Tuesday, August 12
Posted 4 p.m.

Close account, cut up cards, return to issuer?

My colleague Leslie McFadden and I read a lot of credit card agreements and terms and conditions from different credit card issuers. This morning Leslie told me about an agreement she read from World Financial Network National Bank in Columbus, Ohio, which issues cards for numerous retailers, including Victoria's Secret, Ann Taylor and Eddie Bauer. I'm going to quote from the agreement for the Victoria's Secret "Angel" card.

The agreement contains this guideline:

8. HOW TO CANCEL YOUR ACCOUNT. You may cancel your Account at any time. Cut each Card in half and send us the pieces with a letter telling us you want to cancel your Account. This includes each Card you gave to others. You still must pay the full amount you owe us.

Neither Leslie nor I has ever seen this in an agreement before. I wonder why they need the pieces? To make it more trouble to close an account? (By the way, message boards are clogged with complaints about this company's customer service.)

Another interesting item in the agreement:

28. CUSTOMER CHANGES. You must tell us at once if you change your name, address or employment.

I can see name and address change, but employment? You get laid off, you tell them you're out of a job and they cancel your card. Credit score dinged.

Now you're cash-strapped and you miss a payment. Here's what item 15 in the agreement says:

15. IMMEDIATE PAYMENT. We may tell you to pay the full amount you owe at once if you do not pay at least the Minimum Payment each time you receive a Statement. We will tell you in advance and/or give you an opportunity to cure your default only if applicable law requires us to do so.

At least they're honest about it: We'll only cut you some slack if the law says we have to.

Oh, and the interest rate on the Victoria's Secret card is at least 22.8 percent and could go as high as 24.99 percent.

In these tight-credit times, you've got to read the agreements and know how much a mistake with a bad credit card company can hurt you. The devil is in the details.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Thursday, July 31
Posted 2 p.m.

Card usage down, credit lines being cut

Javelin Strategy & Research, a firm that studies the financial industry, has just released a report on the state of credit card usage currently. Analysts found that people are using their cards less and they are having trouble paying the balances.

In addition, the study, conducted in May, found that card issuers are cutting back also: More than 60 percent are cutting credit limits for existing cardholders, and more than 70 percent of issuers are curtailing their efforts to get new customers. (Your mailbox just got that much less cluttered.)

But the consumer behavior is really striking: 37 percent of respondents to the survey said their use of credit cards has declined, and 54 percent said they had stopped their purchase of "discretionary goods (luxury items)." Many -- 45 percent -- also indicated that they had stopped putting money into savings. And 28 percent said their ability to pay off their balance each month has decreased.

The president of Javelin Strategy, Jim Van Dyke, draws this conclusion in the press release about the survey:

"Consumers are making deliberate cutbacks, like shopping at superstores, eating out less and watching what they charge. We believe this is because most people have already been impacted by the downturn or they're anticipating that we haven't seen the worst of it. It's very cautious behavior."

I know the data that officially show we're in a recession is still to come, but it sure feels like it's here, judging by the e-mail we get from readers.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Tuesday, July 29
Posted 4 p.m.

Charge your mortgage

We know people like their credit card reward programs and try to accumulate as many points or cash-back dollars. So how about charging your biggest monthly expense -- your mortgage -- to a credit card?

A firm called ChargeSmart, based in San Francisco, lets you pay your mortgage, auto and student loan and utility bills online with a credit card. They have more than 4,000 billers, which probably covers most Americans.

It's worth reading the FAQs, though. This is what they say about their fees:

The funding of a ChargeSmart™ payment account is always free. However, regardless of how the account is funded: cash, check, wire transfer, Visa or MasterCard; there is a per payment fee of $4.95 plus a handling charge of 2.29% of the transaction amount.

What's interesting to me is that if you pay your mortgage on a credit card, your mortgage company gets its money. If you default on your credit card, the card issuer is left holding the bag of your debts.

Moody's, which tracks credit card defaults, has been showing higher default rates every month. If people start adding four-figure mortgage payments to their credit card debt and only pay a portion of the total balance each month, the scenario for Americans' indebtedness is even more dire.

Rising defaults create much greater risk for the card issuers. Everyone's always bashing the credit card companies for their practices, but we should remember that they have made credit available to many more people than ever before. (Whether or not those risky people should have credit lines is another debate.) We're already seeing card issuers trimming credit limits for cardholders; the issuers are managing their risk.

If millions of people default on their cards, believe me, credit will dry up fast. It will be back to the '70s: stricter lending standards, credit available only to those who have top credit ratings, higher interest rates.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Thursday, July 24
Posted 2 p.m.

Affinity cards for small groups

Affinity credit cards -- those are the ones that are allied with alumni groups, sporting organizations and so on -- have been in circulation for the past 20-odd years. Most of them support giant groups, like Notre Dame alumni or NASCAR or the Sierra Club. (Last year the rage was "green" credit cards that offered a variety of good works, like offsetting carbon emissions for every dollar you spend.)

Regardless of the cause, this is a good way to raise money for your organization because the groups get a set amount for every account that's activated and then a percentage of every transaction. But mostly it's been limited to very large organizations.

Now there's a company called CardPartner that is offering affinity Visa cards to small groups, like a church or a school, or a smaller nonprofit, such as Guide Dogs for the Blind, which is one of their clients.

Yesterday I spoke with the president of CardPartner, Adam Elgar, who explained that using the efficiencies of the Internet, they can serve these smaller groups easily. An organization just goes to the CardPartner Web site and fills out some forms online. The site will assist the organization with marketing the cards to their supporters or members. UMB, a bank based in Kansas City, handles the card issuing and also does the credit checks on card applicants.

The organizations aren't required to sign up a minimum number of cardholders. "For the organizations, it's risk free," Elgar said.

Another difference with this program is that the cardholders' names and information don't get shared with other companies. "People respond to the fact that they're in control of who gets the mailing," he explained.

So finally smaller groups can benefit from an affinity program. Of course, terms and conditions and interest rates are all set by UMB, and from what I read on one of the card applications on their Web site, the terms and conditions are pretty much standard credit card rules -- fine print included.

Comments? Questions? E-mail plastic_rap@bankrate.com.

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