In an apparent effort to recoup some of the losses suffered under enactment of new financial reform laws, some banks are manipulating the order in which they process bank account transactions to maximize the number of overdraft fees they can charge customers.
Here’s one of the scenarios reported by irate bank customers:
Say you have $500 in your checking account on a day that your bank receives four debits against your account:
$5 latte
$220 groceries
$80 veterinarian
$565 auto insurance
Your total debits for the day total $870 against a balance of $500, overdrawing your account by $370.
If the bank debits the three small purchases totaling $305 (easily covered by your $500 balance) before it processes the larger $565 insurance debit, you would incur a single overdraft fee. However, if the bank debits the larger purchase first, causing your account to be overdrawn, it can charge an overdraft fee for each subsequent debit. At the end of the day, you’ll pay 4 overdraft fees instead of one! At $35 a pop, that’s a loss of $105.
Bank customers expect their accounts to be debited in the order purchases are received. Consumer credit repair experts, however, have found that many banks — 25% according to a 2006 FDIC survey — shuffle debits received in the same day to maximize overdraft fees, generating significant profit for banks.
In our example above, if the insurance transaction arrived at the bank early in the day and was processed before the other transactions occurred, most consumers would agree that, while onerous, the bank is within its rights to impose 4 overdraft penalties. However, when the three smaller purchases occur before the insurance debit arrives, consumers rightfully argue that they should only be charged a single overdraft fee. When banks processes debit transactions out of order to rack up fees — known as “high-to-low” check clearing – consumers are understandably outraged.
Wells Fargo bank was recently called to task for high-to-low check clearing by a California judge who called the practice “gouging and profiteering.” Wells Fargo was ordered to pay $203 million in restitution to customers who had been unfairly charged. While the U.S. District Court ruling applies only to Wells Fargo bank, it is considered an encouraging sign for similar suits in other states.
What Final Phase of Credit Card Act Means for Consumers
Yesterday, on August 22, 2010, the final phase of the 3-part Credit CARD Act of 2009 went into effect. February saw the bulk of changes mandated by Congress in the way banks manage credit cards, but the final phase of the CARD Act includes some significant changes that will impact consumers. Credit repair professionals say the new changes provide additional protection to consumers from unfair and arbitrary practices by credit card issuers.
Credit card fees.
•Those annoying inactivity fees that credit card issuers charged card holders who did not use their cards are no longer permitted. Also, consumers cannot be charged for failing to meet minimum charge amounts.
•Credit card issuers are prohibited from leveling late fees that are greater than the minimum monthly payment.
Credit card interest rates.
•When credit card issuers increase a card holder’s interest rate because of late payments, they must give the consumer an opportunity to earn back the previous rate. If a card holder pays his account on time for six consecutive months, his interest rate must be lowered to the previous rate.
•Starting February 2011, credit card issuers must review a consumer’s account every six months if their interest rate was increased for any reason after January 1, 2009. If the circumstances that caused the increased interest rate no longer apply, the card issuer must reduce the consumer’s interest rate. One flaw in the new law is that it does not specify the reduction amount.
Gift cards.
•The new law protects the long-term value of gift cards. Gift cards, prepaid cards and gift certificates cannot expire within 5 years of activation, unless — and here’s the loophole – the terms and expiration are clearly disclosed before purchase.
•If consumers load additional funds onto a gift card, the 5-year expiration period is automatically extended by 5 years.
Credit repair professionals should make certain that their clients understand the latest credit card changes made under the Credit CARD Act. Click here to access a Credit.com’s Consumer Guide explaining all of the CARD Act changes.
Credit card fees.
•Those annoying inactivity fees that credit card issuers charged card holders who did not use their cards are no longer permitted. Also, consumers cannot be charged for failing to meet minimum charge amounts.
•Credit card issuers are prohibited from leveling late fees that are greater than the minimum monthly payment.
Credit card interest rates.
•When credit card issuers increase a card holder’s interest rate because of late payments, they must give the consumer an opportunity to earn back the previous rate. If a card holder pays his account on time for six consecutive months, his interest rate must be lowered to the previous rate.
•Starting February 2011, credit card issuers must review a consumer’s account every six months if their interest rate was increased for any reason after January 1, 2009. If the circumstances that caused the increased interest rate no longer apply, the card issuer must reduce the consumer’s interest rate. One flaw in the new law is that it does not specify the reduction amount.
Gift cards.
•The new law protects the long-term value of gift cards. Gift cards, prepaid cards and gift certificates cannot expire within 5 years of activation, unless — and here’s the loophole – the terms and expiration are clearly disclosed before purchase.
•If consumers load additional funds onto a gift card, the 5-year expiration period is automatically extended by 5 years.
Credit repair professionals should make certain that their clients understand the latest credit card changes made under the Credit CARD Act. Click here to access a Credit.com’s Consumer Guide explaining all of the CARD Act changes.
Identity Theft Can Be Messy
First the good news: Stolen checks and credit cards may be the easiest to deal with because most banks charge victims nothing for stolen checks, and may only charge only $50 for credit cards, regardless of the amount of fraudulent charges. Some charge nothing at all. (Because of this, the identity theft protection packages that they offer aren’t worth the money.)
Now for the rough stuff. Debit cards can be damaging because of the ease of cash withdrawals. The sooner you report it the cheaper it is for you – between $50 and $500, but if you don’t notice for more than 60 days, you may be held liable for the full amount withdrawn. Ouch.
Then there’s the hassle of clearing it all up. According to Identity Theft Facts:
• Victims of identity theft lose an average of $2,000 to $15,000 in wages trying to repair the financial damage caused by identity thieves, and some even spend up to a year trying to deal with their cases.
• On average, victims spend between $850 to $1400 in expenses related to their cases, which includes paperwork and any other legal fees.
• As a result of identity theft, nearly half of all identity theft victims have difficulties obtaining credit and loans, and roughly 1/5 of victims have higher credit interest rates. Over 2/3 of victims have difficulties removing negative information from their credit scores.
This is where it may be well worth having a the help of a trained credit counselor.
Here are some tips to protect yourself:
• Shred documents with financial information
• Erase all personal information from old hard drives, memory sticks, PDA’s, cell phones etc., before getting rid of them
• Cover the keypad when you enter account numbers in public
• Don’t respond to e-mails that ask for your account number and password.
• Don’t give financial information to telemarketers who call you. Call the company’s published main number instead.
• Create strong passwords with a combo of letters and numbers that would be impossible for anyone to guess if they had basic information about you.
• Be sure your computer’s operating software is up to date and that you have antivirus software that protects you from malware and other threats.
Now for the rough stuff. Debit cards can be damaging because of the ease of cash withdrawals. The sooner you report it the cheaper it is for you – between $50 and $500, but if you don’t notice for more than 60 days, you may be held liable for the full amount withdrawn. Ouch.
Then there’s the hassle of clearing it all up. According to Identity Theft Facts:
• Victims of identity theft lose an average of $2,000 to $15,000 in wages trying to repair the financial damage caused by identity thieves, and some even spend up to a year trying to deal with their cases.
• On average, victims spend between $850 to $1400 in expenses related to their cases, which includes paperwork and any other legal fees.
• As a result of identity theft, nearly half of all identity theft victims have difficulties obtaining credit and loans, and roughly 1/5 of victims have higher credit interest rates. Over 2/3 of victims have difficulties removing negative information from their credit scores.
This is where it may be well worth having a the help of a trained credit counselor.
Here are some tips to protect yourself:
• Shred documents with financial information
• Erase all personal information from old hard drives, memory sticks, PDA’s, cell phones etc., before getting rid of them
• Cover the keypad when you enter account numbers in public
• Don’t respond to e-mails that ask for your account number and password.
• Don’t give financial information to telemarketers who call you. Call the company’s published main number instead.
• Create strong passwords with a combo of letters and numbers that would be impossible for anyone to guess if they had basic information about you.
• Be sure your computer’s operating software is up to date and that you have antivirus software that protects you from malware and other threats.
Rescoring Can Boost Poor Credit Rating
You would think that the combination of low home prices and low mortgage interest rates would have sent the real estate market soaring, but that hasn’t happened. The fly in the ointment has been exceptionally tight credit. Since getting burned by their own subprime loans, mortgage lenders have made it difficult for consumers with good credit scores to obtain home loans. People with merely average or poor credit scores are finding it impossible to quality for a mortgage loan or any other type of credit.
Mortgage lenders face pressure to adhere to extremely tough underwriting procedures not only from within their own organizations but also from Fannie Mae, Freddie Mac and the Federal Housing Administration. New rules requiring higher credit scores have made obtaining a mortgage loan a real challenge. Mortgage lenders are looking for FICO credit scores of at least 700 and prefer scores in the mid to high 700s.
That’s a tough standard for most folks to meet today. Economic fallout from the recession and continuing high unemployment rates have caused the average U.S. consumer credit score to plummet. More than 43 million Americans — 25% of all consumers — now have FICO scores under 599, putting them in the untouchable category as far as lenders are concerned. It now takes a FICO score of 740 or higher to qualify for Fannie Mae’s best mortgage interest rates.
To combat narrow loan qualifying standards, credit repair professionals have had to get creative to find a way around the roadblocks lenders have tossed in consumers’ paths. Experienced credit repair professionals can fast-track their clients into rapid rescoring programs that have the potential to boost FICO credit scores. Rescorings performed by independent credit reporting agencies vetted by the nation’s big three credit reporting bureaus can change credit file information, presenting a more positive picture of a consumer’s credit life that results in a higher credit score.
Rapid rescoring can usually be accomplished in 3 to 5 days and typically costs between $90 and $200, depending on the number of credit accounts and borrowers. Contact a credit repair specialist to see if rapid rescoring could improve your credit score.
Mortgage lenders face pressure to adhere to extremely tough underwriting procedures not only from within their own organizations but also from Fannie Mae, Freddie Mac and the Federal Housing Administration. New rules requiring higher credit scores have made obtaining a mortgage loan a real challenge. Mortgage lenders are looking for FICO credit scores of at least 700 and prefer scores in the mid to high 700s.
That’s a tough standard for most folks to meet today. Economic fallout from the recession and continuing high unemployment rates have caused the average U.S. consumer credit score to plummet. More than 43 million Americans — 25% of all consumers — now have FICO scores under 599, putting them in the untouchable category as far as lenders are concerned. It now takes a FICO score of 740 or higher to qualify for Fannie Mae’s best mortgage interest rates.
To combat narrow loan qualifying standards, credit repair professionals have had to get creative to find a way around the roadblocks lenders have tossed in consumers’ paths. Experienced credit repair professionals can fast-track their clients into rapid rescoring programs that have the potential to boost FICO credit scores. Rescorings performed by independent credit reporting agencies vetted by the nation’s big three credit reporting bureaus can change credit file information, presenting a more positive picture of a consumer’s credit life that results in a higher credit score.
Rapid rescoring can usually be accomplished in 3 to 5 days and typically costs between $90 and $200, depending on the number of credit accounts and borrowers. Contact a credit repair specialist to see if rapid rescoring could improve your credit score.
Credit Repair Pro Offers Fastest Route to Healthy Credit Score
If, like many consumers, your credit score has taken a hit during the recession, it will take more than a little effort to repair the damage and bring your credit score back up to desirable levels. Backlash from the recession has resulted in tighter credit standards and more onerous credit requirements. Obtaining a credit rating equal in stature to the high rating you enjoyed before the recession now requires more work, greater effort and achievement of a higher score than you had previously. Credit industry standards for good and excellent credit ratings have increased, establishing new, higher FICO scores for “good” and “excellent” ratings.
Consumers are willing to make the necessary budgetary cuts, reorganize their finances and work hard to re-establish an acceptable credit rating. The problem is that most consumers don’t know what to do or how to do it to effectively raise their credit scores. Savvy consumers realize that seeking professional help is the fastest, smartest path to restoring their credit rating. Credit repair professionals have the knowledge, training, experience and credit repair software to assist consumers in designing and implementing an action plan that will bring their credit score back up to a healthy level.
Before the recession, most people had all their financial ducks in a row. Wall Street investments, retirement accounts and savings were on track, promising a comfortable retirement in the future. The recession was like sending a pack of foxes into the duck pond. Investments and retirement accounts were bloodied or destroyed. Savings rates dropped to near zero. Not only was the cozy retirement you had been planning wiped away, but finding the cash for daily living became a trial.
As the economy has begun to improve, people are trying to get their ducks lined up again. Credit repair experts recommend a little tough love to start rebuilding your financial flock:
•Open a savings account to serve as an emergency fund. If you put 10% of your monthly income into your savings account, in a year you’ll have a month’s worth of income saved for emergencies.
•Pay bills, loans, credit card accounts, mortgages, etc. promptly. Every late fee chips away at your credit rating.
•If you get a sizable tax refund, adjust your W-2 exemptions to keep more money in your pocket.
•If you stopped making 401(k) deposits, it’s time to start back up.
Consumers are willing to make the necessary budgetary cuts, reorganize their finances and work hard to re-establish an acceptable credit rating. The problem is that most consumers don’t know what to do or how to do it to effectively raise their credit scores. Savvy consumers realize that seeking professional help is the fastest, smartest path to restoring their credit rating. Credit repair professionals have the knowledge, training, experience and credit repair software to assist consumers in designing and implementing an action plan that will bring their credit score back up to a healthy level.
Before the recession, most people had all their financial ducks in a row. Wall Street investments, retirement accounts and savings were on track, promising a comfortable retirement in the future. The recession was like sending a pack of foxes into the duck pond. Investments and retirement accounts were bloodied or destroyed. Savings rates dropped to near zero. Not only was the cozy retirement you had been planning wiped away, but finding the cash for daily living became a trial.
As the economy has begun to improve, people are trying to get their ducks lined up again. Credit repair experts recommend a little tough love to start rebuilding your financial flock:
•Open a savings account to serve as an emergency fund. If you put 10% of your monthly income into your savings account, in a year you’ll have a month’s worth of income saved for emergencies.
•Pay bills, loans, credit card accounts, mortgages, etc. promptly. Every late fee chips away at your credit rating.
•If you get a sizable tax refund, adjust your W-2 exemptions to keep more money in your pocket.
•If you stopped making 401(k) deposits, it’s time to start back up.
The Good, Bad and Ugly of “Bad Credit” Credit Options
You practically can’t get by these days without a credit card in your wallet – you can’t book a flight, rent a car or get a decent hotel room without the presence of plastic. The problem that people with poor credit scores have is that it can be difficult to get approved for a good credit card with a low credit score or without a solid credit history. This doesn’t necessarily leave those with low scores out in the cold, but many of the options available have some less than favorable associations that you may have to deal with.
If your only desire is to be able to make online purchases or book a flight and you don’t have a whole lot of concern for improving your credit score, you could opt for a pre-paid credit card. A pre-paid credit card will work in the same fashion as a traditional credit card, but you only have access to the funds that you have put on it – it won’t do anything to establish your credit history or work to raise your credit score.
A secured credit card is similar to a pre-paid in the fact that you need to put money on the card prior to using it, but it will give you a bit more in the way of freedom than a regular pre-paid card. A secured card will often report to the major credit bureaus so you can actually start building new or rebuilding damaged credit. A secured card is a great option for someone just starting out building their credit history or for someone with poor credit who has the initial minimum to lay down to secure the card and who doesn’t want to deal with excessive interest rates.
There are credit cards specifically designed for people with low credit scores and these “bad credit” credit card can actually be a blessing for people who want to slowly rebuild their credit and have a little bit more freedom than they would with a pre-paid. The pitfall of “bad credit” credit cards is that they often have low limits and exceedingly high interest rates – the low initial limit may not be a big deal for most, but if you don’t plan on keeping up with your payments and paying off the balance every month, the high interest rates can be a tough pill to swallow. If you charge more than you should or fall behind on your payments, a credit card with a high interest rate can result in you paying hundreds or even thousands of dollars more for an item or service over the course of time it takes for you to pay it off.
If you want to obtain credit and you currently have a low score or little history, you need to weigh the pros and cons carefully prior to deciding which option is best for you. Credit is available to even those who have made mistakes in the past, but choosing the wrong option can have you in an even worse situation than you were before if you aren’t careful
If your only desire is to be able to make online purchases or book a flight and you don’t have a whole lot of concern for improving your credit score, you could opt for a pre-paid credit card. A pre-paid credit card will work in the same fashion as a traditional credit card, but you only have access to the funds that you have put on it – it won’t do anything to establish your credit history or work to raise your credit score.
A secured credit card is similar to a pre-paid in the fact that you need to put money on the card prior to using it, but it will give you a bit more in the way of freedom than a regular pre-paid card. A secured card will often report to the major credit bureaus so you can actually start building new or rebuilding damaged credit. A secured card is a great option for someone just starting out building their credit history or for someone with poor credit who has the initial minimum to lay down to secure the card and who doesn’t want to deal with excessive interest rates.
There are credit cards specifically designed for people with low credit scores and these “bad credit” credit card can actually be a blessing for people who want to slowly rebuild their credit and have a little bit more freedom than they would with a pre-paid. The pitfall of “bad credit” credit cards is that they often have low limits and exceedingly high interest rates – the low initial limit may not be a big deal for most, but if you don’t plan on keeping up with your payments and paying off the balance every month, the high interest rates can be a tough pill to swallow. If you charge more than you should or fall behind on your payments, a credit card with a high interest rate can result in you paying hundreds or even thousands of dollars more for an item or service over the course of time it takes for you to pay it off.
If you want to obtain credit and you currently have a low score or little history, you need to weigh the pros and cons carefully prior to deciding which option is best for you. Credit is available to even those who have made mistakes in the past, but choosing the wrong option can have you in an even worse situation than you were before if you aren’t careful
Big Bank Fees Causing Customer Exodus
Big banks are taking a hit that many credit repair professionals hope will serve as a wake-up call and a return to customer-oriented service. In the wake of the economic meltdown, the subsequent federal bailout and continuing tight credit, consumer ire with the banking industry is starting to change where Americans bank. Anger and frustration over the myriad and increasing fees big banks have begun charging for previously free services has caused many customers to flee America’s big banks in favor of smaller regional or community banks and credit unions.
In an effort to recoup recession losses and get around new restrictions imposed by the recently passed financial reform bill, major U.S. banks have instituted a plethora of new fees and upped the rates of fees already in place. Fees for making a deposit, processing an ATM transaction, visiting a teller window, using the night depository, utilizing online bill payment services and other typical bank services have outraged consumers. Cash-strapped bank customers argue that these services, most of which were previously provided without charge, should still be free. After all, they argue, shouldn’t bank customers benefit from depositing their money in the bank? If banks are going to use customer money to make more money, bank customers think they should get something in return. So far, all they’ve gotten is more fees and severely restricted credit opportunities, neither of which have done anything to endear banks to their customers.
Excessive bank fees may be the instigating force for consumer unhappiness with major banks, but poor customer service and credit denial are the triggers that compel big bank customers to withdraw their cash and deposit it elsewhere. Community and regional banks and credit unions have become the happy beneficiaries of the growing big bank exodus.
Consumers are finding that community banks and credit unions provide more customer-friendly service than their behemoth counterparts. Small community banks rely on support from local residents and businesses for their business. To attract customers, community banks offer stellar, more personalized customer service and provide a greater number of services at no charge. Because they are more vested in the local community, community banks are also more apt to lend money and extend credit lines to their customers.
In an effort to recoup recession losses and get around new restrictions imposed by the recently passed financial reform bill, major U.S. banks have instituted a plethora of new fees and upped the rates of fees already in place. Fees for making a deposit, processing an ATM transaction, visiting a teller window, using the night depository, utilizing online bill payment services and other typical bank services have outraged consumers. Cash-strapped bank customers argue that these services, most of which were previously provided without charge, should still be free. After all, they argue, shouldn’t bank customers benefit from depositing their money in the bank? If banks are going to use customer money to make more money, bank customers think they should get something in return. So far, all they’ve gotten is more fees and severely restricted credit opportunities, neither of which have done anything to endear banks to their customers.
Excessive bank fees may be the instigating force for consumer unhappiness with major banks, but poor customer service and credit denial are the triggers that compel big bank customers to withdraw their cash and deposit it elsewhere. Community and regional banks and credit unions have become the happy beneficiaries of the growing big bank exodus.
Consumers are finding that community banks and credit unions provide more customer-friendly service than their behemoth counterparts. Small community banks rely on support from local residents and businesses for their business. To attract customers, community banks offer stellar, more personalized customer service and provide a greater number of services at no charge. Because they are more vested in the local community, community banks are also more apt to lend money and extend credit lines to their customers.
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