Last week we reported that credit card debt is declining in America. The numbers for July have recently been released and show continued improvement in the number of unpaid accounts. The latest figures for net loss are as follows:

American Express: 10.18% down to 8.92%
Bank of America: 13.86% to 13.81%
Capital One: 8.82% to 8.78%
Chase: 8.04% to 7.92%
Citibank: 10.51% to 10.03%
Discover: 8.75% to 8.43%

However it’s important to note that while the above numbers reflect the net loss, the number of accounts which were 30-59 days late did go up slightly for some issuers. Also these were based off figures from a Credit Suisse report. There have been other reports (such as Capital One’s regulatory filing on the 17th) which differ.

What do you think… are things improving or is it just accounting tricks?

January 1st is just a day away and one thing is for sure… 2009 will be a new year in so many ways. Will the economy turn around or will it stay flat? One thing is for sure, the old days of easy credit to anything with a pulse are long gone. As far as credit cards go, Credit Card Forum is making three predictions:

(1) Lending Standards Will Remain Tough – The economy could start turning around in the second and third quarters, but lending requirements will remain equally as strict.

(2) Balance Transfer Promos Will Continue To Be Reduced - The fabulous 0% on balance transfers credit cards we’ve seen over the years will not be seen again anytime soon. Long gone are the days of 0% until balance is paid in full, 0% for 12 or 15 months, and other similar interest rate deals. True, there will be the occasional balance transfer offer for 12 months interest free, but these will be rare and only available to customers with the best credit. Longer offers, such as 0% for 15 months, will unfortunately not be available. Of course, the creditors who continue to give the longest balance transfer offers during this time will have the opportunity to pull in more new customers than the other guys.

(3) The Fed’s New Credit Card Rules Will Be Adapted Early – As of now, creditors have all the way until July 2010 to implement the new credit card reform rules. Credit Card Forum predicts not every creditor will wait until last minute to adapt the new rules. In the 3rd and 4th quarters of 2009, we will see a number of credit card companies adapting the practices early. The main reason they will do this is it will be a good marketing PR move they can mention in commercials and advertisements.

“Can a store require an I.D. if I’m paying with a credit card?”

Tell this to your friend… they won’t believe you.  Tell this to your mom… she won’t believe you.  Tell this to a store… they definitely won’t believe you.  But what I’m about to tell you… believe it…

You never need an I.D. to use your credit card!

Yes, I know that sounds crazy in an age of rampant identity theft and fraud, but it’s true.  A merchant is not allowed to require your I.D. for a credit card transaction.  You’re signature is all that is needed.  Whether you’re buying Starbucks or a shopping spree on Rodeo Drive – no I.D. required!

Don’t believe me?  I Know, most stores would never believe me.  I bet the police wouldn’t buy it either.  But I’ll prove it.  Let’s start with the world’s most popular credit card… Visa.  Below is an excerpt from their merchant rules:

“Although Visa Rules do not preclude merchants from asking for cardholder ID, merchants cannot make an ID a condition of acceptance. Therefore, merchants cannot refuse to complete a purchase transaction because a cardholder refuses to provide ID. Visa believes merchants should not ask for ID as part of their regular card acceptance procedures.”

…and if you think I’m lying, you can view the official document here:

http://usa.visa.com/download/merchants/rules_for_visa_merchants.pdf

Not only can a store not require a drivers license or other I.D., but Visa actually discourages them for asking for it!  MasterCard also has an equivalent policy, which can be found here if you still don’t believe me:

http://www.mastercard.com/us/wce/PDF/MERC-Entire_Manual.pdf

American Express and Discover both have similar policies, and not only prohibit I.D. from being required, but also strongly discourage it.

Often when people hear of this, they are either delighted or discouraged.  I’ll address the later, first.  By federal law, you can only be held liable for up to $50 of fraudulent credit card charges.  That was enacted decades ago, and today, I have never heard of any credit card company, even the scummy ones, enforcing the $50 deductible.  Simply put, you’re not responsble for charges.  So before you blow your stack, remember it’s not your money that’s liable!

Now that brings us to the question “If a store can’t ask me for I.D. to use a credit card, wouldn’t that hurt the credit card companies?”  Well theoretically, yes, they take the liability.  But with modern automatic fraud detection techniques, such as unusual spending patterns or use of card outside of your normal areas, the crime is usually caught (as in new charges prevented) early on, even if the consumer doesn’t notice them.

Credit card companies want their products to be as user-friendly as possible, and they know requiring I.D. isn’t exactly user-friendly.  Therefore they’ve concluded they’d rather take the risk with their money.

Personally, I am glad merchants can’t require an I.D. for a purchase.  There’s been countless times I don’t have an I.D. on me.  Also I think requiring an I.D. for smaller purposes is too much of a hassle anyway.  Plus let’s admit it, everyone nowadays has Photoshop and photo printers that can crank out a fake drivers license that would suffice anyway.  In reality, requiring an I.D. is no foolproof way to prevent fraud at all.  Criminals will simply turn to different avenues to use the stolen cards instead, such as on the internet.

Next time a store clerk asks for your I.D., you may want to point out the agreement they have with the credit card associations.  If that doesn’t work, and you really feel wronged, you can file a complaint against them:

Visa: 1.800.VISA.911
MasterCard: 1-800.300.3069

So next time someone asks you “Do I need an I.D. to use a credit card?” you can tell them… no!