New Gimmick in Credit Cards

I made my annual sock shopping trip to Macy's a few weeks ago. I paid for my purchase with my Macy's Visa card, always worth a little discount. When I received e-mail notification of the bill a week later, I went online and paid it immediately.

Therefore, I was a little surprised to get a paper statement a couple of weeks later, but maybe their system is a little slow. Or perhaps they always send it. What astonished me was to see that the statement total was $2 higher than the bill.

 

You can see that the bill was for $48.24 but that the statement shows an amount due of $50.24. 

I called to see how an additional $2 charge crept in. They said that was for interest if I chose not to pay the full amount due. I checked the credit agreement and it says:

B. There will be a Minimum INTEREST CHARGE of $2.00 in any billing period in which the INTEREST CHARGE resulting from application of the Daily Periodic Rate would be less than $2.00.

I protested that I had already paid the bill but they said it was, "Just our policy." I asked what would have happened if I had paid the $50.24 in full with the statement. They said that the $2 would have been credited to my account. I'm not sure I believe them.

The agreement does not say that they will charge you ahead of time, assuming that they will be entitled to collect interest on the next billing cycle. 

A further review of their credit agreement showed this feature:

If you make a Purchase during a billing period with an unpaid Previous Balance, we will begin charging interest on the Purchase from the date it is added to the balance and continue to accrue interest until payment in full is credited to your account.

As I read this, if I did not pay the bill in full and bought something else, that they would start charging me interest, currently 24.5 percent, on the date of purchase, not at the beginning of the next billing cycle.

Obviously, issuers of credit cards are trying everything they can to squeeze more money out of you. But this doesn't seem like much of a reward for my loyalty to the Macy's brand.  I wonder how much they will charge me to cancel the card. 

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Bulldoze in Lieu of Foreclosure? One Frustrated Homeowner's Solution

This is probably not the best solution to the housing problem or the rising foreclosure issue, but that's exactly what one frustrated Ohio man did, according to an AP report this morning:

"An Ohio man says he bulldozed his $350,000 home to keep a bank from foreclosing on it.

Terry Hoskins says he has struggled with the RiverHills Bank over his home in Moscow for years and had problems with the Internal Revenue Service. He says the IRS placed liens on his carpet store and commercial property and the bank claimed his house as collateral.

Hoskins says he owes $160,000 on the house. He says he spent a lot of money on attorneys and finally had enough. About two weeks ago he bulldozed the home 25 miles southeast of Cincinnati."

Mr. Hoskins also spoke to local TV station WLWT and was quoted as saying: "When I see I owe $160,000 on almost a $350,000 home, and someone decides they want to take it -- no, I wasn't going to stand for that, so I took it down."

Here's a clip of Terry sharing his story on WLWT:

This story is blowing up on the airwaves and the web and many are calling Terry a hero for standing up and sending a message. Others are speculating whether Mr. Hoskins will be prosecuted for his actions and end up in prison. What do you think? Share your thoughts in the comments section!

Reality Check: Appraisals

As everyone knows, Congress is working on a new set of laws to regulate all aspects of the financial services industry. Last I heard, the document was over 1,100 pages long and it is frightful to think of what the law will be when Congress finally gets through with it. After all, the mortgage industry is currently having trouble digesting the last changes in regulations.

The first of these new mortgage industry regulations was the Home Valuation Code of Conduct (HVCC) that became effective on July 1, 2009. It was supposed to "clean up" the appraisal process by having appraisals ordered through independent Appraisal Management Companies. These were not actually required by law but were adopted by Fannie Mae and Freddie Mac after the Attorney General of New York, Andrew Cuomo, twisted their arms.

Exactly why the Federal Housing Finance Agency that supervises Fannie Mae and Freddie Mac didn't say, "Hey! Wait a minute. That's not your job! We regulate these enterprises, not you; if you think something ought to be done, make your proposal to us." But Fannie and Freddie were reeling from years of mismanagement and losses that wiped out their shareholders. I suspect they just had no will to resist. What was more likely was that their regulator's leader, James B Lockhart III, dropped the ball and let someone else usurp his authority. In fact, in an ironic twist of fate, the administrator who oversaw two of the largest corporate collapses in American history now works for a private company that helps companies that need restructuring.

The effect of HVCC has been that these intermediaries interposed themselves in a system at a cost of between $100 and $150. Lenders order from an AMC that, in turn, orders from a list of appraisers. This was a pricewise competitive business before, so one of three things had to happen.

The appraiser would be paid a normal cost minus the AMC's fee that would be deducted from the cost charged to the customer. That would mean the appraiser makes $100 to $150 less. Or the cost of the AMC would be added on to a higher price of the appraisal so that the consumer pays more. The third alternative would be that only newer, less experienced appraisers would work for such small fees. In practice, all three have happened.

Let me insert a little information here. According to statistics complied by alamode, inc., publisher of appraisal software, the average price for appraisals in my county was $375. By comparison, I have a fee schedule that one AMC uses to establish what they will pay. This is the schedule:

	One Unit Full Appraisal
Tier 1	$225.00
Tier 2	$250.00
Tier 3	$300.00

You can see easily that the appraiser's income will be 20 percent to 40 percent less than the old days if the AMC charges market price for appraisals. That is about what they earned back in 1982. In my view, no good appraiser can afford to work for that small of a fee.

Sometimes the AMC charges more. One lender has its own captive AMC and they now charge $475 for a standard appraisal.

The third case was amply demonstrated by an appraisal we received in early January. It had problems that were ultimately solved, but when I looked at the appraiser's state license, it showed that the appraiser got his license in September. He had three months on the job!  In the old days, an appraiser couldn't get in the list of approved appraisers unless he had at least two years' experience.

I shudder to think what the scene will be like a few years from now, but my guess is that many competent appraisers – the backbone of the industry – will have changed careers, a tragic loss.

It is clear to most of us in the mortgage industry that neither consumers nor investors are better protected by this process. I doubt that the complaints from consumers, lenders, and appraisers will have any effect on efforts to change the system either.

The only good thing is that they didn't make us order appraisals from the Post Office, but maybe that's next. After all, who knows the neighborhoods better than the letter carriers?  

As a consumer, you just have to add one more "potential problem" to your list of things to worry about in the mortgage industry.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

What's the best way to store important receipts and papers?

A couple of years ago, my step-father-in-law became ill and now requires 24-hour care in a nursing facility. I take care of his finances, making sure his bills are paid on time. He was also the victim of identity theft, and I worked with the police department to arrest the criminal. (She was caught and sentenced, and was ordered to pay restitution but I'm sure she won't ever do that.)

Needless to say, the amount of paperwork that arrives from banks, credit card companies, hospitals, doctors, and state/federal government agencies is enormous. I bought some filing boxes but they quickly became full. For the last few months, I simply tossed all the paperwork into a large plastic bin, promising myself to buy a large filing cabinet to store the papers when I had a chance.

A couple of weeks ago, I reorganized my office, and I set the bin next to our garage, planning to bring it back in the next day. That night it rained, but I didn't think anything of it, because the bin had a lid, which snapped down tight. When I lifted the bin to bring it back in the office, it weighed a lot more than I remembered. That's when I noticed a crack in the lid. I'm glad my kids weren't around to hear the language I used when I took the lid off the bin and saw that the papers were soaked with rainwater.

It took a long time to dry the waterlogged papers -- I laid them out on the floor of the office, about 20 pages at a time. After a few hours they were dry enough to put on the "dry" pile. Then I laid out 20 more wet pages and let those dry. I swore to myself, "never again."

I don't want to deal with physical pieces of paper any longer. I want to go digital. Now that off-site backup is cheap and reliable (I use Backblaze, which costs $5 a month), I feel confident about storing my father-in-law's records (as well as my own records) as PDF files.

Right now, I'm looking at my options. I'm mulling over three different ones:

1. There's Shoeboxed, a service where you stuff all your receipts into a prepaid envelope and let a machine do all the scanning for you. Shoeboxed offers three different plans starting at $9.95 a month for 50 receipts and business cards. The downsides to Shoeboxed (at least for my purposes) are that it seems to be catered for archiving receipts, not all kinds of documents, and it stores the receipts on their system. I want copies of all the documents on my hard drive as well as online.

2. A company called The Neat Company sells a USB-powered scanner that converts receipts, documents, and business cards into digital files. This sounds appealing to me, but the reviews on Amazon are mixed. Some people say the scanner is slow and the software is buggy. I have asked the company for an evaluation unit and will let you know what I think.

The third option, which is the most attractive but also the most expensive, is the Fujitsu ScanSnap S510M, which can digitize both sides of a piece of paper in one pass, and can process 18 pages a minute. It's gotten rave reviews on Amazon, but a new unit costs $800 and a refurbished one costs $395. I've also asked Fujitsu to send me an evaluation unit.

I'm curious to find out what your experiences with digitizing documents are. If you have suggestions or horror stories, please share them in the comments section!

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

Will New Credit Card Laws Help Consumers?

Credit.com's John Ulzheimer appeared on FOX Business to discuss whether or not the new CARD Act laws will benefit consumers. Interestingly enough, the new laws may actually hurt more than they help.  Watch the clip:

To read more about John's thoughts on the CARD Act, visit our News Center to read his latest article: The New Credit Card Law: A Good Idea, But Consumers Still Lose

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

How to Be Lucky

University of Hertfordshire psychologist Richard Wiseman has been studying luck for the last 17 years. It may seem like a silly thing to study. Isn't the concept of "luck" just superstitious nonsense? Well, according to Wiseman, luck isn't a kind of cosmic fate that gets stamped into people's souls when they are born. Rather, it's a matter of perspective, awareness, and willingness.

Wiseman came to this conclusion after reading about psychology studies that show how "unlucky" people miss out on lucky opportunities because they are too focused on other things. He conducted further experiments of his own. In one, he gave people a newspaper and asked them to count the number of photos in it. It took an average of two minutes for self-described unlucky people to count all the photos. But people who considered themselves lucky were able to come up with the correct number in a couple of seconds. How? "Because the second page of the newspaper contained a half-page notice with 2-inch tall letters that read: "Stop counting. There are 43 photographs in this newspaper."

Wiseman realized that "lucky" people "are skilled at creating and noticing chance opportunities, make lucky decisions by listening to their intuition, create self-fulfilling prophesies via positive expectations, and adopt a resilient attitude that transforms bad luck into good."

Is it possible to change unlucky people into lucky people? To answer that question, he started a kind of school to make people luckier. He gave his pupils homework lessons designed to make them think more like lucky people: "These exercises helped them spot chance opportunities, listen to their intuition, expect to be lucky, and be more resilient to bad luck."

Lucky for Wiseman, his school worked! He reported that "80 percent of people are now happier, more satisfied with their lives and, perhaps most important of all, luckier."

Are you interested in becoming luckier? Check out Wiseman's 2003 book, The Luck Factor: The Four Essential Principles.

Telegraph UK: Be lucky -- it's an easy skill to learn

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

Credit.com Made Fast Company's Top 10 List for Most Innovative Finance Companies!

We're on a roll! Only hours after making Money Magazine's Top 20 List of Best Web Sites, Fast Company included us in their list of Top 10 Most Innovative Finance Companies:

"Winner of Finovate's 2009 Best of Show, this free service makes credit scores easier to understand: Credit.com does a "soft inquiry" on your credit report, then gives you a letter grade that's an estimate of the range of scores you'd get for $15 a throw from the credit bureaus. A grade of B correlates to a FICO score of 700-749, a TransUnion score of 765-844, or a PLUS score of 695-739."

It's an exciting day for all of us at Credit.com. Kudos to the amazing staff and team members who put their heart and souls into this effort. All the hard work truly shows the dedication and love for what we do.

To read more, check out the full article: Top 10 Most Innovative Finance Companies

Click here to get your free Credit Report Card. Don't forget to let us know what you think!

Credit.com Named One of 20 Best Money Websites

In today's release of Money Magazine, Credit.com was chosen as one of the 20 Best Money Websites! Our Credit Report Card was listed as the best free consumer tool for consumers to find out how good their credit is for free:

"For a quick sense of where you stand (for free!), you can't beat Credit.com. Click on the Credit Report Card and answer a few questions."

We are thrilled! Thank you, Money Magazine!

To read more, check out the full article: The 20 Best Money Web Sites

To order your free Credit Report Card, go to https://www.credit.com/r/credit-report-card to try it out! We love feedback, so don't forget to let us know what you think!

A Tricky Way to Avoid Paying Credit Card Minimum Annual Purchase Fees

Credit card companies are always looking for ways to squeeze an extra dollar out of their customers, and with the recent federal regulations putting an end to some of their sneakier tricks, they've come up with a new one: Hitting customers up with a fee if they don't charge a certain minimum amount on their cards each year. Citi recently announced it would charge a $60 fee to customers who rack up less than $2400 in credit card purchases in a twelve month period.

Jim Wang of Bargaineering has an interesting, albeit tricky, way to avoid paying the fee: use your card to buy $1 US coins from the US Mint's Direct Ship Program. The Mint is promoting this program as a way to get dollar coins into circulation as a substitute for dollar bills (coins last longer than bills). But if you deposit the coins in your bank account to pay off your credit card bill, you are defeating the purpose of the program. In the comments section of his post, Jim says it's better to use the coins to buy things instead of depositing them into your bank account.

I can't imagine this loophole lasting much longer, especially if a lot of people start using it to avoid the fee. A better solution, in my opinion, is to call the credit card company and tell them you are going to cancel the card if they don't waive the fee.

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

The Good Guy Tuna Fish Company: Your Credit Card Issuer?

A very smart man once told me the true value of being a better company. Not only from the perspective of being more efficient and profitable, but also better to the people we’re privileged to call our customers. One of the issues that we always found confusing was the perceived lack of any sort of public relations involvement with company decisions. Now don’t get me wrong; I fully believe public relations play a part in every company’s policies. But I’m not so sure how prevalent a role it plays.

Case in point, the CARD Act. Large credit card issuers will be forced to change how they do some of their business. For the majority of the latter part of 2009, it seemed like the banking industry was blaming future higher prices on lawmakers who were trying to change the system with the CARD Act legislation. This made them sound unsympathetic, uncaring and, frankly, evil.

Now it seems like one large credit card issuer has broken out of the pack and embraced the value of good public relations when it comes to changing policy. Several weeks ago, Bank of America sent notices to many of their cardholders explaining how they were going to comply with the CARD Act. And if any of you read the notice (many people do not), you would have seen a crystal clear explanation of their new law as well as their actions to comply with the new law. Barclay’s and Home Depot Card Services did the same.

Bank of America has even created a new summary of your rates, fees, and payment information called a Clarity Commitment®. I have to tell you that I’ve been reading bank communications for 20 years now, and this is easily one of the most clearly written communications I’ve seen. And unless you don’t speak 8th grade English, Bank of America cardholders now will have a better understanding of the terms of their account and the actions that will be taken by the bank if you do certain things.... and avoid doing others.

So instead of telling us that credit is going to cost more for everyone and that access to credit will be limited for those with poor credit, why not change it from a negative to a positive? Comply early, comply often, embrace the new rules, and look at it as an opportunity to engage with your cardholders. Become the Good Guy Tuna Fish Company!!

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.