mike Newbold with SkyBank recommends “log in periodically and look at your account activity and see if anything looks suspicious.” The bank says it will work to restore customers balances.

Source: NY Times
Americans spent one in seven of their take-home dollars on debt payments last year, up from one in nine in 1980. Experts say few consumers are able to calculate the true costs of such payments. Behind closed doors, the decisions families like the Moellerings make about their debt — when to pay it off, when to shuffle it to lower-interest sources and when to let it revolve and build — can determine how much their salaries are worth. Like many others, the Moellerings have run up avoidable penalties and occasionally spent themselves into more debt or higher interest rates, even as they have tried to juggle other balances to bring down their monthly payments.

This spring they allowed a reporter to see how they struggled with these choices. Ms. Moellering’s basket recently included more unwelcome news: $2,693 due on a Visa card through her credit union, including finance charges of $25, and $13,680 on a CashBuilder Elite Visa, including a monthly finance charge of $200. Their credit card debt came to $22,228, including $380 in monthly finance charges. Interest varied from 12.1 percent to 32.24 percent. The Moellerings also have a mortgage of $93,000 and a home equity loan balance of $68,574, at 8 percent interest.

“We have friends in the same position,” said Ms. Moellering, who earns $30,000 a year as an administrative assistant. “One was off his insurance for a couple weeks and he broke his arm, and they’re out 25 or 30 thousand. We’ve talked to them about it. It doesn’t matter what you do, you always have that credit card debt.”

Source: thisismoney (UK)
Credit card companies have found a new way to squeeze money from customers. Some have set minimum monthly repayments so low that they can actually be less than the interest charged. So the balance owed can increase - even if you do not spend anything. Lenders have been gradually reducing the minimum repayment they require each month from around 5% of the balance owed a few years ago to between 2-3% now. Less debt is paid off each month, allowing banks to grab even more of your money in interest payments as it takes longer to pay off your balance. [more]

Source: The Age (AU)
Bank customers paid 21 per cent more in penalty fees to banks last year as they struggled to manage booming credit card debts, new Reserve Bank figures show. The explosion in penalties comes as Australia’s credit card debt jumped by almost $5 billion to $39.5 billion, or almost $2000 a person, in the 12 months to March. More than 70 per cent of that debt is not being paid off before interest kicks in.

But bank income from penalties is not due to an increase in the fees charged, the Reserve Bank said in its report, as average late payment and over-the-limit fees at major banks rose by only $1 or $2 in the year. Instead, it is due to more people getting into trouble with credit cards more often, consumer advocates say. [more]

Source: Chicago Tribune
Finally, beware of the credit card offers you will receive when you arrive on campus. These cards can be poison for your financial future. Most charge relatively high interest rates–often 18 percent or more a year. And if you miss a credit card payment, the interest rate can shoot up to 28 percent or more. Worse yet, if you are on time paying one card, but miss another, all your interest rates can shoot up.

Credit card companies share information through an elaborate computer web that tracks every payment you make and don’t make. This is how your credit score is built. Some people encourage college students to obtain credit cards to start building a good credit record. If you think you might be tempted to buy what you can’t afford to pay off each month, or if you worry you might misplace a bill from time to time, skip the credit cards and just use a debit card.

Source: Scotsman.com
A NEW generation is champing at the bit to finish their studies and join the world of work, but when it comes to money they are like lambs to the slaughter. Financial independence is full of risks and rewards, but as you can’t put an old head on young shoulders we spoke to recent graduates at Scottish Gas, Royal Bank of Scotland, Press Data Ltd, Scottish Widows Investment Partnership, KPMG, and The Audience Business and compiled a list of things they wish someone had told them. This list includes;

• I wish I had known exactly how much tax and national insurance would eat into my salary.
• I wish I had been told that my take-home pay would shrink come April.
• I wish I had been warned about the full implications of student loans.
• I wish I had known my overdraft would disappear at graduation.
• I wish I had known that my current account was not the best place for extra cash.
• I wish I had known that banks have different exchange rates for the same currency.
• I wish I had known that credit cards charge different interest rates depending on how you use them.
• I wish I had realised that my credit card company did not use my monthly repayment to pay off the most expensive debt first.
• I wish I had understood the consequences of only making the minimum repayment on my credit card each month.
• I wish I had known how much running a home actually costs.
• I wish I had known how complicated mortgages can be.
• I wish I had known the importance of budgeting.
• I wish I had been told to start my pension as soon as possible.
• I wish I had known that I would be throwing away free money by not joining the pension scheme.
• I wish I had known that asking for advice can be hugely useful.
• I wish I had known where to get impartial financial advice.

Axcess News reports that “According to the US Federal Reserve, consumers are borrowing at the fastest pace in four-months, despite the rise in gasoline prices and collapse of the housing market. Consumer credit increased at a 6.7 percent annual rate in March compared to a 2.8 percent increase the prior month, which marked the fastest pace of consumer borrowing since November.”

Maybe people are borrowing faster and more, not because they are ignorant and stupid but because they might understand that the country is headed for a depression that is going to be greater than the Great Depression. Maybe these people think “if we’re going to crash hard, let’s live it up while we can”.

The Monterey County Herald has taken a look at the consequences of credit card debt and found, like we have, that surveys clearly show that high credit card balances are a leading cause of divorce. Whether this is because the spouse knows or whether it is done behind the other’s back.

The article comments on the nature of the jewelry industry by saying that “The jewelry industry will tell you the rule of thumb is to spend two months’ salary for an engagement ring. That’s fine if you’ve got two months’ salary lying around. If not, common sense tells you that going deep into debt isn’t the way to begin a marriage”. Unfortunately, we are seeing a lack of common sense in a huge percentage of people who happily go into debt, not knowing what they are really getting themselves into.

Source: MoneyExpert
Most British teenagers “lack awareness” when it comes to credit card borrowing, a new study has found. Debt charity Personal Finance Education (PFE) found that 90 per cent of adolescents felt that credit cards are an “easy way” to obtain funds that would otherwise not be available. And in a statistic that may surprise some, one in twenty said it was their understanding that credit card debts never had to be paid off if the borrower did not wish or was unable to.

Source: The Mirror
GREEDY banks are finding new ways to claw back cash from customers. Fearing a crackdown on charges, they are hitting back with new ruses. This is despite the “Big Five” - HSBC, Barclays, Halifax Bank of Scotland, Lloyds TSB and Royal Bank of Scotland - making combined profits of £41.3billion in the past year. That’s £131 a second.

Reader Phil Hartney was the victim of one of these sly money spinners. When he opened his Virgin Money credit card statement he was stunned to find he had been hit with a £10 charge - for being £12.72 in credit. Phil, 54, of Glossop, Derbys, said: “This seems wrong. I was amazed I could be made to pay for keeping my account in good order. I keep this card for emergencies. I don’t want to owe anything, so I left it in credit. It’s unfair to sting me.” He has been trapped by the latest fee - a credit balance service charge. Any Virgin Money customer with a positive balance on a card for more than 12 months will be charged £10.

Source: Thrifty Scot
The government has decided to take away our rights in an effort to put a stop to debt. This can make the most pragmatic economist shake their head. Less than five months ago the Bank of England was publishing reports that claimed there was no debt mountain. They claimed that half the population could clear their debts, except their mortgage, before the end of 2007. Then, reports were being published that made claims that the average UK consumers was using their debt to build wealth.

Now we are expected to swallow the new Big Brother position the government is taking on debt. Several changes have taken place that will make it more difficult to borrow, and reduce the chances of running from your debt. The government’s Big Brother program is simple, ‘none of your financial information is private any more.’ The banks will be allowed to share your bill paying information, current loans, bank balances, and a host of other information with the Credit Reference companies. It wouldn’t be so bad, if this is where the information stopped. [more]

Source: TVNZ
The Commerce Commission has begun an investigation into unreasonable charges on late bill payments for credit cards. Collectively, New Zealanders owe almost $5 billion on credit cards. The Commerce Commission investigation has been prompted by similar action in Britain in which its Fair Trading Office found hefty late payment fees unfair. As a result their banks cut fees by half.

Penalty charges for credit cards in New Zealand can be up to $25 - even if a payment is just a day late - and that is on top of interest. The Consumers’ Institute says while credit card holders need to take charge of their debt, the fees are unfair in some cases. “You do have to be responsible for your own card and you should try and pay if off on time, but then you are encouraged to use credit cards and if you are late by a couple of days then you shouldn’t have to have an outrageous fee slapped onto your payment,” says Consumers’ Institute spokesperson Sue Chetwin. Budget advisors are dealing with the consequences of what they say is a growing trend.

“What we’re seeing is that in this day and age more of the loan companies and the credit card companies are taking advantage of the fact they can get away with doing these charges,” says Salvation Army spokesperson Katherine Martin. The banks say the fees recover their costs and customers are always provided with information on that cost base.

Danny Schechter: “We live in a country where the credit and loan complex has become as powerful as the military industrial complex. There are 10 banks that dominate the credit card business. They basically operate with impunity.”

Source: CBS2 Chicago
Interest rates on credit cards have sky-rocketed over the last couple of years, leaving card holders with mounting debt. As CBS 2 Consumer Reporter Dorothy Tucker reports, people have more power than they realize to get bills down to size.

Until recently, Rush Kittle felt powerless over the rising interest rates on his credit cards. Then he learned that banks are in the mood to bargain these days, so he simply picked up the phone and asked for a break. “I just flat said that I thought the interest rate was too high. And I’d like to get a lower interest rate, and… immediately the guy accommodated me,” he said. Experts say fierce competition is forcing card issuers to negotiate to keep their good customers. “The market is just saturated with credit cards and banks–the only way they’re going to get new customers is to steal them from other banks, and they know that. It costs them about $300 in marketing to get a good customer,” said Scott Bilker of DebtSmart.com.

Bilker, who has written a book on the subject, says you need to be persistent when you call. If the first person can’t help you, insist on speaking to a supervisor. “You can say, ‘look, I’ve spent all this money, I’ve paid on time, I’ve made you guys a lot of money. I want a better deal,’” He said. And to improve your odds, come prepared with options. Shop for cards with lower rates, and save those balance transfer offers you get in the mail. “You need a deal breaker,” Bilker said. “That’s what you’re going to do if the bank doesn’t reduce your rate. You’re either going to close your account, or transfer your balance.”

No bank is going to advertise that they’re willing to do this, so you have to take the initiative to make the call to lower your rates. Those with decent credit who pay on time and carry a balance have the best chance of getting their rates lowered.

Source: PRNW
The Personal Credit Index(SM) is down 15 points to 90, which is the lowest level since November 2006. Here are some of the schoking numbers:

Consumer financial concerns

• 38 percent are concerned about not being able to pay medical costs associated with a serious illness
• 28 percent fear not being able to pay the medical costs for normal health care
• 28 percent worry about not being able to maintain the standard of living they enjoy
• 21 percent are concerned about not having enough money to pay their monthly bills
• 16 percent are worried about not being able to pay their rent, mortgage or other housing costs
• 13 percent worry about not being able to make minimum payments on their credit cards

Credit Card Usage:

• 37 percent say they generally pay the full amount of their credit card bill(s) each month.
• 13 percent say they usually pay the full amount but not always
• 24 percent say they pay as much as they can but usually leave a balance
• 11 percent report that they usually pay the minimum but not much more
• 13 percent said they did not have any credit cards

Quality of Life:

• Only 26 percent of those making less than $40,000 annually feel they are in a good position to buy, while 71 percent feel they are not
• In sharp contrast, 60 percent of those making $75,000 or more feel they are well-positioned to spend, while only 38 percent of these consumers feel they are not in a good position to buy
• Among those making $40,000 but less than $75,000, 44 percent feel they are in a good position to spend, while 53 percent feel they are not

Source: Guardian Unlimited
Borrowers struggling with personal loans and credit card debt are being pressured to take out consolidation loans that could result in the loss of their homes. Debt advice charities, including Citizens Advice and the Consumer Credit Counselling Service (CCCS), warn that lenders are increasingly pushing customers to extend their mortgages, or take out second loans secured against their homes to pay off existing unsecured debt, even when they know the borrower cannot afford the new repayments.

Peter Tutton, a social policy officer specialising in credit and debt for Citizens Advice, says: ‘There are problems with secured consolidation loans - we’re seeing lots of evidence that where people do get into [financial] trouble, they’re being pushed into consolidation.’

Citizens Advice is conducting research on credit and debt, particularly relating to the housing market, that will be published in the summer. This, says Tutton, will name and shame lenders involved in such cases. The CCCS says its advisers are seeing a rise in the number of people struggling with loans secured against their homes. Nine times out of 10, a borrower should not convert unsecured loans to secured ones, it adds.

James Ketchell, a spokesman for the CCCS, says it is easy to tempt people into such a move at the moment, as interest rates are considerably lower on secured lending than unsecured. ‘It’s a solution for five or six years, but then they build up more credit card debt and personal loans and they’re in an even worse situation than before. That’s why we say that type of loan is to be avoided in general.‘ [more]

Source: Investor Daily
Consumer watchdog Choice has hit out at banks for a surge in the number of people going bankrupt. Choice said aggressive lending practices were to blame for a nine per cent rise in the number of people filing for bankruptcy, along with interest rate rises and spiralling household debt. In the March quarter 6585 people filed for bankruptcy, according to figures released yesterday by the Insolvency and Trustee Service Australia. Individuals made up 82 per cent of applications.

Choice called upon all financial institutions to adopt responsible lending charters that would include generous hardship provisions for consumers struggling to repay mortgages and credit card debts. “Some banks have implemented responsible lending charters on their own,” Choice senior finance policy officer Nick Coates said. “We would like to see an industry standard adopted so that consumers have peace of mind no matter who they bank with.”

ANZ became the first bank in Australia to adopt a formal responsible lending code in 2005. Choice also called on the NSW government to push through finance brokers legislation to protect consumers from mortgage brokers who offer unreasonably high loans. The Iemma Government has drafted national legislation to regulate and license finance brokers to tackle problems with reverse mortgages. “This legislation has been stalled for more than 12 months and Australian consumers simply cannot afford for it to continue to be bogged down in red tape at a time when interest rates could rise again,” Dr Coates said.

A recent Choice shadow shop of reverse mortgage brokers and lenders revealed wide default clauses, poor standards of information and salespeople that encouraged consumers to take out maximum possible loans.

Source: American Chronicle
When debt accumulates, you can get aid from your own bank if you have an account with a full service bank. If you deal with institutions that only profit out of credit cards, chances are they won’t want you to consolidate your debt. Thus, you need to understand why full service banking is best for you and what are its advantages.

Credit card debt is one of the biggest financial issues Americans have to face every single day. The accumulated credit card debt of the average American adds up to $8000 and is the main cause of bad credit, delinquencies, default and eventually bankruptcy. In order to avoid this situation it is smart to count on the aid of financial institutions. Consolidating your debt with your bank will show them that you are willing to honor your obligations and thus, they will be more flexible. Consolidating your credit card debt into the wrong kind of loan can cause you more travels than the solutions it may bring. You need to understand fully the consolidation process and the options available to you in order to make the right decision. Full service banking can make things easier because you won’t need to resort to a different lender like you need to do when you deal with credit card banks only.

There are full service banks that offer credit cards, checking and savings accounts, mortgage loans, personal loans, car loans, consolidation loans and many more. Most of these products get pre-approved when you hire their services and thus are immediately available once you request them. This is a great advantage because you don’t have to suffer those long credit verification processes. The bank knows exactly what your income is, how you spend it and so on. Credit Card banks on the other hand, know only how you spend with their products and don’t offer additional financial products, thus, if you need to consolidate your credit card debt, you have to resort to other lenders that require credit verification and income proof which you may or may not pass. Thus, full services banks are always the best way to go.

Source: Independent Financial Comparison (one, two)
This is excellent.

1. Annual fees are making a comeback

Throughout the Eighties and early Nineties, annual fees were the norm, as most credit-card issuers levied them. However, aggressive competition from the likes of the ‘American Eagles’ (Advanta, Capital One, MBNA, etc.) saw annual fees all-but-abandoned in the mid to late Nineties. Sadly, as lenders attempt to cope with rising bad debts and an enforced reduction in late-payment fees, annual fees are now making a comeback. More than a dozen cards now levy annual fees, and firms such as Lloyds TSB and MBNA are selectively introducing annual fees, targetting unprofitable customers and dormant accounts. So, keep a close eye on your monthly statements, in case your card issuer decides to spring an annual fee on you.

2. Balance-transfer fees are rising

If you’re paying interest on your credit-card debts, try transferring them to one of the dozens of cards which offer introductory interest-free periods lasting from five to twelve months. These 0% balance transfers cost card issuers a lot of money to subsidise. So, lenders have responded by bringing in transfer fees to offset the cost of providing interest-free credit. If you opt for a 0% balance transfer lasting six months or more, then expect to pay a fee of, say, 2% to 3% of the value of each transfer.

3. Card protection plans aren’t worth it

Last year, I acquired a new credit-card and, sure enough, the annoying sales calls began. One product on offer was a card protection plan from the likes of CPP and Sentinel. This cost £29 a year and provided protection against losses due to fraud and theft. Naturally, I turned down this kind offer, explaining that the true cost this product should be about £3 a year. Also, the Consumer Credit Act limits my liability against fraud to just £50 — and card issuers usually waive this sum.

4. Cash interest rates are extortionate

If you use a credit card to withdraw cash from a cash machine or over the counter, watch out for two things: cash-withdrawal fees (see point 5) and sky-high rates of interest. Although a typical credit card will charge an interest rate of around 16% a year on purchases, interest rates for cash withdrawals are far higher — anything from 20% to 30% a year. Even worse, you lose your normal interest-free period of between 45 and 56 days). Ouch!

5. Cash-withdrawal fees are steep

As well as attracting higher interest rates and forfeiting your interest-free period, making cash withdrawals on credit cards racks up additional fees. Until last year, this fee was, say, 2.5% of the amount withdrawn, with a minimum charge of £2.50. However, cash-withdrawal fees are on the rise, with many issuers now charging 3% (minimum £3). So, get the message: credit cards and cash don’t mix. Stick to making fee-free, interest-free cash withdrawals with your debit card.

6. Credit-card cheques are a rip-off

Unsolicited credit-card cheques are of my pet hates. Indeed, I’ve closed more than one account because a card issuer kept sending them to me. The big problem with credit-card cheques is that, nine times out of ten, they are treated in a similar fashion to cash withdrawals. Thus, although they offer ‘convenience and flexibility’, these benefits come at a high price. (While most credit-card cheques charge high rates of interest plus handling fees, look out for low-cost balance-transfer cheques which charge low rates of interest and could save you money.)

7. Foreign usage fees gobble up your spending money

When you spend on a credit card abroad, buy from an overseas website, or pay for goods in currencies other than sterling, all but a few credit cards charge you an extra ‘foreign currency conversion’ fee. Typically, this adds 2.75% to the cost of overseas purchases, or £5.50 for every £200 spent. To avoid paying this unnecessary fee, be sure to take the right plastic abroad. The following cards don’t levy this charge, both in EU states and worldwide:

Post Office : Classic MasterCard and Platinum MasterCard
Nationwide BS : Classic Visa, Comic Relief Visa and Gold Visa
Morgan Stanley : i24 MasterCard (this ultra-premium card charges an annual fee of £275)

In addition, watch out for fees for making withdrawals from cash machines abroad, which are broadly similar to those charged here in the UK.

8. Interest rates are too high

At present, the Bank of England’s base rate is 5.25% a year, yet a typical credit card charges more than 16% APR on purchases, and even more on cash withdrawals. In my view, this margin (more than ten percentage points over the base rate) is too high. Of course, by keeping interest rates high, banks makes higher profits from our addiction to spending on credit, so don’t expect rate cuts any time soon.

9. Late-payment charges

Until last year, most credit-card issuers would levy a penalty charge of between £20 and £25 if you missed a payment, failed to pay on time, or exceeded your credit limit. However, following enforcement action from the Office of Fair Trading (OFT), no card issuer now charges more than £12 per offence. Nevertheless, as an ex-banker, I know for certain that the true cost of dealing with these problems is measured in pence, not pounds, so I firmly believe that the card issuers got off lightly. Then again, recovering unfair bank and credit-card fines is a doddle, if you read our ultimate guide to reclaiming your money!

10. Minimum monthly repayments mean misery

Minimum monthly repayments (MMRs) are the work of the Devil. Until the mid-Nineties, credit-card issuers would demand an MMR of at least a tenth (10%) of an outstanding balance. However, fierce competition for customers has whittled this away such that most card issuers now require an MMR of 3%, 2.5%, even a measly 2%. Of course, the lower the MMR, the longer it takes to repay your debt. Indeed, as MMRs mainly consist of interest and other charges, they hardly chip away at your debt at all.

For instance, let’s say that you owe £2,500 on a credit card which charges an interest rate of 1.5% a month (19.56% APR) and has a minimum monthly repayment of 2.5% (minimum £5). If you pay only the bare minimum, you will repay this debt in 26 years and one month. Over the decades, you cough up a total of £6,058, which is your original debt of £2,500 plus interest of £3,558. Therefore, avoid MMRs like the proverbial plague!

11. Negative payment hierarchies bump up the cost

Be very wary of transferring a balance to a 0% credit card and then taking this card shopping. Unless your 0% deal also extends to purchases, you will pay standard rates of interest on your spending. This is because almost all credit-card issuers apply what’s known as a ‘negative payment hierarchy’. In other words, your monthly repayments first go towards repaying your cheapest debt, such as a 0% balance transfer, leaving your most expensive debt to accrue interest. Nationwide BS is the only major credit-card issuer not to use this sly trick.

12. Payment protection insurance is hugely overpriced

As I warned in Millions Conned By Card Cover, credit-card issuers charge extortionate premiums for payment protection insurance (PPI). Also known as credit card repayment protection (CCRP), this optional insurance meets your monthly repayments if you are unable to work due to an accident, sickness or unemployment. This protection is up to ten times as expensive as it should be, so don’t buy it — unless you like being mugged, that is!

13. Credit cards encourage you to spend more

When spending on credit cards, we often splash out more than we initially intend to. Indeed, Keith Tondeur of money education charity Credit Action warned that paying with plastic encourages us to spend around a third (34%) more. Tondeur’s report, Escape from Debt, was originally published in 1993, and I imagine that this overspend will be much worse these days. Thus, if you find it hard to resist impulse purchases, then steer clear of credit cards.

14. Twelve different ways to calculate interest

According to consumer group Which?, the UK’s top twenty credit-card issuers charge interest in twelve different ways. This makes a mockery of Annual Percentage Rates (APRs), because a card with a ‘higher’ APR can be cheaper than one with a ‘lower’ APR, depending on how each calculates interest. Thus, Which? recently made a super-complaint to the Office of Fair Trading, asking it to introduce a standardised formula for calculating credit-card interest.

Source: Newsday
There are some traps credit-card companies have laid for consumers that can trigger a spiraling financial crisis, potentially leading to an endless cycle of consumer debt. One such practice, known as universal default, permits the companies to increase interest rates if a cardholder makes just one late payment to another credit card company or even pays a phone or utility bill late. That means if your credit card payment arrives past due, you risk having your interest rates raised on all your other cards.

Nearly half of U.S. banks use universal default, enabling them legally to raise consumers’ interest rates as high as 40 percent. Credit-card issuers justify the practice by saying it’s an indicator of increased risk - the higher the risk, the higher the rates. This hidden and unfair practice, however, is harmful to New York consumers.

To give an understanding of why credit-card companies don’t want universal default stopped, consider the potential for profit. There are approximately 30 million credit cards issued in New York State, with the average consumer holding more than four cards and 16 percent carrying 10 or more. Statistics for 2004 show that the average household credit card debt was $9,300 nationwide, and total card debt is currently about $800 billion nationwide. In addition to universal default, consumers face new penalty fees along with complicated and ever-shifting interest rates that are driving up the costs of using cards. For example, some issuers are charging cardholders a $5 to $15 fee to make a single bill payment by telephone, and between $2 and $13 to obtain a single copy of a billing statement.

In the 1980s, companies provided a 15-day grace period before fees were assessed or interest rates were raised. But today these charges can be issued even if your payment is just minutes late. Yet another practice, called double-cycle billing, charges interest on your current balance as well as your balance from the prior month, even if you paid on time. Information about these practices is often buried in the fine print of a credit-card agreement that can run 20 pages or more. Nationwide, banks collected a record $17.1 billion from such penalty fees in 2005, a 15.5-percent increase from 2003. Late-fee charges increased 160 percent over a 10-year period to an average of more than $33 per late payment in 2005.

More and more New Yorkers are at risk of higher debt from using credit cards; seniors and college students in particular are two groups that have been relying more on credit cards in recent years. A new study by the National Consumer Law Center says the average credit-card debt for consumers aged 65 to 69 has skyrocketed 217 percent in the past decade, to $5,844. Ten out of 12 colleges allow companies to set up tables on campus and offer free merchandise for students who apply for credit cards. This aggressive marketing is contributing to student debt. About 47 percent of college students have four or more credit cards. By the time they graduate, students often have doubled their average credit-card debt while tripling the number of credit cards in their wallet.

In March, Citigroup - one of the largest issuers of credit cards - announced it was voluntarily giving up use of universal default after congressional hearings and consumer groups began focusing more attention on this unfair practice. Although this is encouraging news, other major financial institutions have not followed suit, and those companies have enough tricks up their sleeves to make the day the credit-card statement arrives in the mail a day of high anxiety.

Source: AlterNet
How do we stop the credit industry’s predatory business model and get Americans out of debt when incomes aren’t rising as fast as the costs of healthcare and housing?

Last week, the FDIC and the Federal Reserve Board were forced to remind the nation’s bankers to verify their customers’ incomes — adding that it might be a good idea to determine whether or not said customers could afford their mortgage payments. The new guidelines are expected to have a chilling effect on what the industry calls “home ownership.” Many esteemed economists have expressed hope that the resulting declines in home values, which have been inflated by the lack of such guidelines, will not stop too many Americans from cashing out the equity in their homes to keep consumer spending up. In other words, the “new economy” is based on people slowly losing home ownership, not gaining it. [more]

Merrill Lynch’s buyout division and Pacific Equity partners are to buy Australian credit-approval company Veda Advantage for $661 million.

The partnership between the US and Australian investment banks to acquire the largest business of its kind in the territory came after Veda’s board unanimously agreed to the offer of $2.93 per share. News of the acquisition of Veda, which provides credit-checking services for credit-card companies and banks, comes at a time when record levels of household debt in Australia has seen the ratio between debt-to-income double during the last ten years.

Michael Birch, of asset management company Wallace Funds Management, told Bloomberg: “Consumer credit keeps rising and Veda has a monopoly business. From a user’s point of view, they’re the only ones with a reliable credit database.”

Since the deal was announced shares in Veda rose by seven per cent to $2.85. Last year Veda’s second-half profit grew by 66 per cent following the sale of the debt collection department of its business for $25 million.

Source: Sunday Herald
SCOTLAND’S GROWING debt crisis is set to take a turn for the worse, as tens of thousands of debtors face being chased for long-standing money owed from years ago - by collection agencies who may have paid just pennies to buy their liabilities.

UK banks and credit card agencies last year offloaded a record £6.5 billion in unpaid debts to money collection agencies, up from about £4bn in 2004. Estimates suggest the total debt being chased could reach more than £8bn within the next three years. Some experts warn that, unlike some banks and card issuers who are seen as a softer touch when it comes to collecting money owed, the new “owners” of the debt are more likely to hunt people down, regardless of how vulnerable they are.

Joanna Elson, chief executive at the Money Advice Trust, which runs Scotland’s National Debtline advice service, said: “The further away debt gets from its original lender, the less interest they may have in ensuring good practice. There may be some collection agencies who cut corners.”

One recent case seen by the Sunday Herald was that of an 85-year-old, now living in sheltered accommodation, facing a demand for almost £2000 for money she owed on a Barclaycard back in August 1999. The original debt had been barely a quarter of that amount, but grew after interest of almost 1.5% a month was added to what she owed. A Barclaycard spokesman declined to discuss the case, but said: “Those who have failed to repay their debts should always assume that their debts have not gone away. Where we do pass on a debt to a collections agency, this action will only be undertaken after all other options have been exhausted. Customers who are in this position will be informed that their debt is being passed onto an agency for collection.”

The surge in the amounts being sold on comes as the big banks wrote off £6.7bn in bad debts in 2006, according to the British Bankers Association, the industry trade body. Total figures for card companies are not known, but Barclaycard alone was forced to write off a staggering £1.57bn in bad debts last year. However, contrary to what many believe, “writing off” debt does not mean those who owe the money are no longer chased for it. However, consumer groups argue that debt collection agencies are bound by the Limitations Act of 1980, which says a creditor has only six years to take legal action over a debt. After that, the slate should be wiped clean.

But Kurt Obermaier, executive director at the Credit Services Association, which represents debt collection agencies, says: “If you owe me £20, the fact that I can’t sue you after six years doesn’t mean you no longer owe it to me. It does not finish the debt and I can go to you seven, eight or however many years later and politely ask you to pay me back that money. If you refuse, I can politely warn you that I will be coming back to see you next week to ask you to reconsider.”

Source: MSNBC
Many banks and card issuers include language in the agreement you sign that they can charge fees of $30 or more — or raise your interest rate to as much as 31 percent — if you’re so much as a day late making a minimum payment on your due date.

Some banks and card issuers will even boost your rate if you’re late on another bill — an industry practice known as “universal default.” The theory is that is you miss paying another bill (even if you’re disputing that charge), you’ve somehow become a riskier borrower. In some cases, these agreements say they have the right to raise your rate “at any time for any reason.” Your only remedy is to pay off the card in full and cancel your account.

Fees have become a huge money-maker for credit card issuers. Late fees now average $34 per month; “over-limit fees” — that’s when you spend more than your credit limit — average $31 per month, according to a recent report by the Government Accountability Office. After hearing loud complaints from consumers about these practices, Congress has begun holding hearings on the credit card industry and is looking into curbing the most abusive practices.

“The disclosures on calculating interest rates are so complicated that virtually no average consumer can understand them,” Sen. Carl Levin, D-Mich., said at a recent hearing. “In some cases, consumers become overwhelmed with penalty interest charges that can double or triple the size of their debt, and make it nearly impossible for them to pay their bills.” Levin cited a case in which a card holder overspent his limit three times for a total of $200 and was charged over-limit fees 47 times amounting to $1,500.

Source: Rebel Yell
It’s the home stretch for seniors, halfway through their last semester. Job searches, grueling interviews and fancy resumes have placed the goal of actually making money in the forefront, but the threat of paying back student loans awaits.

College tuition is rising far faster than inflation. On average, students at a public university will accumulate student loan debt of approximately $19,000. In Nevada, the estimate is about $16,700 on average. Compounded with payments on the loan, students will also be facing an all-time high interest rate of 6.8 percent. If your debt is close to these numbers, expect to pay around $400 a month for the next seven years.

It makes sense: You have to spend money to make money. But what about saving for that rainy day, your dream home or a wedding? You go into further debt. The bills add up. Let us count the ways: credit cards, car payments, car insurance, rent/mortgage, utilities, student loans, food, health/dental insurance and traffic tickets. Even if one manages to skim over a couple of these, the point is, living in America is not cheap.

Interest rates have been rising for a while. Tuition has increased faster than the low-paying jobs that students usually maintain. A student who has $20,000 in debt, with payments for 30 years, can expect to pay $27,000 when you include interest. Going to college is big business. Many students think their debt will disappear once they graduate. This is true if they find a limited teaching or nursing job that qualifies for federal loan forgiveness. however, the odds of either happening are slim. Instead, we are pushed into the work force.

Source: Aberdeen News
“If you would be wealthy, think of saving as well as of getting.” A mind-set such as this is rather difficult to find. Saving money seems to be either on the back burner or nearly impossible for many Americans today. In the eighteenth century, the enlightened thinker and early American, Benjamin Franklin knew the problems that debt brought on.

More American households are in debt today than at any point in the past 15 years. In fact, debt is rising faster than income. This is especially true in middle-class households. There seem to be two major components to the debt crisis in America: people spending money on things they do not need and cannot afford, and banks and other sources encouraging us to do so.

Franklin also said, “Pride is as loud a beggar as want, and a great deal more saucy.” Today there are many items that could drive a person into debt. Take a look around you. There are many new electronic devices, fashions, toys, cars, etc. The list could stretch out for miles, which would probably not come as a shock to many people. It seems as if we live in a world where “keeping up with the Joneses” is not a simple saying, but a way of life.

Source: Mortgage Solutions
The discovery that one in 20 teenagers does not believe that money borrowed on a credit card needs to be repaid must have made debt counsellors’ hearts sink, while also reassuring educationalists that the introduction of lessons in finance into the school curriculum has not arrived a day too soon. A survey, published in February by the charity Personal Finance Education Group (PFEG), of 1,000 teenagers aged 14 to 18, found that by the time they were 17, more than half of those surveyed had already been in debt and 90% worried about their money.

Source: Cardguide UK
Over recent weeks a number of credit card companies and issuers have been announcing that they will be charging fees to customers that hold credit cards but do not use them.

Card issuers have argued that these customers are actually costing them money because they have to pay administrative costs for issuing statements and administrating accounts, but they are not actually making them any money because they are hardly ever using their credit cards. However, some think that the fees that are being applied to the inactive or rarely used accounts of many credit card holders are just another way for card companies and banks to try and recoup losses that resulted from the ceiling limit that was placed on credit card penalty fees by UK financial regulators last year.

Source: Alternet
America is very wealthy country, but one has to wonder how much of our wealth is in fact a chimera, spun of a consumerist ideal and given the appearance of solidity by a flood of easy credit? How much poverty and real economic pain is covered up by an endless succession of pay-day loans and EZ-finance rip-offs that eventually just bury people under mountains of debt from which they have little chance of digging themselves out.

Today’s bankruptcy rate is ten times what it was during the Great Depression, foreclosures are at a 37-year high and the United States has a negative savings rate, yet we’re told every day that the economy is going gangbusters. George W. Bush often points out that more Americans own their own homes today than ever before. He doesn’t mention that they also have less equity in those homes than ever before. Every day brings news of the potential scope of the emerging “sub-prime” loan scandal — what Robert Kuttner called “deregulation’s latest gift” — and new indicators that the housing market that’s driven so much of the economy for the past five years is a bubble that’s begun to burst right before our eyes. Compounding our personal debt problems are our representatives, equally profligate spenders who are just as happy to run up enormous budget deficits and who reflexively guarantee and subsidize trillions of dollars of new loans to already strapped American businesses and consumers.

It’s a pretty good time to ask ourselves just how we got here.

Source: Courant.com
The credit card industry is bilking millions of Americans. Since 1990, credit card debt has more than tripled, fueled largely by aggressive and reckless lending by card issuers. Today, Americans owe roughly $800 billion in credit card debt. Nearly 60 percent of cardholders carry a balance regularly. Seventy percent of credit card industry profit comes from interest and late payment fees. In fact, in 2005, banks collected almost $8 billion from penalty fees. [more]

Source: Nevada Thunder
In addition to borrowing from the world’s poorest countries, Bush & Co. are secretly confiscating your hard-earned dollars to support their out-of-control spending habits. In short America has been living beyond its means for too long and the reckoning is looming. The consequences of delaying action to address the root causes of the problems are serious and long-lasting. The time for action is now. For further information on how to get involved visit: http://www.time-bomb.org/

Source: China Daily
“Enjoy today’s happiness using tomorrow’s money” is a slogan that has been deeply rooted in the heart of many young credit card holders. However, a recent survey found that some of them are worried about becoming card slaves, a term used to refer to people pay only the minimum amount against their credit card debt every month.

Conducted by China Youth Daily and www.sina.com, the survey collected roughly 1,800 ballots and found that 23.7 percent of them were worried about becoming slaves, borrowing money from one card company just to pay off the debt on another and always living on the edge of bankruptcy.

Following relentless promotions by banks in recent years, credit cards are now popular in several large cities in China. Holders have an average of more than two cards. The survey found that 35.8 percent of people have one credit card, 34.8 percent have two or three, and 20 percent have more than three. Although about 85 percent of people said they pay off their credit card debt every month, roughly 12 percent of people said they pay only the minimum balance, the survey found. Young people have become the mainstream of credit consumption. A credit card website - www.51credit.com - has more than 300,000 registered members, including many undergraduates and middle school students. The members’ average age is just 26.

“When paying for things with my credit cards I never think about how much I earn each month, only what is left of my credit line. My monthly salary often fails to cover my debts. Credit cards stimulate consumption, and help me to enjoy my life now and worry about my debts later. I bought my computer, mobile phone, iPod and other expensive items using my credit cards.” (Xia Xiaoxue, 24, an office employee).

Comment: So an increasing number of the Chinese population are falling into the same trap that many Americans have fallen into… and can’t get out of anymore. Debt for life. Slavery to the banking system to repay debts a dozen times over.

Source: Stuff
Nelson has had one of the highest increases in bankruptcies in the country, prompting a Nelson budget adviser to warn money lenders and spenders to be become more responsible.

Finsec, the bank workers’ union, is also calling on banks to change their pay systems so that bank workers are not encouraged to sell credit card debt to customers. Nelson has had the third largest leap in the number of bankruptcies between 2003 and 2006, up 55.1 percent from 49 to 76. It follows Dunedin, up 62.5 percent from 88 to 143 bankruptcies, and Napier, with a 60.9 percent rise from 87 to 140 bankruptcies. Bankruptcies in New Zealand have hit an eight-year high, with 2380 people declared bankrupt in the first eight months of this financial year, a 22 percent rise on the same period last year, the Sunday Star-Times reported on Sunday. The main causes of people going bankrupt were unemployment, overusing credit, bad health, relationship breakdown and lack of health insurance. [more]

Source: El Paso Times
Easy credit, predatory lending, trapped borrowers. As Americans rack up ever more debt, the winners are the big banks and real estate millionaires, and the losers are — increasingly — everyone else. So says filmmaker James Scurlock, whose new documentary “Maxed Out” casts a gimlet eye on our nation’s debt-laden way of life.

The evidence he presents is compelling. Americans owe more than $2.4 trillion in consumer debt, according to the U.S. Federal Reserve. Our savings rate has fallen below zero. Scurlock accuses the financial industry of issuing far more credit than people will ever be able to pay back, ensuring it will collect interest payments into eternity.

Source: Telegraph
The Government is to remove all barriers to banks sharing data on us in a bid to curb irresponsible lending. But the potential for error is huge, writes Teresa Hunter

The Government is poised to remove all privacy to our financial arrangements by allowing banks and other institutions to reveal full details of our accounts to each other and credit reference agencies, even though we may not have given permission for this data to be shared.

The move is likely to prove controversial as credit reference agencies can be prone to errors. Citizens Advice confirmed that the bureaux regularly deal with clients who have been refused credit because of problems with their files. Moira Haynes of Citizens Advice says: “There can be things on files which customers do not agree with, or imply financial associations with other people which do not exist. We do what we can to help them get the mistakes corrected.” [more]

Source: Scotsman News
It was introduced to help tackle credit card fraud, but now chip-and-PIN technology has been blamed for fuelling the ongoing rise in consumer debt. The claim was made by the online consumer advice service uSwitch.com, which said that the popularity of the new system has made it easier for people to get cashback on credit card purchases at the till and overspend.

Chip and PIN was introduced in February 2006 as a replacement for the old-style signature strip system, which was considered to be an easy target for potential fraudsters. Since its introduction, it has been credited with cutting down on fraud, but a report produced by uSwitch.com suggests this has not come without a cost to consumers. The service said the introduction of the new technology had led to a “dramatic increase” in credit card debt, and added that up to one million people believe that charges on credit card cash withdrawals are free, as they are on debit cards. This is not the case. [more]

Source: Sunday Star Times (NZ)
Bankruptcies have reached an eight-year high and experts are warning people to reduce their personal debt. In the first eight months of this financial year, 2380 people have become bankrupt, a 22% rise on the same period last year. Until this year, bankruptcies have been rising by only a few percentage points each year.

The five main causes of people going broke are job loss, excessive use of credit, relationship breakdown, ill health and a lack of health insurance and decisions to stand as guarantor for someone else’s loan or business venture. Business commentator Rod Oram said people had been pushing their luck for a long time and warned bankruptcy rates would accelerate should there be a severe recession and unemployment. “It’s time to start reducing debt now.”

Household debt levels had rocketed, in part because banks and other lenders were pushing the boundaries of lending, including offers of 100% mortgages. Consumers were also enjoying competitive credit card rates and finance firms had eased their lending criteria. “I think it will come back to haunt them,” said Oram. People were less paranoid about debt and there were many who owed more than the value of all their assets, he said.

Source: Easier Finance
From this weekend people will have a new home for their money as credit unions launch current accounts. Credit unions are financial co-operatives set up to give access to financial services to their members. Over the last 25 years the sector has seen massive growth and the introduction of current accounts is a major step forward in the development of credit unions in the UK.

Even today many people in the UK do not have current accounts. This is for a number of reasons, but the Government has identified that individuals without current accounts are generally at a disadvantage in society. Some people are unable to provide the utility bills or passports that banks require to open current accounts. Others may be concerned about opaque pricing strategies by the High Street banks. Whatever the reasons, the new credit union current account is designed to provide access to current account services to many more people.

Source: Cardguide UK
For the first time the number of people in the UK seeking insolvency in 2006 broke the 100,000 barrier, illustrating the high consumer debt level problems that have emerged, with nearly one and a half trillion pounds worth of consumer debt in total. Banks have taken the hit pretty hard, with many major banks complaining about the high levels of bad debt that they have been left with as a result of consumers seeking protection through bankruptcies and IVAs because they cannot afford to keep up with repayments on financial commitments such as loans and credit cards. And it seems that some major banks are now intending to take a stance against these bad debts. One of the UK’s major banks, Barclays, is planning to revamp its credit card services to focus on mainstream borrowers, and it is looking to do this through getting rid of its sub-prime credit card division according to recent reports. [more]

Source: AZ Central/WSJ
Debit-card use is soaring, but a series of recent scams highlights the growing risk of fraud to consumers who use the method of payment. Thieves are always inventing new ways to steal consumers’ account information, whether they use debit or credit cards. But debit cards typically put consumers at greater financial risk because they offer less legal protection than credit cards in the event of loss. And because debit cards access funds directly from your bank account, the money is missing while you sort out any theft, which could mean bounced checks, late fees and other problems. [more]

Source: Washington Post
The Washington Post received this question; “I have an annuity worth $10,000 from a lawsuit many years ago. I currently have about $15,000 in student debt. I’m planning on attending graduate school in a few years and was wondering if I should use that annuity to pay off my student debt or keep it and use it for graduate school costs. I think the biggest issue is probably how either choice affects student aid: do they count student debt in your favor, and do they count an annuity against you?“

Read the answer and advice here.

Source: USA Today
USA TODAY states that the lenders who “are so incompetent that they extend credit to people who can’t handle it deserve some of the blame and some of the bill” (“When interest rates hit 32%, there ought to be a law,” Our view, Credit practices debate, Friday). The lenders aren’t the incompetent ones; the card holders are. Credit card companies are a type of business. Their goal is to make money. There are rules that go with the use of a card: Break the rules, pay the penalty.

Source: Daily Gotham
One of the more alarming developments of life for ordinary people during the years of Bush Jr. has been the explosive growth of consumer debt. As it turns out, the reason for the vast increase in such debt because you and I buy too much. In fact, explained Harvard Law Professor Elizabeth Warner, the big factor in debt increase over the years has been the stagnation and decline in real wages together with vast increases in the core costs of housing, medical care, child care and transportation. [more]

Source: ABC News
Another expert with a passionate opinion is Elizabeth Warren, a professor at Harvard Law School who teaches contract law, bankruptcy and commercial law.

“The ideal customer is the one who is in serious financial trouble: stumbling, making a payment, missing a payment but making another payment, staying just barely on their feet, making three payments in a row, catching up a little, falling behind a little and staying in this sweatbox for years and years and years,” she said. [more]

Source: Pahrump Valley Times
According to Scurlock, incomes have risen about 1 percent in “real terms” in the past generation, while household debt increased over 1,000 percent. Scurlock cites the Federal Reserve in saying that 12 percent of young families were more than two months behind on their debts in 2004. With new bankruptcy laws, that figure has undoubtedly gone up. Scurlock interviewed people in the industry and, to his shock, found that credit card companies and big banks encourage debt-to-the-extreme.

Fees and “extras” such as unneeded insurance are the ways that banks make their money. For instance, although Scurlock says they take little to no time to process, there’s a reason that “bounced checks” come with a $25 or higher bank fee.

Source: HLS
“Maxed Out,” a new documentary examining the proliferation of debt in America, was shown at an advanced screening in Ames Courtroom. Filmmaker James Scurlock and Professor Elizabeth Warren, a leading bankruptcy expert who appears in the documentary, were on hand after the film for a panel discussion.

“Credit cards are transforming middle class America, and James Scurlock is determined to tell the story,” says Warren. “Maxed Out pieces together clips and interviews to tell a tale that startles, and eventually outrages, the viewer. The film is a reminder that one person with an idea, a camera, a few friends and a lot of perseverance can help change a national conversation.”

In the film, Scurlock interviews debt collectors, pawnbrokers, people in debt, and experts like Warren to show how the credit industry unfairly targets consumers, wreaking havoc upon the lives of Americans.

“We’re all led to believe that people get into financial trouble because they are irresponsible, but I’ve learned that most people are getting in trouble because the banks and credit card companies are setting their customers up to fail,” said Scurlock. “The more credit they give us, the more credit we need. When we inevitably fall behind, they can charge the huge late fees and the over-limit fees and the stratospheric interest rates that drive their profits.”

To solve the debt problem, Scurlock calls on the government to pass tougher regulation on the credit industry as well as the industry itself to change its practices. Instead of targeting the least responsible consumers, Scurlock argues, lenders should take income into account when offering credit to consumers. Scurlock is also the author of the book “Maxed Out: Hard Times, Easy Credit, and the Era of Predatory Lenders,” which is a companion to the documentary. Warren has written several books and articles exposing the credit industry, including “All Your Worth: the Lifetime Money Plan” and “The Two-Income Trap: Why Middle-Class Fathers and Mothers are Going Broke.” The screening is sponsored by the Consumer Law Unit of the Hale and Dorr Legal Services Center.

Click here to view a trailer of the “Maxed Out” documentary.

Source: USA Today
An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

Executives of three major banks defended their credit card practices as responsible and responsive to consumers’ needs in testimony at the hearing of the Senate Homeland Security and Governmental Affairs’ investigative subcommittee. Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.

The interest charges and fees on Wannemacher’s account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin, D-Mich., the subcommittee’s chairman.

“Unfair? Clearly, I think,” Levin said. He said an investigation by the panel found that “sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers.”

Source: AJC
Ten thousand dollars in credit card debt sneaked up on Randy Arroyave like a ninja in the night. When he got his first card, he would only use it for big-ticket items, like a $300 leather coat or trips home to Latin America. Then he would pay it off, diligently but slowly. “I was very careful and very apprehensive to use it,” recalled Arroyave, 30.

But he relaxed his credit card code when he quit working to attend Hunter College of the City University of New York, using it for meals, entertainment and small things.