Current Topics

Credit unions: Best revenge for angry cardholders
What to Do in 2010: Banking, Loans, and Credit Cards
Want free checking? Check out credit unions
Move Your Money: Where Populist Fervor Meets Friendly Faces
Steps to Prevent Identity Theft, and What to Do if It Happens

Credit unions: Best revenge for angry cardholders

By Carla Fried, published on CNNMoney.com, More Money blog

Another week, another credit card policy change. This time around the news is that American Express will dock rewards points for certain co-branded cards when a cardholder doesn’t pay on time. To get the points reinstated, cardholders will first need to pay the obligatory late fee and then an additional $29 to recoup docked points. The AmEx cobranded cards hit with this new policy are Delta Air Lines, JetBlue, Hilton Hotels and Starwood Hotels, putting them all in line with the same policy that’s been in effect for AmEx's regular Green and Platinum cards for years. But the timing of the latest announcements just adds to the pile of credit card cutbacks and fee hikes that made 2009 the annus horribilis for cardholders.

Sure, 2010 looks to be marginally better once new credit card regulations kick in, but I’m still betting the bank credit card industry will find new and creative ways to extract revenue from consumer accounts. It’s their business model, after all.

But sweet revenge could be just a credit union away. A recent Pew Trust study determined that on average, credit cards issued by credit unions charge much lower fees than their bank-card brethren. For example, the median late fee on a credit union card is $20. For a bank card it’s $39. Yes, that’s right: Credit unions charge 49% less. Credit unions also offer a better interest rate deal. By law credit unions cannot charge more than 18% interest; the median bank-card penalty rate for late payments, according to Pew, is 29%.

So if you’re not exactly feeling the love from your current bank card, maybe it’s time to check out credit unions, whose nonprofit status tends to make them more customer-friendly. A good search tool is at findacreditunion.com.

If you take a look-see and decide to move your banking accounts as well, just make sure you opt for a federally-insured credit union. The National Credit Union Administration offers the same deposit insurance coverage limits as the FDIC does for banks.

One interesting quirk to be aware of if you go the credit union route, according to creditcards.com, is that the collateral for any loans you have through a credit union will also serve as collateral for your credit card. Unlike the case with bank credit cards that are chiefly uncollateralized debt, a credit union card balance is tied to any other assets you have secured through the credit union.

What to Do in 2010: Banking, Loans, and Credit Cards

By Kate Ashford, published on moneywatch.bnet.com

When it comes to your debt in 2010, you’ll want to combine a strong offense (grab a mortgage or refinance) with a powerhouse defense (beat back rising credit card rates and fees).

Mortgage rates are at historic lows — 5.07 percent for a 30-year fixed — and home buyers will be able to snag a special tax credit until July. So early 2010 will be a prime time to refinance your mortgage or apply for a new home loan. But credit card issuers will continue turning the screws on customers in 2010, raising rates and hiking or inventing fees. Because the credit card law taking effect in February will restrict lenders from punishing riskier customers, many good-citizen
cardholders will be told to pay more.

The nine best strategies for borrowing in 2010:

1. Refinance your mortgage

Low mortgage rates will make refinancing tempting as the year begins, especially if you have an adjustable-rate mortgage resetting in 2010 or 2011. Many mortgage analysts think rates are as low as they’ll ever be. So the longer you wait, the more you risk the low-interest window shutting. Just remember the advice of MoneyWatch Editor-at-Large Jill Schlesinger: Don’t refinance if you don’t expect to stay in the home long enough to recoup the closing costs. Skittish lenders will be quick to reject applicants who seem too risky, so be sure you have what it takes to get approved for a refinancing. For example, your mortgage costs shouldn’t total more than 29 percent of your income.

If you’re upside-down in your mortgage and unable to refinance to a lower rate, but you’re current on your payments, you may be eligible for the federal government’s underutilized Home Affordable Refinance Program, which expires June 10. If you got your home’s first mortgage before January 2009 and it’s owned or guaranteed by Fannie Mae or Freddie Mac and doesn’t exceed 125 percent of your home’s current value, you’re eligible.

“The refinancing program is the Rodney Dangerfield of government programs,” says Greg McBride, senior financial analyst for Bankrate.com. “It doesn’t get any attention.”

If you’re behind on your mortgage payments or experiencing financial hardship, investigate the government’s Home Affordable Modification Program. Although both programs suffered from a slow ramp-up in 2009, look for efficiency improvements in 2010.

2. Buy a house

If you’ve been sitting on the sidelines waiting for the right moment to make an offer, 2010 will be the time. Says Mark Vitner, a senior economist for Wells Fargo: “We’re not going to see dramatic increases in interest rates, but they’re likely to gradually move higher over the year.” If you’ll qualify for the $6,500 home-buyer tax credit for current owners or the $8,000 credit for first-time buyers, make an offer before winter ends. You need to be under contract by April 30 to get the tax break.

3. Keep an eye on your credit score

A good credit score is more important than ever for anyone trying to get approved for loans or credit cards in 2010 and qualify for the lowest rates. Lenders consider a credit score above 720 to be good. To learn your score, order your free credit report from annualcreditreport.com and spring for the $8 additional charge for the magic number. Or take the results from the credit report and feed the
info into the Score Estimator at MyFICO.com.

4. Check for any closed credit card accounts

When you read your credit report, make sure all your credit card accounts all still open. You may have cards buried in a drawer that were canceled without your knowing it, and a credit-card cancelation could have reduced your credit score. Even after the new credit card law takes effect in February, issuers will still be allowed to cancel your account without notifying you. Believe it or not, “that’s not considered a material change in the terms of your account,” says John Ulzheimer,
president of consumer education for Credit.com.

5. Consider a credit union

Interest rates on cards from credit unions are about 20 percent lower than at banks, according to an October 2009 study by Pew Charitable Trusts. One reason: Unlike banks, which can slap on sky-high rates, federally chartered credit unions can’t charge more than 18 percent. (State-chartered credit union rates are also capped at about that rate, but state laws vary.) You’ll have to become a credit union member to get a card; find one at FindACreditUnion.com.

6. Charge every card you have (sensibly)

In 2010, credit card companies will be looking for any excuse to lower your credit limit, raise your interest rate, or nix you as a customer. Banks are still dealing with a serious increase in uncollectible balances. Bank of America, for instance, wrote off 76 percent more in uncollectible loans in 2009 than the previous year. If you’re not charging on a card and not carrying a balance, you’re not making the company any cash. That means you’re creating a bulls-eye on your credit line. So
charge at least a little on every card most months.

7. Fight higher rates and fees

No matter how good a customer you are, don’t be surprised if you get hit with higher rates or new fees in the coming year. If that happens, call the card issuer and politely, but firmly, ask the rep to reverse the move. If you’re a longstanding customer on good terms with the company, there’s a decent chance you’ll get satisfaction, especially if you threaten to walk. Ken Lim, CEO of CreditKarma.com, a credit-score service, says card issuers these days often toughen up “on a batch
basis” without paying much attention to the particular cardholder’s history. “Or sometimes they’re simply relying on you not even noticing the change,” says Lim. “You’d be surprised what a phone call can do.”

8. Opt out of overdraft charges

Beginning in February, you’ll have to tell your credit card issuer if you want to be allowed the ability to go over your limit (and owe an overdraft fee of up to $39) when making a purchase. Starting in July, you’ll have to do the same thing with your debit card — that is, you must “opt in” if you want overdraft protection on your debit card purchases and ATM withdrawals. If you do nothing, you’ll automatically opt out of both.

Banks will lobby hard to get you to opt in and add this “protection,” so they can rack up overdraft fees. Don’t fall for the bait. “I can’t think of a reason why you’d want to opt in,” says McBride. True, you might get embarrassed if your card is declined in public. But to us, that seems better than having to cough up $39.

9. Add your college-age child to your card account

Starting in February, a child under 21 won’t be able to get a credit card without a parent or legal guardian as co-signer unless he has proof of enough income to afford the monthly payments. This will protect some kids from predatory credit card practices and getting hooked on credit before they’re old enough to drink. And that’s a good thing. But it also means that some college students
will have a harder time developing their own credit history.

That’s where you come in. If you have a responsible teen and want to help her build credit, add her as an authorized user to a card of yours. But don’t cosign for plastic with your child. “There are too many downsides to cosigning,” says Ulzheimer. “Cosigning means equal liability for both parties.”

Copyright 2010 CBS Interactive Inc.

Want free checking? Check out credit unions

By Sheyna Steiner, published on Bankrate.com

Rumors of the death of free checking may be exaggerated; the consumer-friendly product is alive and well at the nation's credit unions.

Bankrate surveyed the 50 largest credit unions across the country and found free checking accounts at 39 of them.

Plus the majority of institutions surveyed -- 41 of the 50 credit unions -- have no balance requirement or monthly fee on their checking accounts.

Three credit unions do have balance requirements to avoid a monthly service fee, the highest of which is $750 at Lockheed FCU in Burbank, Calif.

Of the nine credit unions that charge monthly service fees, the highest is $10 per month and the lowest is $1.

Credit unions offer the same services as most large banks, but with a community-oriented slant and members-only policy. For instance, all of the credit unions surveyed offer online banking.

"Credit unions are not-for-profit organizations that are owned by and in operation for the benefit of their members," says Greg McBride, senior financial analyst at Bankrate.com.

In keeping with their community-oriented mandate, credit unions offer other benefits to their members, including generous amounts of transactions, lower fees (in some cases) and networks of ATMs.

The fine print: fees, minimums and ATMs

Monthly transactions Almost all -- 47 out of 50 -- of the credit unions allow unlimited monthly transactions. Three credit unions do put some restrictions on their members. At the State Employees' Credit Union in Raleigh, N.C., members can write up to 50 checks per month but are charged $0.20 per check thereafter.

"The average consumer does 25 to 30 transactions per month on an account, says Hank Israel, director at Novantas, a consulting firm to the financial industry.

"Much in excess of that and they find that it is a merchant trying to use a consumer account so they want to make sure that the accounts are in the right place from a cost and service perspective," he says.

Another institution, American Airlines FCU in Fort Worth, Texas, allows four free transactions -- deposits or withdrawals -- by phone or in person, and charges $2 for subsequent transactions.

Only one of the credit unions surveyed charged for debit card transactions. The State Employees' Credit Union of Maryland, in Linthicum, assesses a 25-cent fee for each PIN-based purchase with a check card.

PIN-based purchases cost banks money, says Israel.

"Some of these are a little arbitrary. You can see the different product managers trying to encourage profit-enhancing behaviors and discourage behaviors that cost them money," says Israel.

Minimums to open Just over half, 27, of the credit unions Bankrate questioned impose a minimum opening balance on their free checking accounts.

For the interest-bearing checking accounts, the Bankrate survey captured the minimum required to earn interest. Nineteen of the 50 credit unions have interest-bearing accounts, and only three require deposits of more than $100 to earn interest.

The highest minimum-opening balances were found at the Teachers FCU -- Elaine in Farmingville, N.Y., and Addison Avenue FCU in Palo Alto, Calif. Both credit unions require a minimum of $2,500 to score yields of 0.15 percent and 0.05 percent respectively. Both institutions do offer noninterest bearing options with, most likely, lower opening requirements.

The average yield on the 19 interest-bearing accounts was 0.3 percent, with the highest, 1.01 percent, at Police and Fire FCU in Philadelphia.

The average minimum opening balance requirement on noninterest bearing accounts is $16. Though many credit unions in the survey ask for only $1 as an opening amount, it can go up to $100.

Minimum balance

"The huge cost for institutions is opening up a dead account, so if customers aren't able to fund it with at least the minimums of balances, the likelihood that the account is actually going to activate and be used is slim to none," says Israel.

Fred Becker, president of the National Association of Federal Credit Unions, says that credit unions often have lower minimums to open accounts due to their community-oriented purpose.

"The idea at credit unions is to get as many as people as possible into the banking system," he says.

NSF

Credit unions may be more community-oriented and generally slightly less expensive than the big banks but they still charge for bounced checks and overdrafts. On average, the fee for insufficient funds is roughly $5 less at credit unions than banks or thrifts.

The average fee for overdrawing your account at a credit union is $24.88 while a bank or thrift would charge $29.58 according to the 2009 Bankrate Checking Study.

At the most overdraft-friendly credit union in the survey, the State Employee's Credit Union in Raleigh, N.C., bouncing a check costs $12 per incident and the first two nonsufficient funds fees are waived.

The most costly overdraft fee in the survey turned up at VyStar CU in Jacksonville, Fla., where members are charged $32 per incident.

ATMs

Convenient access to fee-free withdrawals nationwide is a big selling point with larger banks. But many credit unions are in a network of other credit unions to allow members wider access to their money.

Additionally, 18 of the 50 credit unions surveyed do not charge their members for ATM withdrawals outside of the network.

Some of those credit unions allow unlimited withdrawals from foreign ATMs and others only charge a fee after a certain number of withdrawals per month.
The typical fee for using another institution's ATM ranges between $0.65 and $2.50, with an average fee around $1.28.

Three of the credit unions surveyed allow nonmembers to use their ATMs fee-free. The average ATM fee for nonmembers amongst the fee-charging institutions ranges from $0.75 to $3.

"There are some really wonderful credit unions that are fairly aggressive in offering other services and some of that are no different than banks in offering overdraft and other solutions so its really buyer beware there. Just going to a credit union doesn't guarantee that you get the lowest price," says Israel.

Because credit unions restrict their services to members, it can seem prohibitive to get an account, however "a lot of people are eligible for membership and they may not even realize it," McBride says.

With the popular perception that free checking at banks is on the way to extinction, consumers may want to check out the checking services at their local credit union.

Move Your Money: Where Populist Fervor Meets Friendly Faces

By Julian Hattem, published on www.HuffingtonPost.com

Huge bonuses to bank executives, casino-style financial practices and millions of unreturned stimulus dollars have made many consumers angry at the nation's biggest banks and looking for a way out.

Daniel Mica knows just where they should go. The president and CEO of the Credit Union National Association said in an interview with the Huffington Post that he hopes "the cold shock-wave" of populist fervor sweeps the financial system and leads customers to credit unions.

And consumers will find that switching won't just be an effective protest, it will also be a change for the better, he says. "At a credit union they treat [you] like a person, not a number," Mica said, because smaller financial institutions don't have the "dismissive arrogance" of the largest banks.

Indeed, more and more people are joining credit unions every day. Mica said that over the last year credit unions have had a two percent growth rate -- higher than the population rate, and the quickest pace that credit unions have seen in a decade -- and searches to find local credit unions have tripled in recent weeks.

The move reflects a growing disillusionment with the nation's largest banks, a sentiment that has been captured by the Move Your Money campaign, which urges people to close their accounts with the six big banks that engaged in sophisticated financial maneuvers and move to a safe and solvent community bank or credit union. It urges people fed up with the big banking system to take politics into their own hands.

It's "the beginnings of people voting with their feet and their wallets and taking money out of banks," Mica said. "And we hear stories [like that] every single day."

He can appreciate the movement's grassroots growth. "It's not just Democrat-Republican, I think that's clear," he added. "I travel the country on behalf of credit unions. We have 93 million members. I've been to every state in the United States multiple times and I listen to Main Street every single day. People are very upset. We talk finance, we talk pocketbook issues, and they're very concerned." He's praised credit unions on YouTube as well.

As to those stuck with the big banks because of their mortgages? "What they need to do is pick up the phone or get on a website and go to their local credit union," he said, "and ask if someone will come down and talk to them about moving their mortgage and what they can and can't do."

The movement is not about destroying the big banks in general, he said; more like putting them in their place: "This country needs a strong financial system including banks and credit unions, but when banks become impervious to public concerns, to the crying needs of America's economy and go off on their own, they need to have their hands slapped and they need to be redirected. We didn't have this situation for a long time in this country, but they became so powerful with so much money that they were able to get their way in Congress and with the regulators for the past dozen years, that they've gotten out of control. And this is all about getting them back in the box and serving America and consumers, not just themselves."

Unlike banks, credit unions are not-for-profit enterprises owned by their members. They pride themselves on lower loan rates and better savings rates, but membership is not open to everyone (though the vast majority of people probably can find a credit union for them, qualifications vary and can be based on employment, residence, religion or some other category -- people should check with their local credit to see if they are eligible). Like banks, they are insured by the federal government (the National Credit Union Share Insurance Fund). People can use the CUNA's website to find nearby institutions.

"We'll always find a complaint here and there about a credit union, but 99.9 out of 100 people are happy to put a bumper sticker on their car that says 'I love my credit union,'" he laughed. "That is not the case about banks."

Steps to Prevent Identity Theft, and What to Do if It Happens

By Elisabeth Goodridge, published on www.nytimes.com

Identity theft is not just an unauthorized charge on a credit card anymore.
Identity theft, according to the Federal Trade Commission, “occurs when someone uses your personally identifying information, like your name, Social Security number or credit card number, without your permission, to commit fraud or other crimes.”

How your information is stolen, and how it is used, varies greatly. With stolen Social Security numbers, thieves are filing false medical claims, applying for mortgages and opening lines of credit for fictitious businesses. By adding fake fronts onto A.T.M.’s or gas pumps, they are collecting credit card numbers and PINs.

But while the trade commission estimates that nine million Americans are victims of some sort of identity theft each year, these extreme cases of identity fraud remain rare, luckily.

You may find that you will need only to close a compromised account or freeze your credit if errors appear. But recovering from the effects of an extreme case of identity theft can be incredibly messy and time-consuming. You could be denied a mortgage, for example, or refused new lines of credit. It can take months or even years to repair your credit history, and this type of crime is hard to prosecute.

While financial institutions, health care companies and other organizations have taken steps to improve security measures in recent years, do not rely on them to protect you. Taking some common-sense steps now can help prevent major headaches later.

PREVENTION
Your first step should be to review monthly statements from your checking and other financial accounts. The earlier you catch an error, the easier it is to resolve it. Yes, balancing your checkbook may seem a monotonous chore, but understanding where your money goes will help you spot any irregular withdrawals or charges. Reviewing your credit card bill each month is critical as well, especially if you charge a lot of your daily purchases. If you have not already, this may be a great time to sign up for online accounts. It’s easier and faster to review accounts online, on a computer you trust.

Next, order and review your credit reports. The three credit agencies, TransUnion, Equifax and Experian, are each required by law to provide you one free credit report a year.

AnnualCreditReport.com has links to all three, and it is the only place to get them free. (Other sites may try to charge you or get you to sign up for monthly services of some sort.) Stagger your requests, and you can monitor your credit history every four months. While you are at it, make sure your name, address and other information are correct. If you find old or inaccurate information, have it removed.

While companies like your health care provider are no longer printing Social Security numbers on member identification cards, a lot of personal information is still out there. Be sure to shred old bank statements, applications for new credit cards and other documents that have personal information.
Secure your personal information online and offline. Do not carry your Social Security card in your wallet. Keep it at home with your other important documents. Be careful about online passwords as well and change them often. And be vigilant about sharing personal information when opening new accounts online. If online advertisements or offers seem too good to be true, they probably are.

ACTION
The steps you will need to take to recover from identity theft depend on the type of fraud you believe has occurred. If you are going through your monthly statements and see an error on an existing credit card, monthly bill or financial account, first call the company to report it.

By federal law, credit card companies have strong consumer protections in place, and they have large departments to investigate fraud. For that reason, you may want to consider using a credit card to pay for online and major purchases. That will give you more protection than if you use a debit card, because the money comes directly out of your bank account when you use a debit card. Making purchases with a credit card provides a layer of protection.

Once you have reported the error and determined there is reason to believe a fraud has occurred, the Federal Trade Commission recommends that you place an initial fraud alert with one of the three major credit reporting agencies. (They are required by law to report the fraud alert to the other two agencies.) The alert, which remains on your credit report for 90 days, automatically entitles you to a free copy of your report. Review this for any accounts you did not open or activity you did not conduct, and confirm that the report has your correct name, address and Social Security number.

Once you have determined that a fraud has occurred, you should also file both a complaint form with the trade commission and an identity theft report with your local police department. And you should file these complaints if you see any new accounts on your credit reports that you did not personally open.

After you have filed the reports, make multiple copies of them and save the originals in a safe place. While identity theft is hard to prosecute, these documents will help you investigate your case with the credit agencies and the financial institutions you do business with. Filing with the trade commission may also provide you with certain protections. In addition, law enforcement may use your information in their identity theft investigations.

Depending on the severity of your situation, you may want to consider the second type of fraud alert. The initial alert, which is recommended if, say, you lose your wallet, requires potential creditors to take certain steps to verify your identity before opening new accounts in your name. The extended fraud alert, which lasts seven years, requires creditors to contact you personally before new accounts are opened.

But there is one thing to remember: Fraud alerts help only when a thief is trying to open a new line of credit. They may not prevent a thief from using existing accounts or ordering new cards. Nor can they prevent the opening of a bank account or another account that does not require a credit check.

While they are different in each state, credit freezes are also available. When you place a freeze on your credit report, businesses and creditors cannot check your credit history unless you temporarily lift the freeze. The cost of freezing your credit, the cost of thawing it temporarily and the rules on who can freeze their credit depend on the state.

Regardless of the severity of the problem, be careful when you contact the companies of the compromised accounts or the accounts you think have been tampered with. While the level of risk varies because of credit limit, credit history and other factors, your credit score may be negatively affected if you choose to cancel credit card accounts. Inform the creditor that you have reason to suspect you are victim of fraud, and ask it for the company’s policy in situations like these. One option is to ask that the account be assigned a new number. Another option, when contacting credit agencies, is to place a 100-word consumer statement on your credit report explaining the fraud. This statement will stay on your credit report as long as you want.

And again, be sure to get documentation on all of your conversations and interactions with these lenders.

EXTRA HELP
In recent years, the three main credit agencies — and other companies as well — began offering credit monitoring and identity fraud services for monthly or annual subscriptions. Some companies even offer identity theft insurance. Prices and services vary, but over all, the agencies promise to monitor your credit report and send alerts if any questionable activity is found.

Whether it is a wise idea to sign up for such services depends on your wallet and your need for peace of mind. If you have already been a victim of identity theft and have had to spend a significant amount of time and resources to clean up your record, the services may reassure you. But if you have not had any problems and you are already vigilant about reviewing your accounts, it may not be worth the money.