Do you remember balance transfer credit cards?  We haven’t seen them around for quite some time, at least not in the numbers we had grown accustomed to prior to the recession.  Balance transfer offers were very popular a few years ago, when consumers routinely moved high interest balances to lower interest cards.  Depending on the deal, this strategy could potentially save hundreds if not thousands of dollar in interest charges annually.  Credit card holders may be able to reap the same rewards today with the return of balance transfer offers.  Here we look at what makes a balance transfer offer a good deal.

Low interest rate

Many consumers are struggling to pay off high interest credit card debt.  This process can take years if you are only able to make the minimum payment each month.  A balance transfer offer on a 0% APR credit card allows more of your payment to be applied toward your balance instead of interest charges.  Before considering a balance transfer offer, compare the introductory rate offered to the rates you are currently paying.  In addition, determine what the rate will default to once the introductory period expires.  If both rates are lower than your current rate, the balance transfer might save you money. (more…)

From 2006 until late 2008, SmartCreditChoices.com received about ten to twenty legitimate complaints about credit card companies a month. In most instances, a consumer’s action caused the problem. The most common complaints typically revolved around late fees, the loss of 0% introductory rates and interest rate increases stemming from late payments. We typically advised our visitors to contact their company, politely plead their case to a supervisor and ask for leniency. Many visitors would write back to inform us of their successes and we took pride in the fact that we could make a difference.

Beginning in late 2008, the volume of credit card complaints began to accelerate dramatically. This trend intensified during 2009 as legislators were crafting the CARD Act. During this time, the nature of credit card complaints changed. Consumers began reporting rate increases, minimum payment increases, and credit limit cuts that in many instances had nothing to do with consumer behavior.

These complaints poured in and we often fielded ten or more in a single day. If this wasn’t disconcerting enough, our tried and true advice to consumers – call, politely plead your case to a supervisor and request leniency – simply stopped working. Just about every major credit card company – except Discover Card – was making drastic moves in advance of the CARD Act and customer service reps had their hands tied. Reading consumer emails became painful. We were on the frontline of a war against consumers and, like our visitors, we were powerless.

The impact these actions had on consumers was devastating. Many saw their interest rates increase to as much as 29.99%. Others, who had secured for life fixed APRs in the low single digits were forced to pay two times their previous minimum payment (something many could not afford) or accept higher, variable rates. At a time when consumers across the country were reeling from job losses and plummeting asset prices, credit card companies were pushing them to the brink.

Once the CARD Act took effect on February 22nd of 2010, the flood of complaints dried up. Banks were no longer able to raise rates on pre-existing balances on consumers who weren’t seriously delinquent or alter the terms of fixed rate cards. This led to a dramatic decline in the most severe complaints and the volume of emails declined significantly.

However, one complaint has persisted over the past year:  credit limit cuts. Now that credit card companies are no longer able to manage risk via re-pricing (i.e. raising rates), they have come to depend on credit limit cuts as a primary risk management tools.

Credit limit cuts impact consumers in a number of ways. The obvious way is by reducing credit. We hear from a lot of consumers who learn about these cuts when, believing they have hundreds, if not thousands of dollars in available credit, their cards are rejected when they try to make everyday purchases. This has obviously created a lot of problems, particularly for the many visitors who learn of credit limit cuts when traveling and find themselves strapped to pay for everything from meals to museum tickets.

However, a lot of people who are hit by credit limit cuts write to us because they are concerned about the impact the reduction will have on their credit score. This varies from person to person, but in some cases, it can be severe. A few people have written in to tell us that a credit limit cut impacted their credit score enough to disqualify them for mortgage refinancing. These people applied believing they had scores in the mid 700′s and found out during the application process that their scores had dropped significantly, thereby preventing them from getting good enough rates to justify refinancing.

Unfortunately, credit limit cuts will not be going away anytime soon. The volume of reports we have heard from consumers has dropped significantly over the past six months, but we still get ten to twenty emails on this subject a month.

As in the past, we advise consumers who were hit with credit limit cuts to contact their credit card companies and politely discuss the matter with a supervisor. This approach has had mixed results. Some report partial reinstatements, while others are simply given the company line.

Moving forward, we anticipate to hear from consumers who are suddenly hit with annual fees. Fortunately, we think this issue won’t occur in the very near future. Credit card companies have never been popular with consumers and, after what they did in 2009, we think they’ll wait a little while before embarking on another widespread campaign that stirs up consumer anger.

You know the drill. You book your car rental online, arrive at the pickup desk and the customer service rep starts pitching you rental insurance that is often ten to twenty percent of your total bill. Depending on the rep, these pitches can evoke a good deal of fear. However, if you’re paying with a MasterCard, you really don’t need to fork over the extra cash, as you are covered by MasterRental insurance.

MasterRental insurance is available to all cardholders who pay for their rental with a MasterCard as long as the rental lasts 15 days or less. To get this coverage, you must decline the collision/damage insurance offered by the rental agency. You also have to rent a card that is valued at $50,000 or less, so if you’re renting a Porsche, buy the best insurance available.

What MasterRental Covers

MasterRental essentially covers the same damages that standard rental agency insurance contacts do. This includes the following:

1. Physical damages covering everything from small scratches to a completed totaled car.
2. Theft or vandalism.
3. “Reasonable” loss of use charges. These are charges a rental agency can levy against you while the car is out of service.
4. Towing charges incurred if your vehicle is damaged and requires towing.

MasterRental Limitations

MasterRental insurance is a secondary form of insurance. This means that your primary auto insurance is billed first and you must pay whatever deductible applies. Damage beyond that is covered by MasterRental Insurance. Additionally, three are a number of other exclusions and limitations. Some of the more important things that are not covered include:

1. Theft of personal items in the vehicle.
2. Any damage or loss resulting from reckless and alcohol or drug impairment.
3. Damages caused by any other illegal activity.
4. Damages created by the use of the vehicle caused by off road driving.

Filing a Claim

If you decide to opt out of rental agency insurance and use MasterRental insurance, be sure to keep the following phone number on you during your trip: 1-800-MC-ASSIST. You must contact them to report your claim within thirty days of the incident. Once you initiate the process, you will be required to submit detailed information on the event within one hundred and eighty days.

For additional information, please see http://www.mastercard.com/tt/personal/en/findacard/credit_cards/gold/gold_mc_master_rental.html or contact MasterCard at 1-800-307-7039.

Credit cards generally offer a higher level of purchase protection than paying with cash, particularly when you use an American Express card.  Purchase protection gives you confidence when shopping, since you know your purchases are protected against accidental damage, theft, or vandalism.  It also provides protection in the event you order an item that never arrives.

Who is Eligible for Purchase Protection Coverage

All American Express cardholders with a permanent residence in the United States, District of Columbia, Puerto Rico or U.S. Virgin Islands automatically receive purchase protection for up to 90 days from the date of purchase on all eligible items they buy with their American Express card.  You do not need to enroll or apply for purchase protection coverage, it is provided automatically to American Express cardholders.

Purchase Protection Coverage Amount

When you buy an item with your American Express Card, you’re insured for up to $1,000 per occurrence and up to $50,000 per card account per year.  Spill a glass of wine on your new Ipad? Its covered. Spill a bottle of wine on your MacBook? You’ll be almost covered.

Coverage Area

While cardholders must be permanent US residents to receive purchase protection coverage on American Express credit card purchases, you can make purchases anywhere in the world with the card and receive coverage.

Cost of Purchase Protection

American Express does not charge extra for purchase protection insurance.  It is a cardholder benefit included with all accounts.

Purchase Protection Claims

If an item purchased with an American Express card has been stolen or damaged, report it to the credit card company immediately and file a purchase protection claim.  You will be required to prove the theft, vandalism or damage, so be sure to keep your American Express receipts, store receipts and damaged items for proof as you may be asked to mail damaged items and/or police reports to American Express.  Claims may be filed by calling 1-800-322-1277. For more information, please visit www.americanexpress.com.

If you are no longer able to meet your credit card obligations and can no longer use 0% APR credit cards to transfer high rate balances, you may need to negotiate with your creditors to work out your credit card debt. There are many agencies and credit counselors who help people negotiate with their creditors.  Before you contact agencies and counselors, though, you should at least attempt to negotiate with your creditors on your own, and try a few debt reduction techniques you might be surprised at what you can accomplish on your own.

Avoid Collections

Credit cards and loans are turned over to a debt collection agency if you fail to make payments.  You’ll damage your credit score if you allow this to happen and it can make it difficult if not impossible to get new credit cards or loans in the future.  If you do get approved, you’ll end up with high interest rates.  Many times you can avoid collections simply by staying in communication with creditors, and sending as much as you can afford to send – even if it’s less than the amount due.  If you know you’ll be unable to resume making normal payments for a long time, be proactive and call your creditors to make new payment arrangements. (more…)