Defending 79.9% APR?

Yep, the company with the eye-popping 79.9 percent card actually defends its methods in a recent Yahoo article. The article explains in quite a bit of detail, but essentially the company is saying that it's the only way it can continue to make money in the subprime lending market.


By now, I'm sure most of you have heard at least a little about this piece of plastic, but let's just recap quickly. The card is targeting people with credit problems. For the rate of 79.9 percent, you get a $300 credit limit. Oh, and a $75 fee for setting up the account. (That's 25 percent of the credit limit, which is the new maximum.)


It's usury, plain and simple. Sure, it's not the stereotypical loan sharking. The interest isn't 100 percent, compounding weekly. And you don't have to worry about Vinny coming over "ta break yo' t'umbs" if you can't pay.


Otherwise, how much difference is there? Both take advantage of desperate people who can't get credit/loans through the normal means.


The problem is that these companies, like loan sharks, will never die off, no matter how many laws we make. There will always be desperate people who don't know enough about their options. There will always be a population to prey on.


All the proof you need is in the results: Two percent of the people who received this offer have responded. That's twice the normal rate.


Of that amount, 83 percent were fully aware of the terms. I'm not sure which is scarier: that so many people accepted these conditions, or that 17 percent of them responded to an offer without reading the terms.


Seriously, has no one heard of secured credit cards?

Citibank is out of touch

I've been seeing some critiques of credit cards. Once people had to (gasp) pay off all those balances they racked up, they couldn't complain enough about those meanie creditors who lent them way more than was responsible.


To be fair, card companies have some pretty evil practices. I just think it's amusing that, around three years ago, most folks considered their plastic a part of the family.


But recently I read a pretty awful account of Citibank's maneuvering that kind of shocked me.


I should start by admitting my somewhat illogical soft spot for the company. It gave me my first card, which I still have 13 years later.of Citibank around. Tim and I are also enjoying a 4% interest rate while we pay down a balance transfer; but I freely admit that my Citibank loyalty has more to do with a long-time relationship than a current special deal.


I read a post by one blogger who was basically being blackmailed by Citi. (I can't remember which blogger, unfortunately, so feel free to help me out in the comments if you know.) So I found an article on The Consumerist that summarizes the scenario: If you don't do a balance transfer of $5,000 or more (with a 3% transfer fee, of course), the APR you're paying will double.


I really started wondering what in the hell Citibank was thinking. It made me feel a little queasy about my relationship with the company. And I had just about forgotten that scummy little tidbit, when I opened my inbox this morning and was reminded that Citibank has completely lost its (business) mind.


Let me be clear: I didn't get a threat, thank goodness. No, what I got was (supposed to be) an enticement:

Dear Abigail Perry, As a valued Citi® cardmember, you are invited to open a Citibank® Ultimate Savings Account and get $25 from Citibank, our retail banking affiliate. A Citibank® Ultimate Savings Account is a great way to save. It features a competitive rate of 1.15% APY2, no monthly fee3 and is FDIC-insured up to $250,000.4 How to get your $25: 1. Open a new Ultimate Savings Account and deposit a minimum of $1,000 by 12/31/09. 2. Maintain a minimum balance of $1,000 for 3 consecutive months. 3. Get $25. Start saving today!

Wow! A whole $25 just for little ole me?!


And to think that silly old Wells Fargo, Chase, Bank of America and a few other institutions were out there offering the same kind of deal for boring old checking accounts! How are you supposed to lock in a fabulous rate like 1.1% if you're putting your money in some no-interest checking account?


This offer from Citibank is clearly a vote of confidence in me.


Those other banks, they just asked for $100. Sure, a couple wanted me to do some direct deposits, but the amount didn't matter. And for that, they'd pay me $100. What an insult!


Clearly, those other guys didn't think I was capable of more than that. Citibank, on the other hand, feels certain that I can come up with $1,000 and keep it in there for 3 months, even though I owe the company about $6,000 on a credit card right now.


Citi clearly believes in its customers. Of course, that belief is that we have no eyes to read all the far more attractive offers that come through the regular mail. But still, isn't it great to know that your credit card company has faith in you? Or at least your stupidity?

Wherein I go all 'old school'

Do people even pay bills by check anymore?


I mean, I usually do one or two, but the bulk get paid electronically. There are plenty of reasons it's better. While 42 cents doesn't sound like a lot, it can add up pretty quickly when you have a phone bill, a cable/satellite bill, a couple of credit cards, and more. I could also argue that electronic transfers come with confirmation numbers, compared to no guarantee (at least, without extra payment) when you mail things through the postal service. I did actually have a bill that never arrived at its destination. I was charged a late fee and, when I called the post office to complain, was essentially told there was nothing they would do.


The truth, though, is that electronic payments work best for me. It works with my procrastination-riddled personality. I can make a payment right up until about noon on the actual due date, compared with how early you have to send a check to avoid any worry of late fees. I don't have to keep stamps around all the time or get to a post office box. (These days, there's one across the street, but in the past I was never remotely close to one.)


So I was somewhat surprised to find myself writing out checks Tuesday evening. There was Tim's psychiatrist, Tim's dermatologist, an old ER co-pay, a phone bill and at least one more that now escapes me.


Really, these could all have been put on a card and paid later, which would have gained us miles through United. This passed through my mind a few times, actually, as I wrote out each check. But I had some strange mental block against doing it that way.


It could be that I'm becoming credit-card averse. Although I think that's only part of it. While I am truly committed to only charging what we absolutely have to, I think I'm also just financially stressed beyond belief.


This has been a bad 5 or so weeks. We got the $500 bill from the dermatologist, which had been building for about 6 months. Then The Body Shop had its sale on Tim's products. Since this only happens once or twice a year, we had to stock up. That put another $340 on the card, which will, at least, be offset by the 5% back from Ebates.


That meant that the United bill was over $800 -- and that was before I had to reorder my energy meds this week. Yet another $340 tacked on. Ouch.


So, more than likely, I was determined to write checks because my poor little heart couldn't bear to see the United bill get any higher. Too painful. As it is, after the checks, we could only throw $360 at that large sum.


Still, I consider this a step in the right direction. Paying with checks means that I have to consciously keep money aside for them. It means paying money with what we have, rather than putting them on the card to be worried about later. Delayed stress is almost always worse. In the back of your mind, you know it's there, but it's amorphouse and sinister. At least by writing checks, you know the exact size and shape of it.


Although I suppose I should note: When it comes to paying credit cards, I still pay electronically. I still have trouble with due dates, so I'll probably always handle them that way.


So what about you guys? Do you do better with checks? Or online payments?

Sorry, but credit cards don't suck

Free From Broke has a tremendous post entitled, "Credit Cards Suck!" As rants go, it's a purty one. Lots of reasons to hate those mean old credit cronies. All sorts of duplicitous maneuvering.


But, and this may make me unpopular with the PF crowd, I have to disagree. Credit cards don't suck. Not by a long shot.


Yes, I understand that they can be deceptive. That's why it is up to us to read all the pamphlets and notices they send us. (Do I practice what I preach? Not always, but I accept that any fallout from that is my fault.)


Of course, there are genuine cases where credit cards treat customers poorly. I understand some have randomly assigned monthly fees just for having an account. And others are randomly cutting lines of credit. Awful practices, but you can still look around for other cards. We're back up to the usual number of card solicitations in the mail again. Clearly, some companies are looking for new customers. And even if you don't have that option, the card companies don't have to know that. Find out about a deal offered to someone else and quote it to the company.


So, okay, there are times when anti-card rants are justified; but, by and large, the cases that FFB points out are due to consumers' willful ignorance. He mentions the old appliance store trick: the 0% for 12 months. In this case, if the entire amount isn't paid off within the 12 months, retroactive interest is charged. I've known about this little ploy for years. So whenever I sign up for 0% anything, I find out if those terms will be used.


Even if you didn't know to ask, that fact was certainly in the terms and conditions. You just didn't read it. In fact, most of us don't read the pamphlet the card companies send out. The print is tiny, the wording is difficult and we're just not interested. So we agree to terms we don't know. Then, when those terms are enforced, we are outraged and feel that we've been wronged. More importantly, we feel that the card companies are the ones who have robbed us -- not our own disinterest in legalese.


Frankly, I think a lot of the anger directed at card companies is a disguised form of entitlement -- the same entitlement that led so many people into debt in the first place. It's almost as though people seem offended by card companies getting money from them. I sometimes wonder what they expeected to happen. Perhaps they thought the company would make them an exception?


Here are the facts: You signed up to get a card; the card charges interest; you will be charged interest. Why is that such a crime? Why do people get to get so angry, if they're not somehow expecting special treatment?


I'm willing to bet these complainers weren't always so anti-plastic. When they got their first cards, they probably loved them. They loved the credit card companies. It was a pure romance, unfettered by nasty realities like ability to pay and interest rates.


But eventually, the tide turned. The relationship wasn't as beneficial to them anymore, and they're angry. While they dig themselves out of debt, they begin to blame the card companies -- to hate them, even. How dare the card companies offer credit with a low introductory rate, specifically set for a finite time?! How dare the companies extend credit further as the people got themselves deeper in debt?! Clearly, the companies should have been holding their hands and acting only in the consumers' best interest, profits be damned!


Don't get me wrong: I know some companies violated consumer rights. They should be punished. But a lot of so-called "abuses" I hear about are nothing more than standard business practices.


For example, FFB complains about credit card companies setting up on campus and offering free t-shirts or other items. As though students are incapable of resisting the lure of a cheaply made, logoed bauble. Yet, plenty students do. Most of my friends avoided that trap. It wasn't exactly an irresistible force, against which we had no will. Some people simply chose not to exercise it.



That said, I understand why some people would sign up for such a meager reward. It's because credit cards are sexy. They're a status symbol, first of all -- especially when you're young and cardless. Beyond that, they're sexy because they give us power. And power, as Kissinger once observed, is the ultimate aphrodisiac. With the cards, we have the power to spend money we don't have. (Maybe we'll have it later, maybe not.) They give us the power to push responsibility and logic into the future, the power to get cool stuff right now.



This credit lust blinds many people to the basic facts. I cannot count the number of times I've read a blogger or blog-reader lament that credit cards are just out to make money off you. You can practically see the venom dripping from this statement.


But why is that such a surprise? Why is that such a bad thing? Credit card companies are businesses; businesses exist to make money. It thus stands to reason that credit cards exist as a way to profit off their customers. If you're a customer, that means you.



My parents were always very clear about that growing up. They had credit cards. They used them. Heck, maybe they even carried balances. I don't know. But I got the message loud and clear: Credit cards are tools, not manna from heaven. So maybe I don't understand because I entered this Faustian bargain with my eyes wide open. Honestly, I have trouble understanding, especially in this day and age, anyone who didn't.



Credit card companies entice you. Sure. No argument here. But, then, so do retail stores. They dangle pretty things on the TV screen or in windows at the mall. They advertise sales to get you in the door. Are they evil too? Are they out to screw you over? Or is it only when they offer you a store credit card that they sink into the pits of hell?



I guess, in the end, I'm not angry because I always knew it was a game. Frankly, I think the companies have always been pretty clear about that. Sometimes we win, when we can afford to pay off the balance in full and avoid interest charges. Other times, the companies win and we owe them some hefty interest charges. Just because the terms aren't in your favor, doesn't mean that the game is fixed. Not when you belly up to the table voluntarily.



So, FFB: Sorry, but I refuse to see credit cards as evil entities trying to suck the marrow from the corpse of your credit score.


I'm not saying I haven't paid plenty of interest. Sometimes it was as a result of not doing enough homework before deciding on something. Other times, it was a purchase I couldn't afford, but needed, such as my medication. Perhaps my options were limited, but there were still options. I could have gone without my medication. That wasn't a good option, but it was still, technically, an option. Instead, I chose to charge it. I accepted that interest would accumulate. So I really can't blame the companies.



Actually, I am grateful for credit cards. They have saved my hide many times.

• I was able to get all the medication I needed. Without Effexor, I would be in severe pain, as the body has a very severe withdrawal reaction. I would probably also have tried to kill myself. I'd have preferred to be able to afford the medications without credit cards, but that wasn't always an option.

• Without credit cards, who knows when we could have afforded Tim's dentures? The surgery alone cost $6,000. It took us ages to pay that off. And he had already been on a no-solids diet for months by the time he got his new smile. He had been exhausted all the time from a lack of calories and nutrients. He was also in pain from several exposed roots. I didn't want him to wait a moment longer than he absolutely had to.

• By signing up for US Airlines credit cards, my mom and I were able to get enough points for two free tickets anywhere in the U.S. So Tim and I were able to go on a honeymoon, despite limited funds.

I'm sure there are plenty of other items I'm forgetting.



The point is that credit cards are a tool. If you lose sight of that, who is really to blame? You're the one who approached the table offering a free shirt. Or bought the appliance on a store card, without thoroughly knowing the terms. So if everything boils down to a choice you made, why is it everyone's fault but yours?

FreeCreditReport.com: As free as it claims to be

Moolanomy recently posted a very upset piece entitled FreeCreditReport.com is NOT Free.


Very incensed, he wrote that it cost him quite a bit of money. He didn't notice the charges on his credit card bill for a few months. But, then, he wasn't looking for them: He was under the impression that it was a free site, not a free trial offer.


He admitted to giving the site his credit card information, but says it wasn't made clear why it was needed.


And I'd like to stop there for a moment...


Here's a basic rule: If you're not clear why a site needs your credit card information is needed, don't give it out.


If you're confused, stop typing and find the "Terms and Conditions." If you're still confused, open a new window and go back to the company's homepage to review the information presented there.


If, after all that, you're still not clear why you have to give your credit card information, you really don't want to sign up.


It's either a scam or you've misconstrued a free trial offer as simply "free." Whichever it is, it's clearly not what you wanted.


Just remember: No free site would ever ask you for your credit card information. Assume that, if you give your credit card information, there's a good chance it will be charged.


But for a moment let's disregard all that. Moolanomy is basically complaining about the lack of transparency on the website. He felt the site wasn't clear that it was selling a product, not providing one free of charge (and free of contingencies).


Personally, I recall the site being pretty straightforward when I signed up about four months ago. I had to read through a few paragraphs, explaining that it was a trial offer, the length of the offer, the charges that would be issued if I didn't cancel, and cancellation policy.


Since then, it's added a front-page disclaimer: "When you order your free report here, you will begin your free trial membership in Triple Advantage^SM Credit Monitoring. If you don't cancel your membership within the 7-day trial period, you will be billed $14.95 for each month that you continue your membership."


To be fair to Moolanomy, he didn't sign up recently. From the way he phrases it, this all happened at least a year ago. Over time, businesses refine websites, as they get feedback from customers. So the site may have been more opaque when he signed up.


In my experience, however, bigger businesses strive to be clear. Since this is a subsidiary of Experian, a well-known organization, I tend to assume it will follow that tradition. At the very least, by being crystal clear and upfront in the terms, the companies are able to resolutely stick to their no-refund policy.


Still, it's also worth mentioning that my recollection may be biased. I signed up for this service through Inbox Dollars. I was doing trial offers for money -- in this case, $8 -- so I was well aware of the fact that this item was only free for a 7-day window.


Of course, all this is speculation. I don't know what Moolanomy saw or didn't see -- what was or wasn't on the site when he signed up.


Honestly, my best guess is that he mistook FreeCreditReport.com for www.annualcreditreport.com. ACR is the site you go to for your once-per-year free credit report from each of the three credit agencies. But FreeCreditReport.com advertises on many sites, offering a free credit report. Given the similarity in promise and name, it's easy to see how confusion would occur.


I want to be clear: My disagreeing with Moolanomy isn't the same as my endorsing FreeCreditReport.com.


There are hidden dangers in sites like this:

• You can, as already mentioned, get a free credit report on your own.

• It promotes the idea that you need someone to monitor your credit for you.
  

• There's the danger of getting charged instead of getting a free trial.
  

Okay, the first point: Just send off for your credit report. You send a request to each agency. This saves you the worry of cancelling a trial offer, and it gets you more actively involved in your credit.


The second point: I don't like the company's message. You don't need someone to monitor your credit for you. If you choose to pay for that service, that's up to you. But there are plenty of resources to help you keep an eye out. Credit card companies are pretty diligent about calling to check on strange activity. Many now also offer you an approximated credit score. If that score changes significantly, you can contact the agencies and find out why. Overall, I just don't like the idea of being so passive about your credit.


Finally, and perhaps the most dangerous, there is the possibility that you will get a charge on your card instead of a free trial offer.


FreeCreditReport.com is actually run by ConsumerInfo.com, which is an Experian company. In and of itself, that fact isn't a big deal. What is a big deal is that there are several other companies that both run. And most of them are offered right alongside FreeCreditReport.com on various rewards programs.


These are the other companies I could find:

• Credit Check Total (also Credit Check Basic and Credit Check Premium)
  
• ProtectMyID.com
• Triple Alert
• CreditExpert.com
• NationalScore.com
• NationalScoreindex.com
• Credit Manager
• PersonalCreditIndex.com
• CreditMatters.com
• ExperianDirect.com
• EyeMyCredit.com (it offers Triple Advantage, like FreeCreditReport.com).

Because of so many different names, it's pretty easy to try to sign up for two free trial offers from the same parent company.


And that's a big deal because, according to the "Terms and Conditions"

Please note, if you have ever been a member and received a free trial, [ConsumeInfo.com] may refuse to give you another free trial offer. Returning members will be billed the membership fee immediately upon renewal.

So does this mean that you'll be simply refused? Or does it mean that your credit card will be charged instantly if you've already had a free trial?


Honestly, I don't know. I've read and re-read these lines. Personally, I think it could go either way.


All I can say for sure is that it seems like a plausible way to worm in a credit charge. When you call to complain, the company simply needs to point out this is in the "Terms and Conditions" and then stand by its no-refunds policy.


Maybe the company isn't really that devious. Or maybe it is. In the end, I decided not to take the risk.


If, after all this, you're angry just like Moolanomy and are sure they're out to trick you... Well, yeah, of course they are!


It's the most obvious play in the book, and companies tend to be pretty upfront about their intentions. They state everything in the "Terms and Conditions." If you choose not to read them thoroughly -- and I am certainly guilty of this at times -- you're tacitly accepting the consequences of the inaction.


For anyone not paying attention before now: Businesses want something from you. They're out to make money, and yours will do just fine. On the other side, you're trying to get something from the businesses, whether it's a free credit report, a sample of a product or making money from a rewards program.


You're both using each other. You are hoping that you can sign up, get what you came for, and cancel in time to not be charged. The company is hoping that you become a convert to whatever it's selling -- or, at the very least, forget to cancel for a month or two.


Finally, if you aren't clear on a particular item in an offer? Don't sign up. Definitely don't give the company your credit card information. Wait until you can get ahold of a customer service representative and get your questions cleared up.


Informed consumerism -- even on "free" things -- is key to being frugal. And to avoiding nasty surprises on your credit card bill.

Are the media being drama queens?

About a week ago, Tim opened a piece of mail and announced that our MyPoints card has increased our limit.


It didn't even occur to me until a couple days later how extraordinary that is. In this economy, my credit cards aren't cutting my limits. Quite the opposite. And they're not trying to sneak in higher interest rates through some back door channel -- although one card notified us that the rate is going up at the end of the year.


Yet all I read about (and hear about other people reading about) are woeful lamentations of countless Americans being turned out of their homes. Stocks plummeting. Card companies slashing limits and raising rates.


So what's a gal to think?


I think that perhaps we're all buying into the media coverage unquestioningly. It seems like no one is trying to quantify just what effect it's having -- and on which sectors of the population. Certainly, there are some major changes going on, as Wal-Mart's sales numbers have indicated. .


But instead of focusing on the question "How bad is it?" perhaps we should be asking "How many Americans will actually be affected? And for how long?"


Because the fact is that there are small rays of hope out there. They're just not getting much coverage. For example, gas is down under $3. But suddenly gas prices aren't the big story.


Yes, that's not enough to compensate for the hard times ahead. But, guess what? We already had the good times.


Like the spoiled children we are, Americans had their dessert first, and now we're aghast (and petulant) that we have to eat our vegetables. A fair number are even trying to get out of it, because the sugary desserts gave them tummy aches.


I'm not trying to minimize the suffering that will happen. I'm not trying to say it's all lollipops and rainbows. Things are bleak. Times will be tough.


But, listening to most news sources, you'd think we're looking at at least a half-decade of strife and uncertainty.


So I was honestly quite startled to find out that the actual prediction is about 18 months: until June '09.


Sure, it could last longer. Maybe it will. But for years and years of market highs and financial self-indulgence I think we can all weather a year and a half of tough times.


I'm not trying to bash the media overly. Editors and publishers go with what sells. And right now, what sells is doom and gloom.


That's because of our own attention spans. Most of us wouldn't click through on a story if the summary were: "Mildly distressing times ahead, but not for too long and not as bad as the Great Depression." But "1 in 6 homeowners 'Under Water'" will really get your attention.


The other big problem is that journalists, like doctors of a critically ill patient, have to prepare us for the worst-case scenario. Better to be too pessimistic than too optimistic. Because if you do better than expected, it can be called a miracle and the doctor's skill. But if you do worse, the family can have emotional pain and suffering -- and a good lawyer.


So the media tell us just how excruciating it's going to be. Stories fill us with details of average credit card debt, rises in defaults, and all that grim information.


So what does it all mean? It means things do suck in the short-term. And, much more importantly for our collective psyches, the future is highly uncertain. That means it's easy to get panicky.


But the upshot is that things may not be as horrifying as news coverage would have you believe.


Banks are being taken care of (mostly by other banks, which I don't love, but it sure beats having whole lending institutions call it quits). There's no Dust Bowl. And people who are in danger of being foreclosed on may be getting government help or settlements from places like Countrywide, whether or not we believe they deserve it.


In other words, while tough times lie ahead, our society isn't going to fall into an everlasting pit of despair. Can we all just remember that? Especially when the angst starts piling up?