Another Reason Why Credit Cards Stink

Still want to use credit cards?

Do you really think it is worth it to spend more to get frequent flier miles that are limited more and more?  If so, then get ready for the terms to change whenever it is convenient for the issuer to make a buck.

Stay away from the plastic!

Fed Plans To Revise Credit Card Rules

Finally, some good news out of Washington! It looks like the rules on credit cards are going to be revised to make them more consumer friendly!

An exerpt:

The new rules would require companies to tell customers 45 days before terms of a credit card contract are changed, compared with 15 days now. And the rules would expand the list of changes requiring advance notice to include those involving penalty interest rates, which often range above 30 percent. Today, most consumers learn only after opening their monthly bills that they have been penalized with significantly higher interest rates because of paying late, going over their credit limits or falling behind with another lender.

Also:

Companies would also be required to spell out that low rates on balances transferred from another credit card apply only to that balance, not to new purchases. And it would require companies to apply payments to the debt carrying the highest interest rate. Many companies now apply payments to the least costly debt, thus forcing customers to pay more in interest.

These measures will definitely help people in getting out of debt. Still, it is shocking that consumers can be treated so badly by an industry without any public scorn. These changes still don’t make credit cards a good method of payment, but they at least start to even the playing field.

Debit Cards, Rewards, and Security

No Credit Needed pointed me towards visaextras.com, a free points/rewards system for users of debit cards. There are a lot of people who are so blinded by the prospect of rebates and rewards that they wouldn’t dream of using anything but plastic. While I would disagree with them, at least using a debit card links your spending to your income in a very direct way.

MSN Money has a related article on rewards and security for debit cards. The most important thing to understand here is that DEBIT CARDS HAVE THE EXACT SAME FRAUD AND LOSS PROTECTION AS CREDIT CARDS. Check

Debt Sinks Worlds Oldest Business

Think using debt to fund your small business is a good idea? I have a great counter-example for you, Koko Gumi. Koko Gumi (a Japanese construction firm) was the worlds oldest continuously operating company, and had been in business 1,400 years. Yes, they have been a family business since the 7th Century and are having to shut their doors. Why? Debt, of course.

You see, in the 1980’s, the company borrowed heavily to invest in the inflated Japanese real estate market. It was an opportunity too good to miss, they thought. The bubble burst, and they were in hock up to their eyes. Then, demand for their services diminished (they are specialists in building and restoring Buddhist Temples) and they couldn’t keep afloat.

The 1-2 punch of debt and hard times is too much for almost any business or family. You can’t predict when hard times will come, but you can influence how hard they will hit you. By preparing with a generous emergency fund and keeping out of debt you can make sure that your head stays above water, no matter what.
If you are interested in learning more, Business Week has all the sad details.

Nothing Wrong With Student Loans (Part 2)

Here are some updates to my previous article

  1. Robert Reich wrote about the real problem with student loans, that the average consumer is being ripped off by finance companies and underserved by the government.
  2. The Washington Post exposes how student loan companies abuse your privacy in order to try and make a buck.

Now, do you still think that these people are the ones we want our children to do business with starting at 18?

Nothing Wrong With Student Loans?

The prevailing logic in our culture is that student loans are a good thing, or at least a necessary evil that is required in order to get an education. In reality they sap both our individual and collective futures. We take the people with the most energy, the most enthusiasm, and the most potential and saddle them with long-term financial commitments at exactly the wrong time.

Student loans are a student loans are a multi-billion dollar industry , in some ways a shady one. With hundreds of millions of dollars going through major universities there is a significant conflict of interest, establishing a relationship that will enrich an institution at the expense of its students. The New York Times published an article detailing the tangled relationship between Citibank and several universities. While no wrongdoing was admitted on anyones part, both parties agreed to pay restitution and to abide to a new code of conduct for student loan processing. That sure sounds like wrongdoing to me!

MasterCard Makes Identity Theft Easier!

I just saw a commercial that really struck a nerve. It is from MasterCard (I believe) and is touting the new proximity cards that don’t require a signature.

The ad is a story about a sick zookeeper who has his animals steal his card, then go to the store and get him chicken soup, a blanket, and other soothing things. Then the animals swipe the card and are able to buy the items without a signature or a second look from the merchant.

I thought this was an excellent commercial, at least from my point of view, as it showed how insecure these tools really are. It tells the world, any mammal can steal your identity!