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The Evolving Face of Credit Card Scams
An anonymous reader writes "The 12 Angry Men have a followup to their piece on the cross-sell scam credit card companies have begun using. Their new article concerns another evolving scam being employed, where users are racking up huge fees and charges on cards that have never even been activated. The article goes deep into the standard way the scam plays out, as well as detailing some interesting history on how credit applications are processed, and where they are typically (and frighteningly) subject to tampering."
Instead of sitting around and letting credit card companies make money off you, there are ways you can get them back.
Sites like Katie's Credit lists a bunch of innovative ways -
* pretending to cancel your rewards card
* charging just under $2 every month on unused cards
* cashing in the $20 checks they send you and canceling before 30 days is up
* and of course, the standard 1-2% cashback
I've read sites like fatwallet and getrichslowly which also have some great techniques with credit cards. Just because they're screwing you over doesn't mean you have to take it.
my credit card story - I had a credit card with a small limit (sub $500 AUD) perfect for small purchases on line, I was happy with this, any debt was paid off the next payday at the latest.
Then the credit card company merged with a major US bank. A couple of years later when my old card expired later they sent me a new card with a letter saying that my credit limit increase to $24, 000 was pre approved. I rang their (Indian based) call center to tell them I wanted to complain saying I didn't want this limit and when the call center staff told me that I couldn't go back to my old $500 limit I told them I refused to let them activate the new card and wanted my account cancelled. Six months later I'm STILL trying to get them to cancel my account, the new card has never been activated, I've never confirmed my new credit limit and they keep charging me fees (including some penalty fees) on a card that has no debt run up on it, That has never been used, that I no longer want and that I've asked them to cancel. Next step is that I will lodge a formal complaint with the Banking and Financial Services Ombudsman that arbitrates Credit Card disputes in Australia
Like the article mentioned, virtual account numbers are great for online purchases. It's one of the first features I look for. Citibank and Bank of America's virtual card services are both pretty nice, allowing you to set a spending limit for each number, as well as expiration dates. I believe Citibank also locks the number to the first merchant who charges to the virtual account.
True, but the fact of the matter is that people DO get into debt more when they use credit cards.
Of course they do. Then again, with things like payday loans and rent to own(effective interest: up to 400%!), there's plenty of people who get into trouble even without credit cards with an interest rate generally less than 30%.
Many people are not disciplined enough to do what you recommend.
True, of course even though I do the same thing, there are things I could theoretically do to increase my earnings/save money even more, but even though it should be fine, I consider it too dangerous or too much work.
For example, I could get a home mortgage for ~6%. My investment returns are averaging 10%. So I could theoretically make more money keeping my house mortgaged(essentially renting it), and going for that 4% marginal. Sure, I'd have to pay income tax on the 10%, but the interest for the house is deductible. Still, that means risking my house - for a measly 4% on average. Sure, some people do it, but I don't like it.
We'd probably be better off teaching fiscal responsibility and budgeting in HS, but even then - we can't make people listen, and that 52" plasma TV looks real good...
Here I am driving a 5 year old car(bought new, paid off, I plan to drive it at least 10 years. $300/month pays for a lot of repairs. Stuff left over once I decide to get rid of it can go towards buying a new car - possibly entirely. I also have a 7 year old 32" TV I bought on special, etc...
But there's people who make less than me running around with HDTVs and expensive cars etc... My only consolidation is that I'm much more likely to be able to retire early and with a better standard of living than them. My goal is to be one of those 'quiet millionaires'. You know, live modestly, but have no real financial worries.
I don't read AC A human right
Talk about cutting off your nose to spite your face.
When you get scammed with a credit card, you call your card company, explain the situation, they say "Thank you Mr. X, we'll investigate it", and then a month or two later you'll get a refund. At no point during this situation did you actually lose any money. At worst your credit limit was artificially low for this period.
When you get scammed with a debit card, you call your bank, explain the situation, they say "Thank you Mr. X, we'll investigate it", and then a month or two later you'll get a refund. In the intervening period you have no money. If you are like many people and have no significant liquid assets outside your checking account, you may end up not eating for a while.
Also note that if you lose your debit card and someone starts using it with your PIN (that they may have scraped off a keypad you used just before they stole the card from you) then you are liable for the charges right up to the point where you call the bank. If a credit card is stolen then you are never liable for any charges you did not personally make unless your signature is present, and even then you are limited to $50/charge.
I personally never use my debit cards because the possibility of having the information stolen is too scary. On the other hand I use credit cards freely have no worries about getting them stolen, because even if someone steals my information the process for resolving it is painless. Of course I also watch what I spend and pay off my cards every month, so that I never get any finance charges. Some people are not capable of staying out of debt when carrying a credit card, and to them I would recommend sticking to cash or checks.
Legally, I believe the account is open when the paperwork is signed. It has to be closed using appropriate measures.
"Activation" procedures are just added by the issuers to reduce fraud and other losses. "CC protection" may be expensive, but it's not fraud. Activation only applies to the card sent, not to the account.
Nothingto see here, move along.
Wrong. Using credit gets you into debt, maybe, but not me. Credit does not get you into debt; debt comes from not repaying your creditors.
People these days just can't accept personal responsibility for things; it's ridiculous.
You're correct, although I understand that some people can't resist the temptation to over-spend. From my point of view, use of credit cards can actually make people wealthier rather than poorer, in 4 ways:
* Rewards. It's easy to find a credit card that gives you some percentage of your spending back as cash or gasoline or airline miles. All other things being equal, this benefits the user - free money!
* Building of credit history. The longer you have credit card accounts in your credit profile (assuming you pay them off or at least pay on time) the better your credit score. This lets you borrow money at a lower rate when you realy have to - say a mortgage.
* Interest. When you buy an item with cash, you no longer have the cash. When you buy an item with a credit card, you get to keep that money until the bill is due - which could be a month or more in the future. You can put that money into a savings account meanwhile and earn interest.
* Barring scams and identity theft, credit is safer than cash. If you lose your credit card, you can replace it for free. Cash cannot be replaced in the same way. Also, credit cards provide a convenient way to dispute charges. Let's say you made a deposit for a service that was never provided. You may have a tough time chasing down the entity you made a deposit with, but you're a phone call and a fax away from your credit card refunding you the money and investigating (yes, in that order!)
Another great feature of credit cards is the monthly statement itemizing your expendetures. If you're into any type of cashflow analysis or budgeting, this could be valuable.
Of course these benefits only accrue to those with sufficient restraint to avoid abusing their cards. If you don't buy anything on the card that you'd not have bought with cash you have access to, you'll be ahead of the game.
http://ed.markovich.googlepages.com
and always pay off the WHOLE bill each month. Unless you have a horrible credit rating you can always get cheaper money than a credit card. But really, if you can't pay it off at the end of the month you really shouldn't buy it. Except for your mortgage, and maybe a car loan, you should avoid debt. Saving isn't that hard.
Anarchists never rule
Here's a trick I was taught: Treat the card like a set of checks.
Seriously, keep the card in your checkbook with a register. When you buy something, deduct it from your checking account. Total up those expenses when the bill comes, verify charges are good, and send them a check in full each month.
I don't read AC A human right
I agree. I do all my banking through a little (well, by little they hold less then $1.5 billion USD) local bank. When I was opening business accounts, the VP of loans poked his head in and introduced himself. I had a problem when I moved, with credit information not being updated, and they sorted it out, in person. I just walked into the main branch, and a half hour later, there was no problem anymore. They are also willing to do odd things, like find a strap of sequential uncirculated ones.
I have a personal account with a credit union for just the reasons the parent mentions. I get better rates on credit (if I need it), better rates on CDs, and the customer service is top notch. The other benefit is that business and personal accounts are separated, so they can't pull the "we can transfer easily" crap. Also, if I ever actually make any money, having assets at two institutions increases my FDIC coverage allowance to $200K.
My only regret is that I pay fees at all ATMs.
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First, I suggest not posting AC, you deserve to be heard. I hope to hear from you again.
if you refuse to take an easy, reliable >4% return on an amount as large as those involved with a mortgage you will not become of one us (hint even if your tax rate is currently so low that the tax advantages accompanying the mortgage interest do not boost your marginal return above the 4% difference you cited, your tax rate will go up in time to add that bonus).
Your acceptance of risk is higher than mine. I'm a bit scarred in that I first started investing just before 9/11. Lost half my initial investment. On paper, I didn't pull it out, and it eventually recovered. Now, I will admit that I'm paying the minimum on my mortgage and investing instead. Then again, I got a sweetheart interest rate, much better than the 6% I could otherwise get. Still, I'm building equity in the house - which I want. Worst case I can still make it - it's just going to take a bit longer.
Having a fixed-rate mortgage on your house does not risk your house in ways different from those.
I have insurance for the other events. Home Owner's association? I could practically set up a firing range in my yard and the neighbors are more likely to come over and shoot with me than call the cops. As for fixed rate mortgage what I was really talking about was manipulating loans such that you have zero equity most of the time - think 'interest only loan'.
This way I still own my house if the stock markets crash and I lose my job.
If you think buying your car outright means that you can budget the $300/mo that would have been a car payment for repairs instead of considering that money as not-yet-spent funds to purchase the car that will replace the one you're currently driving -- you will not become one of us.
I think you misread me - the $300 payment that represented my car payment when I was still paying it off. What I'm doing now is placing that money into investments each month earmarked 'car'. It's a little more bookkeeping to keep track of the number of shares for that purpose, but whatever. It's a somewhat nebulous fund that's meant to pay for major vehicle expenses - not including gas or routine maintenance, but including buying a new car. Basically, I know that some major maintenance will probably be required between now and 10 years. That $300/month will more than cover that. If the maintenance is too bad, or the car no longer meets my needs, then the fund goes towards a new car; ideally buying it 100% cash. The 10 year point is merely a goal, not a end point. If I still like the car, I could drive it for 12. It's just that I figure after 5 I'll have plenty of money, even assuming some repairs, to buy a new car. The way I look at it - if I end up spending $900 in year 8 to get to year 10 I'm still ahead of the game.
Financially, the difference between buying your car for 'cash' vs. on credit is that you save the interest costs and (if you did it right) had benefited from the returns made on the not-yet-spent funds but you still need to include that 'car payment' in your budget *every* month rather than just the months after your current car dies.
That's what I meant. $300 monthly payment ceased going into GM's pocket and into my portfolio, earmarked 'car'. I just don't feel the need to mark it exclusively for 'new car', instead choosing to allow it to also be used for sane repairs on my existing vehicle - after all, I'm still ahead as long as it's costing less than $300/month to keep running in a suitable condition. Heck, if it reached $100/month to keep going, I'd be car shopping.
I'm firmly on my way to a somewhat early retirement - I'll have the $1million, after starting with essentially 0 as a teen. I could do it faster, but I do like some luxuries, like my $1200 gaming machine(built myself to save money). Of course, my last gaming computer was four years old when I replaced it, so it ends up being a lot cheaper than drinking at a bar.
I don't read AC A human right
Bank of America gave this guy a big credit limit at a "fixed" rate of 6.9%.
I used to be a BoA customer for about 4 years just as a casual card holder. Last year I had some unexpected expenses that basically maxed the card at at about 2 months of my income which over all isn't critical to me. Then about a month later I get a letter saying my interest rate is going from 7% to 20%.
I called them up and asked why in the world was my interest rate being increased since I have never had a late payment in my life and the actual interest rate had been cut by the feds. They said it was my credit score and at time I freaked and thought I had just been a victim of identity theft and had equifax do a credit check and I had a clean and awesome score. I called them back a second time and demanded why my rate was increased especially since my credit score was damn fine!
They said they couldn't do anything even with me threatening to cancel my account for a lower rate and all I could do was send a letter that said I disagreed with the rate change which basically froze the account. Since I was never using them again I did... And they didn't raise the rate.
Then a month or two later then send another notification of a rate increase.
Enough was enough, so I used my savings (which I loathe to not have cash around) to pay the whole thing off out of spite.
Bank of America is run by bastards who think they can rip off everyone.
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