Each month the Federal Reserve issues the G.19 Consumer Credit report, composed of statistical data for credit usage. Today, they released their latest report for the month of April. The report includes information for many types of loans – like vehicle and college – these are installment loans. Meanwhile the revolving loan category is made up almost completely of credit card debt.

For the 19th month in a row, the revolving loan category debt has gone down. Right now the total stands at $838 billion, compared to $975.7 billion in September 2008. But even though consumers are carrying less debt on their credit cards, the data claims installment loan debt is going up.

Do you view this has a good thing, since the banks are lending more? Or do you view this as a bad thing because installment loan debt is growing?

You really don’t even want to get me started on the whole concept of paying for luggage. First, the airlines used post-911 as an excuse to start charging for everything from bags to a cup of water. That’s ridiculous in itself, but what’s worse is that those baggage fees have steadily risen over the past few years and in turn, it has caused people to try and cram everything they can into their oversized carry-ons. You would think that would be a clue that the baggage fees are a bad idea, but Spirit Airlines believes the solution is to now charge for carry-ons too (yet one more reason why the Spirit Airlines credit card sucks).

Well unfortunately, it doesn’t look like the baggage fees are going away anytime soon… unless you have a Delta American Express card. A few days ago they announced that the first bag would fly free on Delta if you paid with an American Express Delta card. Not only will it be free for you, but also up to eight additional passengers under the same reservation.

Just think about it… for a family of four taking a vacation, normally it would cost $200 in fees if each person had one bag (4 people, $25 per bag for departure, $25 per bag for return).  But if that same trip was paid for using your Delta American Express, you would be saving $200 on that trip alone!

Interested in applying for a Delta AmEx card? Check out this special offer featured in our Delta Reserve credit card review!

Q: What are the typical effects of foreclosure on credit score?

A: Unfortunately, this is a situation that is becoming all too common since jobs have started moving offshore. First I would like to point out that whether you have a foreclosure, short sale, or deed in lieu of foreclosure, the impact on your credit score should be about the same. Aside from your credit score, obviously each of these approaches has their financial advantages and disadvantages depending on your situation. So regardless of which of the aforementioned applies to you, here’s what you need to know:

1. There is no magic number
There are some “experts” that will try and give you an exact number, but the truth is no one knows  the exact effect of foreclosure on credit scores. This is because the FICO scoring formula is kept secret, so without knowing it, we can only estimate.

2. For those with score of 750 to 800+
If you currently have a high credit score around this range, a good estimate is that you can expect around a 200 point drop after foreclosure. However if you’ve already fallen behind on payments and have credit cards that are maxed out, it’s probably unlikely your score is still this high, even if it was before.

3. For the typical person in foreclosure
Typical assumptions would be that the person going into foreclosure have already exhausted or nearly exhausted their other lines of credit, including credit cards and loans. Under these circumstances, the credit score has already taken a hit and after a foreclosure, they should probably expect a point drop of around 100 to 150.

Buying a Home After Foreclosure
There are new guidelines in place now by Fannie Mae for getting approved for a mortgage:

After a foreclosure, you have to wait 5 years before you can be approved. For years 5 to 7 after, there are additional restrictions; 10% or more downpayment, 680+ credit score, and it must be a personal residence. There are situations known as “extenuating circumstances” which might allow you to buy again after 3 years. These include things like illness, severe injury, a spouse’s death, etc. which may have been a major cause in your foreclosure.

After a deed-in-lieu of foreclosure, you will have to wait four years. If there are “extenuating circumstances” involved, you may only need to wait two years. A 10% downpayment will also be required.

After a short sale, the waiting period is two years.

Rebuilding Credit After Foreclosure
While its true that the effects of a foreclosure on your credit score won’t be as bad as a bankruptcy, you will take 7 years for it to fall of your report. Therefore during those 7 years, it will be nearly impossible to hit the 800s, but if you play your cards right you can build up your credit score back to the mid to high 700s during this period.

In order to rebuild your credit as quickly as possible, stay on top of your other lines of credit. That means if you have credit cards that aren’t maxed out and you can afford to pay them, then you should keep paying on them. The same holds true with car loans, etc. Basically, you want to keep open and preserve your other lines of credit, because it will be difficult to open up new accounts during the first couple years after your foreclosure.

If you’ve defaulted on your other lines of credit – such as your credit cards – and want to start fresh, then you may want to consider a secured credit card. Since you typically can’t charge beyond your security deposit, typically anyone can get approved for this type of card, regardless of their credit score. True, it will cost you a bit in fees, but a good secured card will be report your account to the credit bureaus. If you’re looking for one, then I recommend this card from our sponsor: Platinum Zero Secured Visa

Q: Can credit card companies garnish wages? I have stopped paying on my card and am worried about my wages being garnished.

A: Once you default on a bill, the party which is owed the money has various options they can take to try and recoup their money. But is credit card wage garnishment one of those options? Well that depends, but most likely yes. Here’s what you need to know…

Understanding State Laws
The options a creditor has for going after you vary state by state. For example in Georgia “all cases where a money judgment shall have been obtained” wage garnishment is permitted… so that basically means any type of debt is subject to garnishment. Meanwhile other states may only allow garnishment on secured debt, not unsecured debt like credit cards. In my state of California, credit card wage garnishment is legal, but the law doesn’t allow money to be taken from the debtor’s bank account if the balance is below a certain point (I believe the threshold is somewhere between one and two thousand).

But even if wage garnishment is legal…
…the credit card company can’t simply garnish your wages by themselves. They will need to first go to court and be rendered a judgement which permits garnishing wages. When this happens you can attempt to file a motion to quash the garnishment, but to be honest, that will be very difficult to do. Typically, the judge will also decide what percentage of your wages can be withheld – usually they can only without “disposable income” when it comes to unsecured debt.

The odds are that…
…credit card wage garnishment is legal in your state. It’s just a matter of finding out the details – i.e. what’s the maximum amount they can withhold, what’s the statue of limitations on the debt, etc. Nowadays creditors are more aggressive than ever with recovering bad debt… so if you owe any sizable amount (say, in the thousands) it’s very possible your credit card company will try and garnish your pay.

What are your options?
You should consult an attorney (keep in mind this post is not legal advice). However if you’re like many people in this boat, odds are that you can’t afford to shell out money to do that. If that’s the case, most communities have a free legal aide center for those that can’t afford to pay someone… they should be able to offer you some wage garnishment help.

Q: I’m a small business owner that is considering Costco credit credit card processing. The fees seem pretty low. Do you recommend them?

A: There’s no mistaking that Costco offers a number of opportunities for both consumers and businesses to save money. However, depending on the circumstances, they’re not always the most cost-effective way to go. So is their credit card processing a good deal or not? Well, here’s what you need to know about how they work.

Costco credit card processing reviews
Not too long ago actually, a good friend of mine was considering switching to Costco. He and his family have owned a successful convenience store for a couple decades now. But as we continue to transition to a cashless society, the card processing fees are really starting to eat away at their bottom line.

Merchants like my friend’s convenience store store suffer the most, because their transaction sizes are so small. As you probably know, credit card processing rates consist or two parts: (1) a flat fee of around 20 to 30 cents per transaction, in addition to (b) a small percentage of the transaction, which is typically 1.5% to 3%.

For example, let’s say your business had a rate of 30 cents + 2% transaction fee:

On a $5 purchase that would equal 8% of the purchase
On a $50 purchase that would equal 2.6% of the the purchase

Any small business that has a high volume of small transactions is greatly impacted by these costs.

So how much better are Costco’s rates?
Well, for starters, it’s important to understand that the credit card processing Costco program isn’t run by them directly. Rather, they partnered with Elavon (a major payment processing company) to offer their services to Costco members.

At the time of this review, here are the Costco credit card processing rates:

Retail Merchants: 1.48% plus 20 cents per transaction
Internet/Telephone/Mail Order Merchants: 1.99% plus 27 cents per transaction

They were also throwing in a free terminal, but the rebate for it isn’t given until after 12 months of service.

The fine print on Costco credit card processing and others
I definitely consider their rates attractive, but here are some things to consider not only for Costco, but other providers too:

• As with all merchant card processing services, different rates are charged for different types of cards. For example, reward cards and business cards will cost you more. Being that most credit cards these days have some sort of rewards program, that means that there will be very few transactions which qualify for that lowest rate of 1.48%.
  .
• The 1.48% for Costco’s service currently applies to Visa and MasterCard. Transactions for American Express and Discover will cost you more. It’s important to remember there are many consumers nowadays who exclusively use AmEx and/or Discover. Since they’re both considered premium credit cards, it’s important to cater to that clientele too and accept them for payment. So be sure and consider the rates for each… the old “Visa/MC only” may have worked in the 90′s but not anymore.

Conclusion?
I do believe Costco credit card processing is a good deal, but I wouldn’t consider it the absolute best for every one. Depending on the type of business you have and average sales volume you get, it may be possible to do a whole lot better going with someone else. So don’t just automatically assuming business credit card processing Costco style is the surefire way to go. You will need to work the numbers and compare credit card processing in order to find out who’s right for you.

CreditCardForum wishes you and your family a very merry Christmas and prosperous new year!

Overdraft fees a huge revenue stream for banks. In fact, US banks will pull in an estimated $38,500,000,000 from this year last year alone (source: Moebs Economic Research). While the banks love these fees, many consumers complain because they say they never opted into them in the first place.

The New Changes & When They Start
On Thursday, the U.S. Fed announced their own new overdraft fee reform, similar to how they did with credit cards. Customers will now have the ability to opt out of the ability to overdraw their account using their debit/ATM card. It won’t apply to overdraft fees resulting from auto-deductions you have set up on your account (i.e. auto-payments for power bills, car payment, etc) nor will it apply to checks. Banks will have until July 1st, 2010 to meet this reform.

My Take On It
As you guys can see from my previous blogposts, 95% of the time I side with consumers. However I’m not necessarily in agreement with how they structured the reform. Before you jump on me for saying this, let me explain why:

First of all, I do believe this fee should be waived entirely if it is a rare occurrence for your account. If you are a responsible person and this happens to you, say once per year or so, then you should not be charged a fee. Simple as that.

Rather, I have a problem with the “serial offenders” that are totally irresponsible and don’t pay attention to their balance. For example, I have a friend who I’ll call Chuck (not his real name) and I would estimate that on an annual basis, he overdraws his account at least a dozen times… and it’s not by accident. He will basically spend until transactions no longer go through. Chuck doesn’t bother to actually check his balance or simply (heavens forbid) actually not spend that extra $30 at the bar when he already know his balance his extremely low.

When it comes to people like this… I can’t say I feel bad for them. If anything, the fees are doing them a favor… hopefully they are ridiculous enough to give them a clue that they need to start spending responsibly.

If you live in the Midwest, you know about Meijer grocery stores. Read this Meijer credit card review to find out if it actually is going to save you any money. Some even ask me if the Meijer card is a scam? Well it’s not, because they abide by all laws, so that’s not the issue. The problem is simply that their “rewards” program is very unrewarding…

First of all I’d like to point out I’m actually a huge fan of this company. I grew up in Michigan and that is where they were founded. Unlike Wal-Mart and others one-stop-shops, I like the fact that Meijers has remained a private company (the 19th largest in the country). However there was one negative thing I recently read about the company from the Human Rights Campaign. According to reports, out of the top 500 employers they rate, Meijer was only one of three companies to be scored a flat 0%. One reason was that they do not offer “even minimal benefits or workplace protection for gay employees.” So in summary, some types of discrimination and harassment against employees is allegedly permitted, as long as it is due to their orientation. But enough off-topic chit chat, let’s get back to that credit card….

The Credit Cards…
Their cards have now been around for years and from my experience they are usually heavily promoted at their stores. Almost always it seems like they are advertising some promotion to get you to sign up – either a small one-time credit or a few pennies off your gas purchases for two or three months.

There are currently two options…

Meijer Credit Card: This is their store-only card which is not associated with any major network (such as Visa or MasterCard) and it can only be used for purchases at their stores/gas stations. At the time of this review, the APR on this one starts at a whopping 26.99%! If you don’t have the best credit you will most likely receive this one instead of their regular card which I’ll talk about next…

Meijer MasterCard: This card operates on the MasterCard network so it can be used anywhere they are accepted. It’s a so called “Platinum” but this appears to be just a marketing gimmick because it doesn’t add any benefits which are special. The interest rate is extremely high on this too, starting at either 19.99% or 23.99% depending on your credit.

The Rewards…
Of course this is probably the main thing that sparked your interest in the first place, but once you run the numbers, you will be surprised to see just how un-rewarding these cards actually is…

5 Cents/Gallon Rebate: At first glance, this may sound like a good deal. But remember that is 5 cents, not 5 percent. At $3.00/gallon, that equals out to be only around 1.6% cash back and keep in mind that’s only at Meijer gas stations. Not too impressive, is it?

Points on Purchases: Now this, in my opinion, is quite misleading. They advertise you will get 1 point for every dollar spent – whether it be at Meijers or somewhere else. No most of us usually assume 1 point equals out to be 1% in rewards, right? That’s not the case here. For every 2,000 points, you get a certificate for $10 in “Meijer Bucks.” Do the math and you will see this card only gives you one-half a percent back. Being that almost every credit card on the market today gives 1% cash back (double what they give) this is an awful deal.

A Better Choice…
There are much better reward cards out there. My favorite is by far the Discover More card. To be completely transparent with you, I want to point out that although this site has a financial affiliate relationship with Discover, we also do with most other financial institutions too. The reason I endorse this particular card over others is because I believe it offers the best value: a full 5% cash back bonus in rotating categories like grocery stores, gas stations, restaurants, and more. Not only does it give literally up to 10x the cash back that the Meijer credit card offers, but you can also use it everywhere… including Meijer! To find out more about how to get this card for free check out my Discover More review.

This was the opening weekend for Michael Moore’s latest movie; Capitalism, A Love Story. Now whether you hate or love the guy, I want you to take that out of the equation for a moment. That’s not what this review is about.

So in a nutshell, this is a documentary about capitalism, both past and present, but more so about what it has recently evolved into the past few decades. Are there things in the film I don’t necessarily agree with? Absolutely. But since when do you always agree with everything someone says? Never.

So even if you’re not a fan of his politics, I recommend you see this movie for the historical information (and yes, there’s even some info about credit cards, too). I judge a documentary on whether or not it gets the gears in your head cranking, and this one definitely does. I especially liked the comical contrasts he made between the teachings of today’s business leaders and the teachings of Jesus.

There’s some really fascinating information and archival footage, at least some of things I guarantee you have never seen before…

The first one being the never-before-seen footage of a President Franklin D. Roosevelt addressing the nation to create a second Bill of Rights. They discovered this on an unmarked film reel found at a university’s archive. In the President’s address, he proposes:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.

America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for our citizens.

(transcript source: Wikipedia)

That was over 65 years ago. Would you say we are now closer to these goals, or further?

If you’re a regular reader of Credit Card Forum blog, you may have noticed there have not been any posts for over a week. The reason being I’ve had [and still have] swine flu and haven’t had the energy to be on the computer. So despite it being only September, be warned if you are in Southern California. I am a healthy younger individual that washes my hands and uses hand sanitizer religiously, but apparently it didn’t do any good.

However the problem is not that I have swine flu… the problem is that I don’t have insurance.

And no, it’s not because I haven’t tried to get insurance. In fact, I can’t even tell you how much time I spent in 2008 trying to purchase insurance once I became self-employed. However, I was repeatedly denied underwriting for ridiculous reasons. The endless phone calls, faxes, and letters to dispute their decision did no good, and you won’t believe just how unethical Blue Shield was during the process, which started with their rejection letter…

Hmm… so what do you think this unacceptable “criteria” could be? It must be something really awful, right?

Well getting to the bottom of this was almost impossible. You see, they list no phone numbers on this letter… once they reject you they don’t want to hear from you. Whether their reason is valid or not apparently doesn’t matter. In fact, they don’t even put their actual physical address on the letter!

Instead they put this obscure post office box address at the very bottom corner…

…and yeah that’s right, they even have to put this little P.O. box in a hard-to-read light gray font. Imagine if I was older and had vision problems?

And you may be wondering who the wonderful individual is there that is making decisions like this which are virtually life and death for some people? Well, they’re not exactly transparent in telling you that either…

Don’t ya just love that signature… a squiggly line resembling an “n” that took a whole 10 nanoseconds to scribble down. I wonder if my buddy David was as thorough going through my medical records as he was signing his name?

After a bit of legwork, I located their phone number through Google and gave them a call…

Operator: Blue Shield
Me: Hi can I please speak to David L. in underwriting?
Operator: I need a last name to connect you.
Me: Your letter didn’t mention his last name.
Operator: Then I can’t connect you. [CLICK]

Like I said, they really don’t want to talk to you! So I turned back to Google and started doing queries like “David L”+ “Blue Shield of California” hoping to track down who this guy was so I could talk to him. No luck.

So I hit the phones again and again, trying to get through to either David himself or just the underwriting department. You would think it would be a right – not a privilege – to at least speak to them, right? Nope! Time after time, the operators gave me the same rude answer, which in a nutshell was “You’re denied. Your problem, not ours. Tough luck. Don’t contact us.”

Then it finally dawned on me… if this guy is an insurance underwriter, he has to be (1) licensed by the state, and (2) possibly a member of one or more of the insurance underwriters associations.

By searching for his first name and last initial, I was able to locate who he was through the National Association of Health Underwriters website. However I got extremely lucky here, because this is an optional organization that he just happened to be a member of. You aren’t going to find everyone in this profession listed.

Once I had his last name, I now had the ability to call! So I gave them a ring, dropped his full name, and they patched me through. The first few times I got his voicemail, but eventually I finally got to to talk to him.

First he claimed I was denied because of an auto accident I was in long ago. However, that excuse didn’t quite work. You see that accident happened in Michigan years ago, the only state which gives unlimited medical coverage to auto accident victims insured in their state (and of course, the accident has to occur there, too). They pay 100% of all medical care – anywhere, any doctor, any time – for treatment resulting from accident injuries… for your entire life!

During my application process with Blue Shield, I even submitted an official document certifying this exclusion. Well, David the underwriter apparently must have not gotten that memo during his decision. But either way, he stood firm. He cited other medical history as a cause for denial…

That’s right folks. Pimples.

But it gets worse…

This is not even referencing a current acne problem. I haven’t had a zit in years! Rather, they’re talking about normal teen acne from many years ago. So attention parents: if your child has a pimple, do NOT tell the doctor or take him to the dermatologist to get a prescription for face wash. Because if you do, your son or daughter will “exceed underwriting acceptance criteria” when they’re an adult!

If you support health care reform and agree that having pimples as a teen shouldn’t disqualify you for insurance as an adult, please link to my story in your blog and help spread the word!

Thanks,
Mike