So, who’s paying for your free rides? It’s sure as hell not Ken Lewis and Jamie Dimon. It’s Joe Sixpack and Sally Can’t-Pay-My-Rent. They are the ones who “buy now, pay later” out of necessity and they are the ones who end up paying the finance charges and late fees and penalties that fill the coffers of the card companies. It’s an interesting system – but all of that might change, depending on how some key credit card bills pan out.

There’s a lot of debate brewing about which fees are fair and ethical. Obviously, nobody likes to lose fistfuls of cash in “convenience” and “service” charges. But some of them make sense. Why shouldn’t you be penalized for spending more money than you have? But then again, could our insatiable hunger for perks and rewards be driving card issuers to resort to desperate measures in order to turn a profit even after shelling out freebies? Consider these three ways that the minority of consumers are subsidizing the benefits of the majority of cardholders. Let us know what you think is fair in the comments section below.

Interchange Fees

When you swipe your card at the register, the card issuer gets a cut of the total sale in order to cover the costs of zapping money back and forth electronically between you and the merchant (interchange fees). Makes sense, right? It’s a convenience charge. It’s just like Pizza Hut might tack on a $1.50 delivery charge (that’s not including the tip) when a customer opts to have the pizza brought right to their door.

But wait – it’s not like that. Because merchants are not allowed to add a surcharge to cover the cost of interchange fees. So, the guy that pays with cash pays the same price as the person who whips out plastic – even though the merchant gets less money for the latter transaction. In a sense, it’s almost as if the carryout customers at Pizza Hut were required, by law, to pay the same price as those enjoying the convenience of delivery.

Now, this metaphor’s a bit shaky, but if you were to pretend that the Pizza Hut delivery driver was not an employee and were instead some kind of freelance food delivery person, you can see where this law would be advantageous for him. From a customer’s viewpoint, there’s no reason not to take advantage of the convenience of delivery – but it eats into the restaurant’s profits. The real winner is the delivery driver.

But then again, there are restaurants that willingly eat the cost by offering free delivery because they believe that it will promote business by offering customer convenience. So, shouldn’t the owner of a 7-Eleven franchise feel the same way? After all, they don’t tack on a surcharge for customers who choose to use the bathroom – which, again, is a convenience that not every customer takes advantage of. Or is it unfair to mandate through credit card agreements and/or state laws that paper and plastic have the same price tag? Discuss.

Further reading:  New York Times op-ed: Rich and Poor Should Pay Same Price.

High Interest Rates

The higher your credit rating, the lower your interest rate. It makes sense – it’s all a numbers game after all. Lenders can afford to take a bigger gamble on someone with a decent track record because it’s a good bet that they’ll pay their dues. But if someone has a history of dropping the ball, it’s best to extract as much money from them as quickly as possible while they still have it (or so I imagine the rationale goes).

No doubt, so-called “bad credit” credit cards are a big moneymaker for the card issuers. Credit cards for those with bad credit often have some of the worst interest rates on the planet as well as annual fees and sometimes prepayments or collaterals (secured credit cards). If we see an end to this type of high fee, high interest rate card, we might all see annual fees on our credit cards (see: Bank of America adds annual fees) instead of just the untrustworthy borrowers.

And shouldn’t it be that way? Why go to such lengths to make the poor poorer for the benefit of those who could obviously afford an extra $29 a year? Or should these irresponsible cardholders pay the price for borrowing more than they can afford? Discuss.

Penalties and Fees

There’s sort of a seesaw effect going on when it comes to credit cards. When things are good, they are really good – the rewards start rolling in and they keep on rolling. You are rewarded with more cash back, better rewards, more perks and lower interest rates. Meanwhile, if you temporarily lose your footing with your credit card payments, it can quickly spiral out of control.

Here’s a scenario:

You get a “bad credit” credit card with crappy rates to go with your crappy credit score and because you have almost no money you max it out with high interest debt, such as cash advance and balance transfers, and start racking up finance charges. Then, because you’re maxed out, you incur “over-the-limit” fees. You can’t make the payment then you get nailed with delinquency fees and a sky-high default rate.

Or maybe you have a debit card and the bank rearranged your transactions so you ended up incurring multiple overdraft fees, which triggered your overdraft protection, that you didn’t even know you signed up for.

When these delinquent cash cows fall out of the money tree and hit every penalty on the way down, you get a free golf vacation package. But now that the downtrodden are ticked and the legislators are ticked on their behalf, there’s sure to be tighter restrictions on these nickel-and-dime tactics. (See: Fed’s new rule on overdraft fees and, of course, the CARD Act). Result? You’ll have to start paying for your own first class upgrade. In fact, we’ve already seen credit card rewards starting to get less and less attractive.

Is this a more realistic situation? Is this more fair and equitable? Or do you think you deserve extra perks just because you can pay your bill on time? Discuss.

Credit card companies have long argued that tighter restrictions will lead to an end to the handout party. When lobbying for a level playing field, it’s important to remember that the majority of us currently stand astride the high ground.

So, what’s your opinion? Should we “spread the wealth around” as well as the fees? Or do you prefer a system that uses the sins of the delinquent to finance rewards for the well behaved?

Discuss in the comments.

Cartoon by HikingArtist.com.

Related posts:

1. 5 Ways to Talk Your Way Into Getting Better Credit Card Rates
2. 8 Convenience Items We Pay More For
3. Why Should You Keep Paying Your Mortgage?

First, a little bit about TransUnion’s TrueCredit Credit Monitoring.  Basically, TrueCredit gives you:

• 24 hour notification of suspicious changes to your credit report
• Immediate and unlimited access to your credit report and credit score
• Ability to “lock” your TransUnion credit report for added security
• Slick “Trend” breakdowns for your debt, savings, credit score and more
• Daily updates your TransUnion report and credit score once a day
• $25,000 Identity Theft Insurance
• A library of educational articles, worksheets and other resources

You can cancel your TrueCredit account within 30 days and you won’t owe a dime. Of course, you get to keep your credit score and report (if you printed it off), which is well worth the $12 anyway, seeing as you don’t get a credit score from AnnualCreditReport.com.

Sign up for your free TrueCredit Credit Monitoring 30-day trial now.

The signup process is extremely simple – after punching in your ID info, it’ll tell you if you already have an account and all you’ll have to do is log in.

Be sure to check the box to activate your 30-day trial

When you are placing your order, either as a new member or a returning customer, be sure to check the box that says “Check the box to start your 30-day risk-free trial, $11.95/month thereafter.” I can’t speak from experience, but I imagine that failing to check this box would forgo the trial and just skip to paid membership (not sure why anyone would want to do this). Also, decline the optional shipping box below. It costs $5.95 and all that paper makes Mother Earth all weepy and sad.

Check to begin your free trial, uncheck to opt out of hard copy.

On the next page, you’ll enter your credit card information (for verification purposes, they say). But as you’ll notice, they do say that they won’t charge you until your trial is up.

Again, make sure to leave the optional shipping box unchecked.

Opt out of hard copy and junk emial

Next, you’ll be graced with one of several affiliate offers. This one is saying I’ll get a $15.00 rebate for my TrueCredit purchase, which is a bit misleading. You do not have to accept this offer in order to get your free trial. The TrueCredit free trial is truly free – no strings attached. So go ahead and click that teeny tiny little “No thanks” link and move on.

"No thanks" to this offer

You’ll then be shown a receipt. Print if off or PDF it and then click through to your information.

Under the “your credit” tab you’ll see where you can view your credit reports, trending, credit alerts, and most excitingly, your credit score.

As you can see, you get your TrasnUnion credit score immediately. Don’t mean to brag, but looks like my credit score is rockin’ (750 is a good credit score).

I'm great!

If you’re like me and need even more positive reinforcement just to get through the day, there’s a little Venn diagram at the bottom, too. Looks like I’m right on the cleavage between “good” and “very good.” Nice.

The sweet spot.

As you can see, you can add your Experian and Equifax scores as well – for a price. The one that I might go ahead and grab is your Experian score. Unlike Equifax and TransUnion, which use the FICO scoring method, Experian uses VantageScore. It’s a different scale and is factored a bit differently as well.

Another feature that you might be interested in trying is called “TrueCredit Lock.” This, as explained in this screen shot, prevents others from looking at your TransUnion credit report and will “help stop ID thieves from obtaining credit in your name.”

Kinda cool

The idea is that whenever you apply for a credit card or mortgage, the lender will have to pull your credit report. And they can’t do that without you popping back on this site and unlocking your TransUnion account.

The rub is, though, that it doesn’t lock out your Equifax and Experian credit reports. You’ll have to go directly through them for a service like that.

It’s also important to note that there is a difference between TrueCredit Lock and the much advertised LifeLock. LifeLock works by submitting a “fraud alert” to the three credit reporting bureaus every 90 days, which is something you can do yourself for free and is a borderline abuse of the system. TrueCredit is just TransUnion exercising its right as a private institution to withhold information about you by your request.

All in all, I’d have to say that I was actually kind of impressed with TrueCredit. The trending features seemed very interesting – there were tools for tracking your debt-to-income ratio and the progression of your credit score over time. It kind of reminded me of the latest personal finance tools from the likes of Mint and Thrive. If you were on a plan to turn around your credit rating, this would be a pretty powerful tool – especially because it lets you get a new, updated report once every 24 hours. I will note that, in spite of this, I couldn’t find mention of my recent Lending Club loan, although Lending Club does say that they disclose information about your account to all three bureaus. It’s possible that my account is too new, though. The reason I cancelled is that after reviewing my report and score and finding it better than I expected, I decided that I don’t really need to monitor my report more than once a year, but of course, YMMV.

Have you signed up for the 30-day free trial from TrueCredit? Chime in with your experience with credit monitoring in the comments section below.

Related posts:

1. A Step-By-Step Guide to Getting Your (Actually) Free Credit Report without Accidentally Signing Up For Extras: Part One – TransUnion
2. Guide to Getting Your Free Credit Report from GoFreeCredit.com
3. Getting Your (Actually) Free Credit Report from SmartCredit.com

Secured credit cards are just one way to build your credit without sticking out your neck. I’d like to devote the rest of this post to some other ways to build your credit from scratch or shambles that you may not have thought of.

Borrow from Uncle Sam

One of the best types of loans you can get is a student loan. These loans have federally protected low interest rates and deferred payments until you are out of school. And, if you enroll in certain programs after college, such as Teach for America, you can be eligible for student loan forbearance or cancellation. At the worst, it’s a cheap loan that help builds your credit. At the best, it’s free money for your education. So skip over that Bank of America booth in the student union and go fill out the FAFSA. Now.

Charge It!

Though credit cards are sometimes referred to interchangeably as “charged cards” they are not one in the same. Charge cards differ from credit cards in that you can’t carry a balance from month to month. If you buy $500 worth of hair scrunchies in March, you’ve gotta cough up $500 when the bill arrives. If you don’t, you immediately default and are charged hefty penalties. The plus side: it will build your credit over time. Oh, and since there’s no monthly balance, there’s no monthly finance charge. There is, however, an annual fee. Read more about charge cards in our earlier post.

Peer-to-Peer Lending

The banks are turning up their nose at subprime borrowers, but that doesn’t mean that no one is willing to help a brother out. If you’re having difficulty with credit card debt and want to build your credit, peer-to-peer lending can be a great way to kill two birds with one stone. Earlier, we reviewed Lending Club, a site that lets you to (potentially) get loans at interest rates in the 9.6% range for as little as $1,000. I tried it out myself and was surprised when my loan was “live” in a matter of hours and fully funded in three business days. But the best part is that Lending Club reports your borrowing activity to Experian, Equifax and TransUnion. As long as you pay off your loan in a timely fashion, your credit rating will go up.

Click here to sign up or learn more at Lending Club.

Become an Authorized User

Once upon a time, there was a thing called “piggybacking” where credit repair firms basically tacked you onto the credit card of someone with a good credit rating as an authorized user. Recognizing this as a way to game the system, FICO put the kibosh on this practice and stopped factoring in authorized users when calculating credit scores. But with FICO 08, Fair Isaac Corporation has devised a way to give credit rating benefits to “legitimate” authorized users while continuing to box out the piggybackers. This means that you can be added to a trusted friend or family member’s credit card as an authorized user and get a little bitty credit boost. But the key is you have to be a legitimate user. You have to be able to make charges and payments on a card opened by someone else. In most cases, this means actually carrying around a credit card with your name on it but the same number as the original user’s. To do this, just call up your credit card company and say you want to be added as an authorized user. I’ve done this recently and they ran a very quick credit check (asked for my SSN) and then shot me a card in no time. Because of the quick process, it’s pretty clear that the selection process is less rigorous than applying for a credit on your own.

These few examples of ways to build your credit without signing up for one of those arduous prepaid credit cards or “bad credit” credit cards with tons of fees and insultingly short leashes should help you safely and effectively work your way towards standard credit cards. We’d love to hear about any other methods that work – so let us know in the comments.

Related posts:

1. Authorized Users: Choose them wisely or not at all
2. 7 Ways to Destroy your Credit Rating
3. Get Low Rate Loans From Your Peers with Lending Club

What’s that you say? There’s no such thing as shoptophan? Then why in the world do people cram themselves into that clamor of noisy, grumpy shoppers just to get those elusive deals when you can get those savings without even getting out of bed before noon on Black Friday? Beats me. They must’ve never heard of price protection.

Black Friday Out, Price Protection In

For all the complaining we’ve been doing lately about credit card trickery, our plastic sidekicks do offer a fleet of free perks that are surprisingly generous but rarely utilized. Earlier, we talked about the joys of extended warranties, which will also be pretty handy for Black Friday shopping for electronic gizmos. But today, let’s take a look at price protection.

What is Price Protection?

Price protection is a guarantee from your credit card that you won’t pay a penny more than the lowest price available. Ever had this happen to you: You get reeled in by a flashy display at Store A and buy it right away on an impulse. The next day, you stroll past Store B and notice the same product, but for $100 cheaper! To make matters worse, Store A runs a promotion two weeks later and slashes the price by 50%. What a bunch of jerks, right? But don’t worry – if this happens, your credit card will pay the difference in price up to $250.  You never worry about jumping on the bandwagon too early ever again.

The most notorious case of this happening on a wide scale was the much grumbled about iPhone price drop in September 2007 that eventually led to a $100 store credit. A forum member at FatWallet attests that American Express did indeed pay out the difference for those who filed claims after buying a $599 iPhone and having the price plummet to $399 shortly thereafter.

How do I sign up for Price Protection?

If you have a credit card that offers price protection, the process for signing up for this feature is extremely simple. Here’s what you have to do: nothing. That’s right, you automatically are enrolled for price protection whenever you receive an eligible credit card. It sometimes goes by different names, but most Visa cards have it, some American Express have it (called Best Value Guarantee), MasterCard has it and Discover offers it on most cards. You can read about it in your terms or you can pop onto your card issuer’s website to see if your card is eligible. For instance, Visa allows you to type in your card number to check to see if you have price protection and then initiate claims online.

So, how do I take advantage of Price Protection on Black Friday?

The key to getting your money back when prices drop is to have the proper documentation. For the most part, this includes:

• A copy of the itemized sales receipt (or mail order packing slip)
• A copy of the credit or check card slip (the one with your signature). You can also provide a printoff of your monthly statement showing the charge.
• Original printed advertisement showing the lower price. This is important: it must show the exact item, the dates when the sale is in effect, the price and the name of the store.

Typically, you are required to submit your claim within 60 days of the price drop. So, hang on to those receipts until then. But anyway, for those of us who want to beat the crowds on Black Friday, here’s what you should do:

1. Sign up for as many advertising circulars, weekly specials subscriptions and newsletters as possible. You’ll get a lot of junk mail – but this is vital. This evidence could save you hundreds of dollars.
2. Do your shopping early. Shop as normal and use your credit card.
3. Save any circulars that advertise Black Friday sales.
4. Go to the store on Black Friday (or ask someone else to go) and have them pick up any circulars that they are handing out in store. Most stores print up flyers on the big day with deals that aren’t included in mailers.
5. When you find a lower price, file your claim.

Pretty simple, huh? Note, though that you can usually only receive up to $250 per item and about $1,000 in total price protection benefits. But that still ain’t too shabby.

(Oh, and of course, this also works for Cyber Monday. Happy non-shopping!)

Photo by revjim5000 – 2007 Zombiefest at the Monroevill Mall

Related posts:

1. Arbitration Follow-UP: Banks May Pay the Price
2. MasterCard, Visa (Cauldrons) to 7-Eleven (Kettle): You’re so Black
3. Quality vs. Price

If the notion of a biodegradable credit card never crossed your mind, consider the following figures highlighted by the New York Times:

• The typical non-biodegradable credit card is made from PVC
• There are approximately 1.5 billion credit cards in the U.S., each one expiring every three years
• A stack of all the credit cards on earth would reach 70 miles into space

PVC, as you can imagine, doesn’t biodegrade when buried (otherwise our plumbing systems would be a joke). And when/if PVC does break down (via incineration) it releases harmful dioxin, which, according to a European Union study, contributes between 38% and 66% of all chlorine content in waste streams. This means that dioxins end up being released into the air and water and, ultimately, in our food and drink.

The Biodegradable Discover® More (SM) Card, on the other hand, is made from BIOPVC, which biodegrades safely in nine months to five years in a landfill or in soil. But enough treehugging – what matters about the Biodegradable Discover® More (SM) Card in the short term is its cashback bonuses, $0 annual fee and 0% introductory APR for balance transfers for the first 6 billing cycles. Not only that, the Biodegradable Discover® More (SM) Card comes with a stylish little logo in the corner that proves to the checkout lady at the co-op that you <3 the earth.

You can read all the fine print about the Biodegradable Discover® More (SM) Card yourself, or you can check out our synopsis below.

Biodegradable Discover® More (SM) Card Interest Rates

Like the normal, non-biodegradable Discover® More (SM) Card, the Biodegradable Discover® More (SM) Card gives you 0% interest on purchases for the first six monthes. After that, the standard APR is a variable between 11.99% and 18.99%, depending on your credit score.

Balance transfers are also 0% for the first 6 billing periods. If you plan on transferring a balance, it’s important to do  so when you first sign up in order to lock in the 3% balance transfer fee. After that, balance transfers cost up to 5%. In both cases, there is a $10 minimum and no maximum balance transfer fee.

Of course, if you are late or delinquent on a payment, all these introductory APRs disappear immediately, regardless of how far into the introductory period you are. You’ll then be charged the default interest rate.

Cash Back with Biodegradable Discover® More (SM) Card

The Biodegradable Discover® More (SM) Card cashback perks work like most cards do these days: 5% on rotating categories and 1% on all other purchases.

The rotating categories are picked for you by Discover and include certain predetermined “popular categories.” These rotate once a quarter and you can see what’s coming up when you log in online. So, for example, for July through September, the categories could be hotels and gas and the next quarter it could switch to restaurants and grocery stores. In order to get the most out of rotating categories, it’s important to keep tabs on what you’ll earn 5% cashback on and time your purchases accordingly.

You can also get up to 20% cashback rewards from selected retailers when you shop through Discover’s online portal. To do so, all you have to do is browse retailers through Shop Discover. Click here for a list of Biodegradable Discover® More (SM) Card cashback bonus partners.

Lastly, and perhaps least excitingly, you get 1% cashback on all other purchases after your spending exceeds $3,000.  Up until that point, you get a mere 0.25% casbhack on normal purchases.

Bottom-line Opinion for Biodegradable Discover® More (SM) Card

Our opinion of the Biodegradable Discover® More (SM) Card is the same as the Discover® More (SM) Card – probably the best cashback card you’ll find nowadays with no annual fee, but rife with the usual pitfalls (make those payments on time, or you’ll have a pretty crappy eco-friendly card on your hands). Knowing that the card won’t outlive your grandchildren once it gets taken to the dump may also help you sleep at night.

Sign up for the Biodegradable Discover® More (SM) Card now.

* See the online credit card application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However all credit card information is presented without warranty. When you click on the “Apply Now” button, you can review the credit card terms and conditions on credit card issuers website.

P.S. – As a public service, we’ve omitted all such phrases as “Go Green, Save Green!” and “Put Some More Green in Your Wallet When You Go Green!” because we assume you’re tired of hearing that kind of stuff.

Related posts:

1. Credit Card Review: Chase Freedom
2. Credit Card Review: The New Face of the Discover® More(SM) Card
3. Credit Card Review: Changes for Chase Freedom

“Would you like to purchase an extended warranty, service protection plan or product replacement plan?”

And your answer to this question should always be the same: “Heck no!”

Retailers make big bucks off of extended warranties for several reasons. Most of all, it’s fear playing into their hands.

“For only $50 extra dollars, your product will be covered for any manufacturer defects for an additional one year.”

Standing at the front of the line at checkout with thirty-two impatient holiday shoppers, it can be hard to crunch the numbers, and most of us err on the side of caution. The question comes down to “Should I forfeit $50 dollars now and potentially save $200 when the thing craps out in four years or should I save my $50 and be out $200 if it turns out to be a piece of junk?”

But the fact of the matter is that if the computer, air conditioner or other electronic gizmo you are buying is a lemon, it’s likely going to eat it long before the manufacturer’s warranty (which is included free with your purchase and covers one to three years) runs out. In truth, you’re far more likely to get tired of your gadget, drop it in a puddle or be ready for an upgrade by the time your extended warranty kicks in – and none of those are covered by the retailer’s plan. At the end of the day, most people never exercise their extended warranty, making it pure profit for the retailer.

The probability that the extended warranty will be moot by the time it matters is one compelling reason to tell the clerk to take his service plan and shove it. But a better reason is that your credit card likely already entitles you to an extended warranty – for free.

Visa, Mastercard and American Express all offer free extended warranties on credit card purchases for most accounts. It’s absolutely free and will typically extend the warranty on your laptop, plasma TV or margarita blender for an extra year for plans that are three years or less. But there’s lots of paperwork involved.

Most of these services work roughly the same – but here’s the process from start to finish for Visa’s Warranty Manager, which is offered to Chase Freedom Visa cardholders.

Step One – Buy the Product with your Visa

After ringing up your purchase, make sure you get a copy of your receipt and the credit card slip that you sign. You may have to ask for it – especially since a lot of places (Best Buy, for example) use those Magnadoodle-esque digital signature pads. Other times, the signature will conveniently show up on your receipt. It’s important that you have a document showing the item purchased and the last four digits of your account number. You can also include your monthly statement with the purchase highlighted.

Step Two – Sign up for Visa Warranty Manager Service

Go to Visa’s Warranty Manager Service page and register your card. It’ll take you offsite to do this and you’ll be asked to enter your credit card number – but don’t worry. This is just to verify that your credit card carries the service. You won’t be charged.

Follow the on-screen instructions and you’re account will be all setup.

Step Three – Register Your Product

Once you’re logged in, you’ll see a link to “Register a Product” on the left hand side. Click it.

You’ll be asked to enter the type of item purchased, manufacturer, serial number, date of purchase and price of purchase (not including tax).

After you submit that information, they’ll mail you a PDF of the form that you have to verify, print out and mail through USPS to “Enhancement Services” out in Montana (?). Along with this form you have to include your receipt, the signed credit authorization slip and a copy of the manufacturer’s warranty. You can find the manufacturer’s warranty information included in the box somewhere – usually labeled as “coverage plan” or “warranty card.” This, they say, will “expedite” the process when you file a claim.

Step Four – File a Claim

When your product fails, you have 60 days to file a claim. You can do so at the Warranty Manager Service page by clicking “file a claim.” Once you file your claim, you’ll be assigned a claim number.

Most of the required documentation will already be on file from when you registered the product. Occasionally, the claims department will ask you to provide a repair estimate. You can get this by calling a “local authorized service center” – if you’re not sure what qualifies, call 1-800-882-8057 for a referral.

Step Five – Get it Fixed or Replaced

Your claim will be approved or denied within five business days. After that, you can:

• Mail your product in to have it fixed or replaced
• Have it repaired at an authorized service center and be reimbursed
• Purchase a replacement and be reimbursed

For the latter two routes, it’s important that you meet the program requirements – you may wish to verify the stipulations on the phone before going ahead with a purchase or repair. If approved, you’ll be mailed a check to reimburse you within five to seven days. The reimbursement cannot exceed the original purchase price.

And that’s it. You’ll likely never have to use this, since most manufacturer’s warranties are sufficient for the lifetime of a purchase.  But if nothing else, the free extended warranty offered by your credit card issuer should be one additional reason why you should never buy a retailer’s extended protection plan.

Have you ever filed a claim through your credit card’s extended warranty service? Tell us about your experience in the comments.

Related posts:

1. Readydebit Prepaid Visa Card Review
2. Trick or Treat?: Bank of America Rolls out Basic Visa Just in Time for Halloween
3. MasterCard, Visa (Cauldrons) to 7-Eleven (Kettle): You’re so Black

Of course, all the historical basics are much the same– the boat still sinks and the steerage still gets locked below the deck as the water rises (women and children and the wealthy first, apparently) – but the biggest contrast is the scope of the drama. In James Cameron’s bodice ripper version, the camera homes in on a story of singular love and the tragedy is in the fleeting romance ended by unthinkable disaster. It is a story of heroic, selfish love.

But in the 1958 film, the heroes are the officers of the White Star Line, who, in spite of certain death, keep cool heads and dutifully and selflessly work diligently to save as many lives as possible.

The officers do an admirable job of keeping the panic in check. The gentleman calmly move about the ship, relating the captains orders to place the women and children in the lifeboats “as a mere formality. Meanwhile, the outwardly unshaken men wryly comment to one another, “I take it you and I might be in the same boat later?”

Even after the captain declares “every man for himself!” and widespread panic sets in, the officers continue to implore the crowd, “Don’t panic! Have some pride in yourselves! If we can get organized, we’ll survive.”

The hero in the 1958 film is the courageous, honor-bound staff of the White Star Line, not an uppity, handsome churl who wins the heart of an icy, high-bred maiden. Likewise, the villain is not a spoiled, jilted lover he’s a man who shamelessly sneaks onto a lifeboat, abandoning hundreds of women, children and his dignity on the sinking ship. This message is clear, as the camera frames his guilt-racked visage as the ship slips into the ocean in the background.

The Sinking Ship, The Grand Applause

Okay, so what does this have to do with credit cards? Nothing, really. It has more to do with the attitudes we take towards our occupations. As Hollywood reframes our historical tragedies – Pearl Harbor, Titanic – we make them interesting to modern audiences by making them very personal stories, where love and loyalties between individuals are more important than the suffering of society as a whole. It’s no stretch to compare the current state of our economy and the financial industry to a sinking ship. And who is at the helm of the consumer finance industry? Who are the White Star Line officers to the dire situation that is the credit industry?

As far as we’ve seen in America, there are none. From the outset, it has been “every man for himself!” In fact, even after the CARD Act was made law, one hundred percent of credit cards offered online by leading bank card issuers continue to include practices that will be outlawed once the Act takes effect next year.  (Pewtrusts.org) That shows that the lenders, the bankers, the credit card issuers will do anything that they can get away with to turn a buck, simply because that’s the American way of doing business. When the government clamped down on rampant unfair lending practices, the industry responded by ratcheting up interest rates an average of 20 percent while they still could, again, according to Pew Health Group.

Where is the dignity? Where is the concern for the fellow man, woman and child? How come the lifeboats are filled with the ones who steered us into this iceberg, while the steerage is left locked beneath the deck and the engine room workers are vainly attempting to bail themselves out?

Codes of Ethics

As we all know, when doctors graduate from medical school they traditionally take what is called the Hippocratic Oath. In a nutshell, it says that the doctor will be true to his practice, he will serve the sick before himself. Essentially, the individual says that he (or she) is a doctor before they are a human being with their own selfish wants, anxieties, political biases and families.

The Hippocratic Oath differs from the volumes of medical laws and legislation that protect us from medical malpractice and incompetence in that it is a code of ethics and is not regulated by the government. Depending on your ideals, those following a code of ethics answer to a higher power than the government. Like most industries, there is a heavy amount of self-regulation as far as professional ethics goes. But as we’ve seen from the recent failures in oversight by the SEC and the NASD (Hello, Madoff and Stanford)  it doesn’t always work to let criminals police themselves. But by failing to have a code of ethics, you send a tacit message to those in the industry: “Do whatever you can get away with. If the government doesn’t catch you, it’s fair game.”

Credit card and consumer finance legislation has received much coverage in the press and blogosphere. But what’s conspicuously absent from the conversation is the question of ethics. Where is the code of ethics among banks and lenders? Why didn’t somebody step in before the subprime crisis and say, “Look, this is going to hurt everyone in the long run. This isn’t right.” Who, within the industry, is denouncing the payday loans and refinancing and loan modification scams – which are baldly targeted at those who are already on the ropes, financially – being advertised on the television?

Where is the Hippocratic Oath equivalent for the credit card and consumer finance industry?

I bring this up now because, in the U.K., they’ve rolled out just that. While Americans are looking to Washington to deliver them from usurers, British banks and lenders have come together to enforce what they call The Lending Code. The Code is meant to protect consumers, “micro-enterprises” (i.e. small businesses) and charities from unfair finance practices associated with overdrafts, credit cards, charge cards and personal and small business loans. This is, however, a voluntary code of practice, and is overseen by an independent organization known as The Lending Standards Boards. Here is how they describe what they do:

The Lending Code covers good practice in relation to loans, credit cards and current account overdrafts. It does not apply to non-business borrowing secured on land or to sales finance.  The Code contains key commitments and detailed notes on how customers should be dealt with through the whole product life cycle, from marketing and account opening, maintenance and the provision of information on changes to term, conditions and interest rates. Important protection is also included to help when something goes wrong, including when someone is experiencing financial difficulties.

The code is sponsored by the British Bankers’ Association, The Building Societies Association and the U.K. Cards Association and it is, in every sense, self-regulation. How effective it is in actually serving consumers remains to be seen – but the mere acknowledgment that the industry needs to be watching out for the best interests of the consumer is a giant step beyond anything that the U.S. financial industry has done.

In the end, it boils down to this: You can legislate all you want. You can write laws and tie things up in red tape and deliver occasional regulatory slaps to the wrist. But as long as there are laws, there will be loopholes. And as long as there is money to be made, corporations and mammoth financial institutions will find ways to weave their profiteering through those loopholes. Laws are good, of course. But what the lending industry needs now is ethics. Because honor has no loophole.

Photo by vsmoothe.

Related posts:

1. Money and Ethics: Do They Mix?
2. The Lending Game: Part 1
3. Get Low Rate Loans From Your Peers with Lending Club

• Sign up is extremely quick and easy – my loan was live and open for funding in less than an hour.
• The community is very sharp – I fielded two very polite questions about my loan
• The staff at LendingClub is responsive and helpful
• Interest rates as low as 7.89% (though mine was 13.72%, probably on account of my crappy income)
• On-time payments are recorded as positive items on your credit report

Interest in learning more? You can sign up for LendingClub now or read about my experience below.

Sign up Process

LendingClub’s initial sign up is streamlined to get you up and running fast. At first, this seemed a bit fishy to me – the first form doesn’t ask for any personal information, just how much you want to borrow and your “estimate” of your credit score. Then they ask you to fill in your employment information. From this, they determine your rate and loan terms.

At first blush, this seemed rife for a “liar’s loan” situation, but LendingClub does state that they may verify employment status. Being self-employed, this didn’t really apply to me. They also will pull your credit report once you apply for the loan, but as one of LendingClub’s employees explained to me on the phone, this is a soft pull. Afterward, they do a monthly soft pull on your account, similar to the monitoring that your credit card issuer will do. Lenders (actually, they are technically “investors” at LendingClub) can see information derived from your credit report, including your debt-to-income ratio, your credit score range and your revolving debt balance, but they do not have access to your credit report.

Fees and Payments

Before you receive your money, LendingClub takes a cut via a non-refundable origination fee. Purusant to Truth in Lending requirements, all the fees and finance charges are broken down for you. In my case, I paid $32.50 in origination fees for my 13.72% APR loan. If I don’t prepay the loan, I’ll pay $219.42 total in finance charges.

My monthly payment is $32.97 and this is payable by ACH deposit. During signup, you link a banking account to LendingClub which is verified the same way PayPal does (by depositing a small amount and asking you to verify the amount deposited). You can make your payments by check, but there is a $15 charge for check processing.

Funding Your Loan

When you post your loan, you are given a little bit of space to explain your situation and what you intend to use the money for. Investors aren’t allowed to know your identity or vice versa, but they can ask you questions. I received two queries, one asking to describe my employment situation further and another asking me if I had considered paying down some of my revolving debt with my loan. The latter suggestion was pleasantly surprising – of course, he wanted to ensure that I’d have the money to pay him back in 3 years, but in a way, he was also looking out for my best interests (something you don’t often see from big banks).

Anyway, after explaining that my revolving debt is just my monthly credit card bill that I pay off every month in full, my loan was quickly funded in full. (On that note, I recommend waiting until you’ve paid down most of your revolving debt before applying for a loan at Lending Club). In the end, I got 10 different investors to fund my loan.

After my loan was funded, I received a call from LendingClub to verify my identity before they disbursed the funds to my bank account. The drill was the exact same stuff they do when verifying your identity when you sign up to get a free credit report – he just asked me about items from my credit report, including my past addresses and the balances on my credit cards. I couldn’t recall the balance on my credit cards, but after telling him information about my student loans, he was satisfied.

Summary

All in all, I would recommend LendingClub. The amount of my loan was admittedly very low and my credit score is fairly decent, but I received funding surprisingly quickly. One perk that LendingClub highlights – paying off loans successfully at LendingClub will increase your credit score. Because of that, it’s a good place for people with bad credit to get some positive items on their report.

I intend to keep the loan just to see how things go and then pay it off in full in 6 months, at which time I’ll likely post an update on my experiences of the entire process.

Sign up for LendingClub and tell us about your experience in the comments.

Related posts:

1. The Lending Game: Part 2
2. The Lending Game: Part 1
3. Nominal Interest Rate v. Effective Interest Rate

H.R.627 – Credit CARD Act of 2009

This bill (now law) has been talked about heavily in the media and the blogosphere. But have you ever taken a first hand look at what’s inside? This bill was spearheaded by Rep. Carolyn Maloney of New York (D), who is also sponsoring a bill to reform overdraft protection and a bill to expedite the CARD Act (see below). This, as you know by now, was signed into law on May 22, 2009 and seeks to stop lenders from arbitrarily hiking interest rates, charging over-the-limit fees and targeting college students, among other provisions. The rough thing, as we’ve seen, is that many of these perks for consumers don’t go into effect until February 2010, and the banks have been scrambling in the meantime to stack the deck in their favor before that time rolls around. Which leads to the next bill of note…

H.R.3639 – Expedited CARD Reform for Consumers Act of 2009

As the name implies, this bill seeks to move up the effective date of the CARD Act to December 1, 2009 and was introduced on September 24, 2009. This effort seems to be a situation of too little too late, though, as that’s only 2 months sooner than the February 2010 date and if this bill doesn’t get passed in the next two months, it’s hardly going to matter. Plus, by now, most credit card companies have already gone ahead and slashed all the rewards and switched all the interest rates to variable rates that they intend to. Still, may be interesting to keep an eye on.

S.1927 – Credit Card Rate Freeze Act of 2009

This bill was introduced by Sen. Chris Dodd from Connecticut (D) on October 26, 2009. This bill is a little bit more straightforward than the expedition bill and perhaps has a better chance of making a difference. The Baltimore Sun has an interesting writeup of the bill. Here’s a quick quote:

“No sooner had it been signed into law, credit-card companies were looking for ways to get around the protections this Congress and the American people demanded,” said Dodd, D-Conn. “This bill would end those abuses and further protect customers today.”

You may remember Chris Dodd’s letter from April urging Fed chairman Ben Bernanke to regulate banks, in which he said:

Credit card providers have been aggressively raising rates on consumers now to avoid the ramifications of this rule when it goes into effect next year.  Companies have increased interest rates across the board now, to increase interest rates before the new rules go into effect.  Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part.  This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal.

This bill basically urges the same thing.

H.R.3904 – Overdraft Protection Act of 2009

This bill was introduced on October 22, 2009 and represents Rep. Maloney’s continued efforts to protect debit card users from exorbitant overdraft fees. We talked about Maloney’s crusade against overdraft fees here at MYC back in September 2009 back when the cause rallied under H.R.1456 – Consumer Overdraft Protection Fair Practices Act. This new bill doesn’t seem much different and seeks to:

• Compel banks to allow customers to “opt in” to overdraft protection, rather than signing up for it by default
• Give debit card holders the decision to reject overdrafts at the register when they have insufficient funds
• Limit overdraft penalties to 1 per calendar month and 6 per year
• Reduce the amount levied for overdraft fees

Other Bills

There are tons of other bills relating to credit cards and the credit industry. Click here to view all credit related bills at OpenCongress.  You might want to check out H.R.3214 – Rating Accountability and Transparency Enhancement Act which seeks to reform the credit rating system and H.R.3126 – Consumer Financial Protection Agency Act of 2009, which seeks to establish a Consumer Financial Protection Agency, as the name implies.

Already following a bill or legislation? Let us know which laws matter to you in the comments section.

Related posts:

1. The Credit Cardholders Bill of Rights
2. Credit card bill on the way… (We hope!)
3. Defeat Overdraft Fees and Debit Card Trickery Using Credit Card Smarts

Highlights of Chase Freedom Card

• 10% to 20% cashback on purchases from selected merchants
• 3% cashback on rotating categories
• 1% cashback on every purchase with no caps
• $50 cash rebate after first purchase
• 0% APR for the first 6 to 12 months
• Access to Chase’s BluePrint budgeting suite
• No annual fee

$50 Cashback

First off, switching to Chase Freedom isn’t a bad idea because of the $50 you get after you make your first purchase.  You can get this $50 applied to your normal rewards or you can be cut a check that arrives in 6 to 8 weeks.

%0 Introductory APR

Like most competitive cashback credit cards, Chase Freedom comes with a 0% introductory APR. How long it lasts depends on your credit history. If everything checks out, you get 12 billing cycles of 0% APR. Otherwise, you can get as low as 6 billing cycles with the 0% APR. Also, regardless of your credit score, if you are delinquent or late on a single payment you immediately get popped over to the “default rate.”  After the introductory period, you get a 23.24% variable rate, unless your credit score is tip tops. For “elite” credit scores, you get 13.24% variable and for “premium” you get 18.24% variable.

Chase Freedom Categories Explained

With the new Chase Freedom card, it’s all about the categories. All of your purchases wind up falling into one of 15 different spending categories.  Like Discover More Card, the categories are picked (seemingly) arbitrarily each quarter and there is a posted schedule when you log in so you can plan for the changes. Currently, when you log into your Chase account, it just lists out the 15 categories, which include:

• Movie Theatres
• Gym Memberships

• Gas Stations & Convenience Stores
• Pet Stores & Veterinarian
• Phone/Cell Phone Bills
• Quick Service & Fast Food Restaurants
• Utilities (Gas, Electric, etc.)
• Drugstores
• Cable/Satellite TV & Internet Providers
• Department Stores
• Beauty Salons & Spas
• Movie Rentals
• Dry Cleaners
• Local Commuting
• Grocery Stores

Online Cashback

Where the real cashback earnings kick in is through the online shopping portal. This is somewhat standard practice for cashback cards and can be a quite lucrative way to save on common purchases (as long as you remember to check the Chase portal before making big purchases). To accrue cashback rewards from Chase’s partners, all you have to do is shop through https://www.rewardsplusshopping.com/ and browse through the retailers. There are some pretty big names here, such as Barnes and Noble, Target, HP and Hotels.com, so it’s worth a gander if you’re planning on a big purchase. According to Chase, there are merchants that offer up to 20% cashback but most hover between 6% and 12% (which ain’t bad).

BluePrint

Chase cardholders also get access to BluePrint, which is basically a suite of budgeting tools. They advertise it as a way to pay no interest on certain purchases, but really, the reason you don’t pay interest on those purchases is because you pay them off before the grace period is up. It’s more of a self awareness thing than an interest break, but it’s kind of neat nonetheless. Check out our inside look at Chase BluePrint for more information.

Also, as one MYC reader (john) pointed out:

The possible catch to the program is this. In general, charges begin accruing interest from the date of purchase (assuming you had a balance at the beginning of the billing cycle). If you pay the full blue print payment, you will avoid paying interest on the full pay items. HOWEVER, if you do not pay the full blue print balance, there is no “fee” or “penalty” (as in you’re credit won’t be harmed), but you will be charged interest from the first day of the billing cycle on those charges, instead of from the date of purchase. This results in a slightly higher interest payment if you fail to pay the full pay payment.

So, take note. Plus, it’s always better to pay off more than your minimum balance, fancy software suite or not.

Balance  Transfers

Balance transfers and cash advances come with a 3% fee with no apparent cap, so be careful. If you’re moving around $5,000, you’ll pay a $150 fee.

All in all, the Chase Freedom card remains a fairly decent cashback credit card. She ain’t quite what she used to be, but with $50 cashback after the first purchase and plenty of opportunities to get over 5% cashback, it’s certainly nothing to turn your nose up at. In fact, it’s still the card that’s in my wallet.

Apply for the Chase Freedom card now.

Related posts:

1. Credit Card Review: Chase Freedom
2. Credit Card Review: The New Face of the Discover® More(SM) Card
3. Credit Card Review: Biodegradable Discover® More (SM) Card