After weeks of partisan bickering, the Senate finally voted this afternoon 60 to 39 to pass Wall Street reform. Officially deemed the Restoring American Financial Stability Act of 2010, it is now headed to Obama’s desk, which he said will be signed next week. Despite the bloated size of 2,319 pages, some feel the bill leaves us with more questions than answers.

Almost everyone agrees that reform is needed, but many question whether this watered-down version addresses the problems… or just creates new ones. For example, the bill remains silent on Fannie Mae and Freddie Mac. Derivatives and hedge funds get to continue their wild West ways. Twelve new regulatory agencies will be created, but almost nothing will be done to fix the 115 current federal and state financial regulatory agencies (only one of them will be consolidated). In a nutshell, the bill leaves us with a regulatory bureaucracy that’s even more bloated than before – countless agencies with overlapping responsibility, all trying to tip toe around each other to enforce extremely vague laws. Meanwhile, the financial “nuclear weapons” like derivatives will remain unregulated.

So what does the Wall Street reform mean for credit cards? Well, it’s unclear since the new rules and regulations that stem from this bill are TBD, but here are a few things we do know…

• Consumer Financial Protection Bureau – This new agency will be part of the Federal Reserve. Its responsibilities set forth in the bill are vague, but it appears this new body will govern consumer financial products;  mortgages, brokers, credit cards, and everything in between.
• Credit scores – Currently, consumers can obtain their credit report for free once per year from each of the three major credit bureaus – Experian, Equifax, and TransUnion – through annualcreditreport.com. Eventually these companies will also have to provide free credit scores, too.
• Swipe Fees – Merchants pay a small fee for credit card and debit card transactions. It is expected that that these fees may be capped by the CFPB. While some people are quick to criticize these fees, it’s important to realize that they are what make reward and cash back credit cards possible. They also cover the cost of fraud and cardholder benefits. Lastly, study after study has shown that card payments help merchants because the customers buy more than they would if paying cash.

If the reform is implemented properly, it will benefit credit card holders. However, the vague wording of the bill leaves much open for interpretation. Just as under-regulation is bad, so is over-regulation. The last thing we want to see is responsible cardholders subsidizing the risky cardholders, paying for their mistakes. Only time will tell if this reform takes us in the right direction.

New credit card late fee laws went into effect this past week that significantly lowers how much you will have to pay. The Federal Reserve has issued its final ruling, placing a cap on the maximum amount a late fee can cost:

• For the first late payment the fee is capped at $25
• If there is more than one late payment in a 6-month period, the fee rises to $35 for every offense after the first
• The late fee can’t exceed the amount that is owed. For example, if the minimum payment due is $15, then the late fee can’t be more than $15.

The above rules also apply to fees for exceeding your credit limit. However on that note, for months now all credit card holders in the U.S. have a right to opt-out of the ability to spend past their credit limit (and therefore, making it impossible to go over the limit).

• Inactivity fees are not allowed. However credit cards can still have policies where an annual fee is levied if certain criteria isn’t met (i.e. having no account activity for more than 12 months).
• If a credit card raises your interest rate (i.e. for repeated late payments) they now must review that decision again after 6 months. That being said, there is no requirement for it to actually be lowered at that time.
• Multiple fees can no longer be given for a single violation. For example, a returned payment and late payment fee cannot both be given.

These laws go into effect on August 22, 2010.

We’ve all seen the commercials for the Chase cash back debit card that offers up to 3% cash back, but is there a catch to this offer? Well, here’s some important things to consider…

You have to pay an annual fee
Unfortunately, they’re charging an annual fee for this cash back debit card. It will cost you $25.00 per year, per card.

There is a cap on cashback
The Chase cash back debit card has a cap on rewards; a maximum of $500 in cashback can be earned in a year.

Purchases made using the PIN won’t count
In order to get cash back they are requiring the purchases to be rung up without a PIN. That means when paying for a purchase, it will be required to ring it up as a “credit” instead of a “debit” transaction.

Only certain categories earn cash back
Not every purchase made with a Chase cash back debit card will earn a rebate. Only the following categories will qualify: groceries, fast food/coffee, gas, drugstores. That means all other purchases will be earning you zero rewards.

There’s monthly tiered spending to qualify for 3% cash back
The Chase debit card with cash back doesn’t give 3% to everyone. In order to get 3%, the total spending across all purchases and merchants will need to meet a certain tier:

$0.01 to $499.99 per month = 1% cash back in above categories
$500.00 to $999.99 per month = 2% cash back in above categories
$1,000.00 and above per month = 3% cash back in above categories

Not always the same rights as a credit card
This is not specific to the Chase cash back debit card, but rather all debit cards in general, regardless of their issuer. There are certain rights (protected by federal law) that apply to credit cards, but not debit cards. Also something else to keep in mind is that if your debit card number is stolen, that could cause your checking account to be temporarily overdrawn (which in turn might cause your outstanding checks for rent, mortgage, car payment, etc. to bounce).

Should you apply for the Chase cash back debit card?
I think it’s great that they’re bringing rewards to debit cards, but when you think about it, paying an annual fee to only earn 3% on a few categories doesn’t make sense, being that there are free credit cards that offer similar programs. Another big drawback is that you are NOT getting 1% cashback on your other purchases (like most credit cards offer) and that means you would be missing out on a lot of cash back.

You can get a higher 5% cash back from Chase (sponsored)
Instead of the Chase cash back debit card, you should check out their new credit card rewards program. You can get a full 5% cash back and no annual fee – check out our Chase Freedom card review to find out how!

Yesterday American Express released their first quarter numbers… net income for the company more than doubled from the same period one year ago – $437 million then to $885 million now. This is largely due to the increase in cardholder spending – up 16% for this quarter

Now if we take a closer look at just their U.S. card business, it made $428 million during the first quarter, compared to losing $7 million during that time last year.

Doubled earnings with record charge-offs?
Ironically – just one day later – Moody’s announces that credit card charge-offs have reached an all time record high… 11.12% of debt was written off during the first quarter. It is the highest level ever since they started their credit card index twenty years ago. Moody’s stated they expect that to be the peak quarter, but on a monthly basis, the peak may be seen in April or May.

Not surprisingly, the charge-off rate a number which closely corresponds to unemployment. Once that plateaus and the job market starts improving, charge-offs should too.

They say history repeats itself… but how many times? Last year, Florida Rep. Sansom got busted for allegedly abusing his AmEx Gold Card to the tune of $170k. Then there’s former House Speaker Marco Rubio and state senator Dean Cannon who allegedly participated in similar schemes using their business credit cards. This year, similar scandals have also been exposed. There’s Florida state GOP Chairman Jim Greer, who resigned in February amid his own financial fiasco which involved alleged credit card abuse. There’s so much alleged fraud, it’s hard to keep track who’s who. However, my favorite of the bunch is Melanie Phister…

At the age of 25, Melanie Phister was just a young junior staffer for the Florida GOP when they gave her a credit card. Allegedly, there were $1.25 million in charges on this card during the two years which followed; things like high end jewelry, a $40k London hotel stay, and even charter jets. Phister’s job supposedly involved work for Rep. Sansom (who was already indicted for his alleged credit card fraud) so I guess the pieces are coming together.

In case you were wondering what cards were involved… from what I can gather it sounds like they were American Express. With that type of high roller spending, I hope AmEx at least offered them an invite for the Centurion

Q: How does the Discover million dollar giveaway work?

A: Being that their motto is “It Pays To Discover” it comes as no surprise to me that they decided to run a sweepstakes like this. In fact, I wouldn’t be surprised if we see this Discover card sweepstakes repeated every year.

When does the contest run?
The Discover Card million dollar sweepstakes takes place from January 1st through December 31st 2010 (so all year long).

How do you enter?
Discover cardmembers receive one sweepstakes entry for each purchase they make using their card. Certain categories of spending receive 4 extra bonus entries per transactions (so 5 entries total per purchase). These bonus categories are:

March – Restaurants
April – Mystery Category*
June – Salons & Spas
August – Dry Cleaners
September – Mystery Category*
October – Restaurants
November – Mystery Category*

*Mystery categories will be disclosed during the prior month on Discover’s website

No purchase, card application, or transaction is necessary to enter the sweepstakes: those without a Discover card can enter once per day by mailing in their info on a 3 x 5 inch piece of paper along with a self-addresses stamped envelope. But of course, it’s obviously much simpler to play by just using your Discover card.

What are the prizes?
The Discover card million dollar sweepstakes is actually giving away a lot more than a $1,000,000. There are 75 prizes which will be randomly awarded each day:

(1) $500 Discover gift card
(4) $100 Discover gift cards
(70) $25 Discover gift cards

After the sweepstakes ends (12/31) there will be one grand prize winner randomly selected from all the entries over the course of the year. This grand prize winner will be awarded $1,000,000. Unlike the lottery which pays installments, this prize will be given in one lump sum for the entire amount…. pretty cool, huh?!

How many total winners will there be?
According to me calculations, 75 daily winners x 365 days = 27,375. Then when you add in the one grand prize winner, I suppose that would mean there will be a total of 27,376 winners from the Discover Card sweepstakes in 2010.

When are the winners notified?
From what I gather, winners are notified via mail in the days/weeks following each daily drawing. The $1,000,000 grand prize drawing won’t take place until January of next year, so obviously that winner won’t know until around that time.

Don’t have a Discover card? (sponsored)
Then check out their top rated card which gives 5% cash back and has no annual fee: Discover More

Alleged debit card fraudster Florin Necula was confronted with some incriminating evidence which was tough to swallow, but he found a way… by literally swallowing it!

The alleged events actually occurred back in January, but they’re just coming to light now, thanks to a recently unsealed search warrant affidavit.

New York City resident Florin Necula and his accomplices are accused of running a card skimming operation involving local ATMs. Allegedly, they rigged the ATMs with credit card readers; when a customer inserted their card, the numbers would be recorded. Necula was apprehended by Secret Service and awaiting integration at their district office. In view was evidence which Necula reportedly had on him at the time of arrest; a USB jump drive. According to court documents, he “grabbed” the jump drive and swallowed it!

After four days, the “evidence” had still not passed through his digestive tract, so doctors at a local hospital “removed the flash drive because they were concerned that Necula would be injured” if they didn’t. It’s unclear whether or not the contents of the drive are still intact since the drive was extracted from the suspect.

But I don’t know what’s dumber… the suspect swallowing the drive or that his defense attorney reportedly said “they didn’t have a right to take it from him” and might file a claim to suppress the evidence.

February 22nd… the day George Washington was born, the day Florida became a state, the day Dolly the cloned sheep was debuted to the world – and equally important – the day Credit Card Accountability Responsibility and Disclosure (CARD) Act went into full effect

If you’re a regular reader of Credit Card Forum, then you already know we have talked about this extensively over the past few months, but here’s a quick summary of the highlights:

Interest Rates
From this day forward it will be much more difficult for credit card companies to raise interest rates on existing balances. This includes promotional interest rates.

Payments
Now your payments will be applied towards the balances with higher APRs first. Grace periods must be at least 21 days. Due dates can no longer fall on days the mail is not delivered

College Credit Cards
The days of free pizzas and T-shirts for college students that fill out a credit card application are over. If they’re under the age of 21, they either need to have a co-signer or a verifiable job to pay the bill themselves.

To find out all the details, you can use the search function on the right side of this page to see our previous posts.

Rep. Carolyn Maloney first introduced her bill for reform three years ago. Here’s a recent interview where she discussed how shocking it is that they were able to pass the reform without loopholes…

New small business credit cards? Here’s why you’ll want to think twice from this point forward…

• Credit Card Reform Not Applicable
  The fact that we finally got credit card reform in this country is a major win for consumers. Although most banks have already became compliant over the past few months, next Monday the reform will officially go into effect. While this is great news for your personal cards, it’s bad news for old and new small business credit cards. Why? Because they aren’t included in the reform. That means they can still pull the ol’ interest rate bate ‘n switch on a small business credit card.
  
  
• Small Businesses Are Categorized As Riskier
  Thanks to all the economic turmoil over the past couple years, new small businesses are being scrutinized more than ever when it comes to giving them credit. If you are a sole proprietor or recently formed an LLC or corporation, it’s considered to be an especially risky proposition. However there’s good reason for creditors being skittish. Take Advanta… they were the second largest issuer of small business credit cards in the United States. However in 2009, a staggering 1 out of every 5 accounts were in default, now the company is bankrupt. All of the other small business creditors suffered brutal losses on these accounts too.

• Lower Credit Limits Than Personal Credit Cards
  Due to the extreme risk associated with small businesses, even if you can get approved, the odds are that the credit limit will be dismal. This is especially the case for new small business credit card applicants, since new companies are considered to be an even higher risk.

• Interest Rates Are Much Higher Than Before
  In the past when times were good, some small business credit cards actually had interest rates that were lower than what was available on most personal cards. Advanta (as discussed above) was notorious for doing this, however now that they’re bankrupt, that train has left the station. I have several American Express cards – one of them a small business card I’ve had several years – and even with my perfect credit and zero debt, my interest rate more than doubled on it! So it doesn’t matter how good your credit is… we are all being affected.

• You Will Need To Personally Guarantee The Credit
  Unless you have an established corporation or business entity that has successfully been using credit for years, you will have to make a personal guarantee to get a new small business credit card.  That means it will be under your Social Security number – just like a personal card is. However unlike a personal card, since it’s still technically a “business” credit card so you will not be protected by the recent credit card reform.

Are there any alternatives to new small business credit cards?
For now your best bet is to probably use a personal card. If the purchases are for your new small business, you can still write them off. What I decided to do was open a personal card and use it exclusively for my business, that way I don’t have to sort the transactions.

For this purpose, right now I highly recommend the AmEx Blue Sky card. Sure, I do advertise AmEx cards on this site, but take a look for yourself at this card and you’ll see why it’s an honest recommendation. Myself and others have had great luck with getting high credit limits and the rewards can be beat with it. There’s no annual fee either. For a special promo signup offer, check out my personal review of the American Express Blue Sky.

Nowadays, they take credit card for everything. In fact, if you’re like me, you probably get frustrated at those dry cleaners and shady convenience store that won’t accept plastic for payment. But one Michigan man allegedly got himself into hot water when he tried to purchase his crack cocaine using – believe it or not – a credit card!

What happened?
Although I don’t live in Michigan, I was born and raised there, so I try to stay on top of their news somewhat regularly. I was checking today, and low and behold I see a bulletin from the Associated Press about a man that allegedly told police he was robbed after he attempted to pay for his crack with a credit card. If that’s not bizarre enough, the story gets weirder…

According to the Flint Police, the suspect reported his 2003 Chevy Malibu was stolen last Thursday. That’s understandable why he would report that, right? Well, not quite… considering that the car was previously reported stolen in Lapeer, MI which is about fifty miles away. So allegedly, he reported this car as being stolen from him, when he had stolen it from someone else in the first place! The suspect also reportedly told police that he was simply trying to buy coke with his credit card when this gunpoint robbery occurred.

Geez Louise… now that story is a perfect example of how drugs will mess you up big time!