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."

Comments

Simple (sort of) solution:

[Z80xxc!]

Just don't use credit cards. Really. Using credit gets you into debt anyway. True, there are other ways to get scammed, but if you don't have a credit card, they can't rack up the charges. If you were to use a debit card instead, then you stand to loose something, but once it runs out, it's gone and they can't keep charging more. Credit is necessary in some circumstances, but for day-to-day purchases, you might be better off without one.

Re:Simple (sort of) solution:

[Feminist-Mom]

Credit cards don't get people into debt - bad judgement and perhaps poor mathematical skills do. It is simple - you know how much you make each month, and have in savings, and don't run up a bill you can't pay. It's just a matter of computing your total resources R, and making sure R > amount you spend.

Re:Simple (sort of) solution:

[andy666]

True, but the fact of the matter is that people DO get into debt more when they use credit cards. But maybe one way to look at this is that a credit card is a easy way to get a short high interest loan, and people are fine with that. On the other hand, most people don't treat it that way and it turns into a long term high interest loan. So it is sort of psychological reasons that get people into trouble. Many people are not disciplined enough to do what you recommend.

A lot of people gamble and get into trouble because of bad judgement. It's sort of like that. Basically a lot of adults act like kids, and you have to expect that as the norm.

Re:Simple (sort of) solution:

[ejdmoo]

Just don't use credit cards. Really. Using credit gets you into debt anyway.

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.

Re:Simple (sort of) solution:

[AK Marc]

Using credit gets you into debt anyway.

Hmmm, I have about $150,000 of debt to three separate institutions, and not a single one of them is a credit card company. Well, not counting credit cards paid off within 30 days with no finance charges as "debt." I have about $50,000 available on my cards, and use it like a convenient checkbook that pays me money for using it and takes nothing from me in return. Anyone not using credit cards for all possible purchases is losing money.

If you were to use a debit card instead, then you stand to loose something, but once it runs out, it's gone and they can't keep charging more.

Debit (tied into your bank account) gives you less protection than a credit card. Also, if there is a problem and your charge account is frozen, if you have credit cards, you pull out another. Most people don't have a full backup checking account in case the first one doesn't work.

Credit is necessary in some circumstances, but for day-to-day purchases, you might be better off without one.

The way I see it, using a credit card for all purchases gives me rebates (cash, airline miles or whatever) protects my checking account from loss, and leaves a more trackable account history than checks or cash. Using credit cards is something people should do, not avoid. Now, the question of paying it off is a completely separate issue. Just like you shouldn't write a check your account can't cash, neither should you charge something more than what you can write the check for when the bill comes.

Re:Simple (sort of) solution:

[camperdave]

No, I'm afraid you're wrong. The moment you charge something to your card you are in debt. Now, you may well pay that debt off promptly and completely. However, that is a side issue.

Re:Simple (sort of) solution:

[dosius]

It lies in the (and I am referring vaguely to the DEVO/Jocko Homo ref in your .sig btw) de-evolution of American society into a group of people obsessed with buying, buying, buying - whether they have the money is irrelevant, GOTTA HAVE IT, and gotta have it NOW.

When we realize we don't NEED this junk and especially when we know how to wait for things ("good things come to those who wait", ain't you heard?), how to save up for stuff (this is one of my vices, I spend money like sand going through my fingers), how NOT to get into debt, we will be much better off.

The closest I'll ever get to touching a credit card are those All Access Gift VISA prepaid debit cards I buy every month at Tops so I can buy stuff online.

-uso.

Re:Simple (sort of) solution:

[MBCook]

Agreed. My only debt is my credit card, which I pay off every month. I've had it for about 2 years, spent plenty of money (bought a HDTV, and a Laptop, along with all my gas) and yet I've never paid them a cent of interest.

The thing about credit cards is that they are a double edged sword. One edge is blunt, the other is sharp as hell. If you do what I (and the parent poster) do, it's a blunt sword. You use it to make life a little easier, you get a small benefit (1% cash back or whatever, depends on card and whatnot). If you screw up, they bleed you. Chances are you don't get 10% interest rates. Most people don't. But even 8-10% can be quite a bit of money.

But that requires you to be responsible. To pay your bill on time. To only spend money you already have.

If you don't do that, a credit card is a really sharp sword. Playing with credit cards (especially the "I'll move my balances to this new 0% card" game) is russian roulette. You know how sharp things like Ginsu Knives are (in the ads, not in real life)? Multiply that by 100, coat the sword in motor oil, and that's what a card is.

If you can't control you spending, you will get yourself into big debt. There is a decent chance that the debt will become normal to you. Once you get one card, it is easy for you to get another if "run out of money" (a.k.a. your up to your limit). You will dig yourself in DEEP.

My best summary would be this: if you don't need a credit card, if you don't spend money... they are safe. If you "need" a credit card, if you like to spend money... they are very VERY dangerous.

There are things that could be done. Overturning that stupid ruling that let banks export usury rates. Ban advertising cards on college campuses (as well as promotions involving cards... no more "Buy one pizza, get one free when you sign up for a Visa card"). Make it illegal to give cards to people who are near their credit limit on most/all their cards already. No "loyalty" cards that have credit attached (i.e. what you see at Best Buy, Circuit City, Nordstrooms, Gap... just about everywhere. Mandatory financial counseling in school (Ohio is moving to something like this I hear) so that kids have a chance to learn this stuff the easy way.

And of course, credit card companies tend to be on the evil side of shady. But I think that of most banks at this point, cable companies, cell phone companies, and quite a few others. What can I say... I'm not a big fan of how many large companies are run.

Re:Simple (sort of) solution:

[skelly33]

Ah yes - that reminds me of the scam that I got hit with by a bank that starts with a "W" and ends with an "ells Fargo"... but I won't name names.

It all started when I made a series of mistakes (ancient history) and ended up having myself added to the bank account of a girlfriend so that we could access the same cash pool. Her account, my name added for ATM access. That relationship didn't work out and, after returning the ATM card, we parted ways.

So, none the wiser, I went to the same bank and opened my own account and got my own ATM card, and life as a bachelor was good. That is until about a year later when I got a call from the bank.

The woman on the phone explained that my girlfriend had over-drawn her account by nearly $1,000 and, since my name was on the account I shared the responsibility for payment. "Excuse me? No, no, you don't understand..." Furthermore, since my account is also with the same bank, they can just transfer the funds from my account to hers for added convenience. "EXCUSE ME?" A spat ensued. She won, though I got in my share of colorful euphemisms.

Ever since I have refused to do my banking with anything bigger than a local credit union who takes care of customers with nervous precision.

Re:Simple (sort of) solution:

[UbuntuDupe]

You know, anyone who's read my posts will know I'm the greediest capitalist out there. I don't have any love for people who get into debt without thinking about the consequences. Esp. the mortgage idiots who are surprised to see an adjustable rate adjust. So on any other issue, I'd be on your side.

But most of what credit card companies do is too much, even for me.

For example, look at this. Bank of America gave this guy a big credit limit at a "fixed" rate of 6.9%. Then he borrowed on that for wedding expenses, at which point it immediately shot up to 20%. Now, we can debate the merits of going that far into debt for that purpose. And certainly, the fine print allowed that. But advertising a 7% rate that becomes 20% if you have the audacity to actually take the offer? It's legalized fraud.

And on top of that, you have to get a credit card to exist in the financial system, even if you don't borrow against it.

(And then there's the whole issue of why the risk-free rate is so low despite the non-existent savings rate for Americans...)

Re:Simple (sort of) solution:

[davetd02]

I'm trying to understand where the "scam" is here. You officially became a joint owner of the account. Presumably there were some documents and signatures involved. You never told Wells Fargo that you were no longer the joint owner of the account. Wells Fargo, thinking you to still be the joint owner of the account, did exactly what "joint owners" do. You get all of the benefits AND all of the drawbacks.

The right thing to do would have been to do more than return the ATM card to your ex-, but also remove yourself from the account.

Re:Simple (sort of) solution:

[dubl-u]

People these days just can't accept personal responsibility for things; it's ridiculous.

Choosing not to use credit cards sounds pretty responsible to me. Not only is it fiscally responsible, but he knows his limits and is sticking to them. What's not to like about that?

who would cross-sell with such losers?

[Greenisus]

i don't know about most e-commerce operations, but where I work, we make a point to not tie ourselves in with the kinds of companies that would do these sorts of cross-sell scams. TFA says some people think of this as free money, but it's not at all. when you hand control of what your users see to a third party, that's not free.

Cash Users Subsidize Credit Users

[mechsoph]

Believe me, you have more than paid for those perks.

In the form of higher prices due to interchange fees, higher prices I'd pay even if I used cash. Using a credit card is a no-brainer. Take the 30-day interest free loan and a refund of 1-5% of the interchange fee. Of course, actually carrying a balance is equally a no-brainer; don't do it.

Re:Better solution

[Firethorn]

The only way CC companies make money off of me is via store processing fees. As the places I shop at don't give cash discounts, that doesn't cost me except in a theoretical way. Before going ape about 'processing fees', remember, there are business expenses related to the handling of cash as well. Handing that $20 to pay for something might actually have more overhead in handing that bill and your change than the processing fees charged by the CC company. Remember, you have to reconcile the till, count and lock up cash, transfer it to the bank, etc...

I haven't paid a cent of interest or fees to the CC companies in a decade. I'll admit I was a bit stupid as a teen - though I didn't dig myself in deep, fortunately. Paid a little interest on my first brand new personal computer though.

On the other hand, the CC company shouldn't be too pissed with me, I'm a quiet customer who pays his bills on time and in full. Sure, they don't get interest from me, but they also don't have to worry much about me not paying my debt and forcing them to write me off as bad debt.

Re:why no credit gouging laws?

[lena_10326]

lenders will bleed most of Americans dry

Lending is a consensual act between two adults. Your panicking isn't justified unless that changed.