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SKIMMING in credit cards

noreply@blogger.com (Renu Yadav) — Tue, 25 Dec 2007 18:45:00 +0000

ALL plastic cards viz. ATM, debit and credit cards have on their reverse a prominent black stripe, about one cm. wide, running across the length of the card. This is the magnetic stripe, which stores the essential information of the card holder. Skimming is unauthorised copying of information from the magnetic stripe of a credit/debit/ATM card. A device called skimmer is employed to copy the information contained in the magnetic stripe. The copied information is then used by the fraudsters to clone the card(s) or is traded for similar cloning. The fraudsters can then create a card(s) with the same characteristics and freely use it / them for all purposes that you can do – till identified or caught.

Where can it happen?

Generally at petrol stations, restaurants, hotels and such outlets where the swipe terminal is not in your sight.

Warning signs:

• A shop assistant takes your card out of your sight in order to process your transaction.

• You are asked to swipe your card through more than one machine.

• You notice something suspicious about the card slot on an ATM (e.g. an attached device)

• You notice any unusual or unauthorized transaction in your account.

How to protect yourself from Skimming:

• If you are using an ATM, take the time to check that there is no gadget attached to the machine.

• If the shop assistant appears to be taking your card out of the sight, and if you suspect something, offer to go with that person or change your mode of payment to cash, if possible.

• If the shop assistant wants to swipe your card on the second machine, you should ask for your card back immediately.

• If you notice such incidents, immediately contact your card-issuing authority.

• Many card issuers provide the transaction alert service via SMS on your mobile phone. Do register for it. You will be alerted just in case your card is misused after skimming despite all precautions.

Be cautious about store credit cards during the holidays

noreply@blogger.com (Renu Yadav) — Tue, 25 Dec 2007 18:16:00 +0000

When you arrive at a retail store register with an armful of items, the clerk will probably ask if you'd like to save 10 percent and receive perks by simply signing up for their store credit card. This may sound too good to be true ... and often it is.

Industry estimates show that the market for proprietary or private-label credit cards surpasses $100 billion annually, so many consumers are wooed by the initial discount. But these forms of plastic, offered by many major retailers to customers through their own financing arms or through third-party issuers, tend to carry high interest rates. While the average bank credit card charges a rate in the neighborhood of 13 percent or 14 percent, many store credit cards' interest rates exceed 20 percent. If you revolve a balance on your credit card, that initial 10 percent savings on a purchase will be eaten up very quickly by the hefty interest you will end up paying.

Michael McAuliffe, president of Family Credit Counseling Service in Rockford, Ill., says, "Every time you go into a store, they're going to push their card. I discourage shoppers from accumulating retail credit cards because they tend to carry very high interest rates, and it's an easy way to damage your credit score." In the formulas credit bureaus use to calculate your credit score, store credit cards differ from bank issued credit cards. With the average U.S. consumer carrying four or five credit cards, additional store credit cards can make you look like a bigger risk to credit agencies, resulting in a lower credit score. A lower credit score, in turn, can raise the interest rates you pay for other borrowing.

Although having a diverse mix of credit within your credit history can potentially aid your score, too many lines of open credit can signal danger to a lender, which may worry about the consumer's potential to incur additional debt.

Meanwhile, store credit cards are often forgotten by consumers who only complete applications in exchange for an initial burst of savings. Many of the 500 million or so store credit cards in circulation are taken out during the holidays. While the store credit card may not be used, the open account will still appear as a line of revolving credit on the consumer's credit report.

Judd Rousseau, COO and director of fraud operations for Identity Theft 911 in Scottsdale, Ariz., says that signing up for a store credit card during the holidays can also put you at risk for identity theft.

"During the holidays, some stores will have tables set up trying to get people to sign up for store cards. They are gathering tons of peoples' personal information in an unsecure area," he says. "Often they have temporary or seasonal people doing that work, and they haven't always had a thorough background check. We're seeing more and more organized crime and street gangs getting into identity theft in that way; they'll get their cleaner-cut girlfriend or younger sibling to get those kinds of jobs and steal the information."

Consumers who sign up for store credit cards may also find that their personal information is shared with other companies or that they are placed on marketing mailing lists. Stores such as retailing giant Wal-Mart routinely provide data to third parties looking to offer you special promotions or services. While buyers' personal information and buying habits represent another source of revenue to companies, it may be an annoyance to consumers who are already flooded with offers they don't need or want.

Managing and getting rid of debt

noreply@blogger.com (Renu Yadav) — Tue, 25 Dec 2007 18:16:00 +0000

Credit card debt has a way of spiraling out of control. The worst thing you can do is ignore it and hope it goes away. When you make poor financial decisions, these details begin to appear on your credit report, which can prevent you from getting a home, insurance or even a job.

4 steps to analyze your situation
People in debt often often hide their heads in the sand, or are simply unaware of how to deal with the problem. So the first step is an honest self-assessment. Below are four ways to get a picture of where you are.

1. Know how much you owe. Gather all of your credit card and loan statements and add up the outstanding amounts you owe -- you do not want this to be a last-minute surprise. Be sure to note what the annual percentage rate (APR) is for each account and whether the payment is fixed (a car loan) or variable (credit cards).

2. Know how much you have. Grab your payment stubs and documentation from any other regular income and determine how much income you have available per month.

3. Know your total monthly household expense. Not everything you earn can go toward paying debt. Write down all your monthly household bills and add up how much you spend on them each month. Be sure to include a cushion for emergencies or buying clothes.

4. Know how much can you afford to pay? Apply this formula to determine how much you can pay toward your debt: Household income - Household expenses = Balance. The balance is how much you should have left each month.

Linda Leitz, author and founder and co-owner of Pinnacle Financial Concepts Inc. in Colorado Springs, Colo., says, "Get a grip on spending. If you're not spending less than you make, you'll never get out of debt."

Who should you pay first?
Credit card debt and small loans should probably be paid off before low-rate student loans and home loans. "Pay the highest amount you can on the higher-rate cards," Leitz says. "Get them and their big interest expense off your plate first."

Some factors to consider when prioritizing:

•    Which debts have the highest interest rates?
•    Which accounts are above 50 percent of their credit limit?
•    Which debts are close to being paid off?
•    Which debts have the highest annual fees?

Negotiate and consolidate
Call your creditors to negotiate lower interest rates or transfer balances to less expensive credit cards. Accounts that are greater than 50 percent of the available line of credit can harm your credit score, so pay off or move some of the balance on such cards to a different card.

Don't keep adding debt
Now that you have a plan of action to reduce your debt, don't blow it by continuing to pile more on. Save only one or two credit cards with low balances so that you can have access to credit if you truly need it. Harrine Freeman, CEO of H.E. Freeman Enterprises and a speaker, columnist and author, says if you are having trouble with credit cards, "Do not open any new accounts. Do not transfer balances unless you can pay the full balance before the promotional period expires. And do not get a cash advance or payday loans to pay down debt -- cash advances are very costly, high-risk items."

Dealing with debt
Getting out of debt and improving your credit report can be done. The following suggestions and resources are aimed toward helping you get on the right path.
•    Your public library should have plenty of books about budgeting and money management techniques. Take advantage!
•    "If you are trying to get out of debt, don't take your cards with you when shopping," Leitz says. Remove the temptation and use cash or debit cards until you are debt-free.
•    Find a way to increase income, whether by selling unwanted items or taking on more work.
•    Contact your creditors immediately if you cannot pay your bills. They may work out a modified payment plan that reduces your payments to a more manageable level. Never wait for a debt collector to contact you.
•    Consider contacting an accredited credit counseling service. A good credit counselor will take you through the financial analysis steps described above, and then come up with a repayment plan. A counseling firm also may negotiate a formal debt repayment plan on your behalf with creditors, which may be willing to accept reduced payments. Be aware that entering into such a plan guarantees you will lower your credit rating because you will not be paying as agreed. Check the counselor's credentials carefully before entering into such an agreement, and recognize that a repayment plan does not erase credit history; accurate information remains on your credit report for up to seven years.
•    If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you and may even reduce or suspend your payments for a short time. When you resume regular payments, you may have to pay an additional amount toward the past-due total. If you and your lender cannot work out a plan, contact a housing counseling agency.
•    Personal bankruptcy should be a last resort because the information stays on your credit report for 10 years.

This has been general advice that works for most people. Before starting a credit card debt-reduction plan, consult with a financial adviser or accountant to discuss your specific financial needs.