To combat fraud, credit card companies are much more likely to place a freeze on a credit card account if a purchase falls outside your normal use. What does this look like?

• You take a trip out of state, say driving across the border and fill up your car at a gas station. The card company has no record of you being in that area, and so it flags this as unusual behavior. Perhaps a thief has your card?
• You make a small online purchase. For example, to set up a child e-mail account, Yahoo requires the parent to charge their credit card by fifty cents. My account was frozen when I did this recently, and I had to call the fraud hotline to verify that the charge was legitimate.
• You travel to a foreign country without telling your credit card company in advance.
• You make a series of purchases for things you do not usually by. For instance, you’ve never bought woman’s lingerie. Until your credit card company intuits this new pattern (maybe you recently got engaged) this may put a freeze on your account.

A Frozen Credit Card

For debit cards, the issue is the hold that happens whenever you pay for something with a signature purchase in which the vendor does not know in advance exactly how much your purchase will be, but you can access the service or product in advance of payment. The two most common situations are renting a hotel room or gasing up your car. For gas purchases at the pump, typically a hold of $50 or as much as $75 is immediately put through, meaning you need to have that much money in your card account to avoid having the purchase being denied at the point of purchase. If you logged into your card account after making a $20 gas purchase, for example, you would see the charge as $75 perhaps for a few hours or maybe even a day or two before the actual amount was registered and the difference credited back to your account. For hotels, the “hold” would be much higher to cover a night’s room rate, say $150 or $200.

Susan Stellin writing in the New York Times spoke to a credit card company about the freeze she experienced when buying gas out of state:  

I was surprised that a cheap gas purchase in California could also freeze my account, so I called U.S. Bank to find out if travelers need to start alerting their banks about their domestic travels, which seemed like overkill to me.

It probably is, said Dave Leiker, a senior vice president with U.S. Bank. He told me that besides watching for unusual spending patterns, banks also monitor where criminals use stolen cards, places like automated payment kiosks in metropolitan areas.

“We may have been seeing a trend where the bad guys were out there using stolen credit cards at gas pumps,” he said.

Did you know that your credit score can be a deciding factor on whether your rental application is approved? Often as not, particular with larger apartment management companies, landlords will do a credit check to find out if you present a risk of not paying your rent. Since it cost landlords plenty to try and evict delinquent tenants, it’s understandable why they want to know your credit score.

Not paying your bills on time, missing car payments, mortgage payments or rent can all reduce your FICO credit score. Score too low, and your apartment rental application may be rejected. It’s ironic, because in this economy, with many people losing jobs and losing their house to foreclosure or short sales, a flood of first time renters has hit the market. Second, there are other people who have been in the same apartment for a long time but are now finding themselves forced to move to save money on rent, or because they moved to accept a different job or be closer to family (without moving in with them), and thus are filling out apartment applications, knowing that their score has been reduced.

What To Do If you Have a Low Credit Score

If you find yourself in this situation, here are some things to do:

• Request a free credit report from the three major credit bureaus: Equifax, Experian, or TransUnion. Under the fair credit reporting act, you are entitled to a free copy of your credit report once every 12 months. (See FTC government site). Note: your credit report will not reveal your FICO score, which is what lenders and landlords do see when they get your credit report.
• You can get your FICO score for a modest fee by clicking on the banner below.
• Consider that your credit score is hopefully only one factor a landlord looks at in deciding whether or not to accept your as a tenant.

1. Employment and income level verification
2. References from previous and present landlords
3. Eviction records
4. Credit Report

You may be able to increase your security deposit or pay two or even three months of rent in advance to get into the apartment you want with bad credit.

The momentum to roll out “wave and pay” or “tap and go” credit cards have stalled, as consumer acceptance did not take hold as much as the card companies predicted. Such smart cards include a radio frequency microchip that when waved or tapped against a special card reader device accept payments similar to the traditional method of swiping a credit card’s magnetic strip through a card reader. The method is meant to be quicker and easier for cardholders and merchants.

Restaurants that accept contactless card transactions include McDonald’s, Arby’s and Jack-In-the-Box, according to the Smart Card Alliance. Other merchants include CVS pharmacies, Walgreens, Sheetz gas stations, and 7-11.

These quick payments can be used even for small purchases like a cup of coffee. Cardholders are not required to provide a signature for most purchases under $25. Stores and restaurants even don’t have to provide a receipt for these under $25 purchases, unless the cardholder asks for one.  Large banks like Chase have led the charge for contactless payments with their Blink cards that were first rolled out five years ago.

This technology has not been widely adopted by prepaid cards. But that could change as the prepaid card industry adapts to the emergence of micropayments.

Interestingly, the technology now seems to be headed into the mobile phone market. The same microchip can be embedded in a mobile phone, eliminating the card altogether. (But how will the lack of the MasterCard or Visa brand mark be interpreted by consumers?)   What the mobile phone brings is the power to communicate via text messaging transactional data anywhere. This opens up a wealth of applications. But will consumers feel these transactions are adequately secure? (We’ll explain how this works in another post.)

Flickr image by ztil301

People often want to know what is the best Student MasterCard or Visa on the market today? The truth is, with the new credit card rules now in effect, it is difficult for students under 21 to obtain a credit card without a parent co-signing on the credit card agreement. Students have to have already established credit to get a credit card. A Catch-22 if there ever were one.

So, of course we here at MiCash believe that a prepaid debit card such as the MiCash Prepaid MasterCard is a great alternative for college students who want and need the flexibility that plastic payments provide, without the dangers of going into credit card debt.

Prepaid cards can curb a student’s impulse spending on such things as beer, pizzas, and MP3 downloads (wait a minute, do they even pay for those?). The reason for this is simple. You can make purchases on a prepaid card if you have enough funds in your card account to cover your spending. Unlike writing a check that could bounce if you don’t have enough funds in your account, you can’t get overdrawn. And unlike paying with a credit card, you can’t borrow money that you don’t have. You don’t have to worry about going further into debt and having to make monthly installment payments to pay back the charges. Students will most likely think twice about every purchase and will be more mindful of their personal budgets.

Flickr image by The Consumerist

Now that the New Credit Act of 2009 is largely in effect, credit card companies have to follow new rules meant to protect consumers. These rules make it harder for banks to charge up front fees for “sub prime” credit cards. Thus, banks that want to remain in the sub-prime market (which includes up to 70 million Americans) and retain the profits they are accustomed to are testing new fees and shifting to higher interest rates. One card issuer recently tested a 79.9% annual interest rate. According Blog News Service:

A national bank charging 79.9% interest on a credit card is legal — as long as the issuer fully discloses the terms as required by the federal Truth in Lending Act. Still, the high rate has been met with shock across the country because it is so much higher than prevailing APRs and penatly interest rates. The CreditCards.com Weekly Rate report national average for bad credit credit cards was 14.15 percent on Feb. 12.

Consumers with bad credit who find it hard to get a low interest rate credit card should shop carefully before accepting a card with a very high interest rate. Of course, they do have the option of using a prepaid debit card like the MiCash MasterCard. A prepaid card is not a credit card, so it doesn’t matter if you have bad credit.

David Lazurus of the LA Times reports that Citigroup Inc. is leading the way for credit card companies to impose hefty annual fees to credit card holders. Citi issues cards that did not have annual fees will now get them, under Citigroup’s new rules. Cardholders have little recourse other than closing an account to avoid the fee, unless the charge at least $2,500 a year. Just another reason why many people are better off using a prepaid card (which is not a prepaid credit card) to make purchases and track their spending.

Lazurus finds it horribly ironic that Citigroup’s CEO announced the new fees after expressing his gratitude to taxpayers for bailing out the giant bank at the peak of the financial crisis.

How Citi expressing its gratitude for that act of taxpayer generosity?

It’s slapping a $60 annual fee on many credit cards that previously had no fees and telling customers that if they don’t like it, tough patooties. They can pay off any outstanding balance and take their business elsewhere.

Man, if that’s Citi when it’s grateful, I’d hate to see the company when it’s cheesed.

We agree.

Here at MiCash, we keep giving you tips on the best ways to save your funds, fix your budget, protect yourself from having your money stolen, and basically milk everything you have earned for what it is worth. We hope we are not giving you the impression that we are promoting a miserly lifestyle. While it is true that saving up is very important and learning to spend less than what you earn everyday is a good rule of thumb to live by, we are not totally shunning the idea of indulging oneself every once in a while. Whether it’s to reward yourself for doing a job well done or as a way to relieve yourself of stress, splurging can be a good thing. We just have to make sure that actually have the money to splurge.

The Difference between Splurging and Overspending

To splurge is to indulge oneself with some luxury or pleasure, usually a costly one, because you can. If you do not have the cash to spare, you would be overspending, not indulging on your spending power. Overspending is like eating an undercooked meal. You eat it because you are too hungry to wait, and the next day, you get an upset stomach. Many times, we have experienced this: Going on a shopping spree and ending up wishing we did not buy half of the things we just bought, because having a lighter wallet feels too unsettling.

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With the holidays over, we have now fallen back to the daily grind. Some of us, due to an excess in year-end indulgences or generosity, have greeted the New Year with lighter pockets and slightly shrunken savings accounts. And you know what they say, “There is no time like the present.” If you want to replenish your savings and acquire more money to spend for this year and further beyond, better start now than risk the fate of having continually dwindling funds throughout the year.

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January 1, 2010. Today is the first day of a whole new year. It’s time to change those calendars, get used to writing dates with a new set of numbers, and start fulfilling those New Year’s resolutions.

Every year, a good number of us list down one or a few things we wish to change or improve in ourselves on the coming year. It could be anything from losing weight to being more patient with the people at work. If improving your credit scores is part of your list of New Year’s resolutions, here are some tips on how to successfully keep your financial promises this year.

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Despite the many advances in e-mail security and online privacy, we still find a lot of scam e-mails being sent into our spam folders. Fictitious deals and unbelievable six-digit cash prizes pop into our accounts without us knowing how or why we were chosen. Sometimes, some of these bogus offers somehow slip into our inboxes. With the growing popularity of mobile phones as lifestyle accessory rather than a personal communication device, even our cellphone inboxes are no longer spared from spam.

We should always be wary of spam mails and messages. There have been many people who have found themselves sucked into the trap of credit card fraud because they unwittingly believed a shady e-mail or text message. Here are a few things to remember to avoid the same fate.

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