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.

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?

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!

Remember the hysteria that surrounded the year 2000? Many believed it would bring about the end of the world! People were pitching their survival products. Some were saying gold coins were the only solution post-Y2K (sounds like today, huh?). But then when the clock finally struck midnight on December 31st that year, nothing happened!

The world did great job preventing that, but apparently, there are some folks in Germany that overlooked a similar glitch for the year 2010. On New Years, 20 million of their debit cards and 3.5 million of their credit cards stopped working. Some estimates even place that number high, at more 30 million affected cards… that’s about 1 in 4 bank cards in Germany.

This was the result of an error in the code, which supposedly made it impossible for the cards’ microchips to process the year 2010. (Meanwhile, it should be noted that most debit and credit cards in the US don’t use microchips. And when they do have one, it’s used for things like contact-less payment. If the chip was broken, the transactions can still be processed by swiping the card.)

So who’s responsible? Blame it on the French. The French company, Gemalto, which manufactured the affected chips takes full responsibility for the problem. They’re working around the clock to try and figure out a solution which doesn’t involve replacing the affected cards.

As a result, some estimates say the economic damage is in excess of $300 billion Euros (or about 430 billion in U.S. dollars). Way to go Gemalto!

For the vast majority of us, our personal finances are just that… personal. There’s really no rhyme or reason for sharing our personal spending with strangers, but that is exactly what the soon-to-be social network, Blippy, wants to do.

What is it?
Philip Kaplan (founder of AdBrite), is now working full time on Blippy which is slated to launch in 2010. Call it a Twitter for credit card transactions. Basically you link a credit card to your profile on the site. Then every time you make a purchase with that card, the details are broadcast to everyone Twitter-style.

Why is it supposedly useful?
One example Kaplan gives is buying a cup of Joe at Starbucks. When you pay for it with your credit card, everyone else will know you are there. “They can come and see me, or whatever” according to Kaplan.

First of all I don’t know about you, but I go there to get my coffee and get out… not to lounge around “the Starbucks scene.” Why do people even do that? It’s not like it’s a social environment. Everyone secludes themselves – entranced by their laptop or iPhone – never saying a word to each other. Anyway, the point is I’m not there longer than three minutes, so good luck catching me after my purchase.

On that note, purchases are often made at the end of your trip to a store or restaurant. You give the waiter the credit card after you’ve ate. You hand it to the cashier after you’ve picked out what you’re buying. Once you pay, you most likely aren’t going to stick around long.

What would I want to share private info?
First and foremost, this is my biggest issue. Why the heck would I want to share my spending with the world? There’s actually a security issue in doing so too. For example, I have had phone calls with American Express when they ask me about a prior purchases as part of verifying my identity. They may ask something like “You made a purchase on Tuesday for gas, which station was that at?” or “Where did you make your $233.40 purchase last week?” With Blippy, a scammer would easily be able to answer these security questions.

Will the whole concept even work in real time?
Even if you like the idea of advertising your personal spending, I want to know how it’s even possible for this to work in real-time, as the creator seems to imply. Credit card transactions are reported in batches, which sometimes take one to three days to show up on your account. So if I’m at Starbucks, how are my friends going to find out about it in real time? I don’t see how that’s possible for most cards.

What do YOU think?
How do you feel about this idea. Will it be the next big thing or just a dud?

I hope you and your family had a wonderful Thanksgiving! I also hope your Black Friday wasn’t too hectic (if you participated). Compared to last year, in my opinion the deals this year really sucked, so I didn’t bother getting up before the crack of dawn to go wait in line. However I did make it out to the mall during the afternoon to take a gander and as expected, the sales were not impressive to say the least. I didn’t buy a single thing.

Black Friday: The Online Version
Meanwhile, many others were skipping the stores for another reason… they were doing black Friday online. In fact, since the beginning of the month there has reportedly been a 23% increase in online purchases (according to ReD payment processing). They also claim the increase in fraudulent online activity (or at least, attempted activity) will be 38% greater than last year. And of course virtually all of that involves debit and credit card fraud.

What To Do If You’re a Victim
Fortunately – at least in the United States – if someone uses your account to make fraudulent purchase, you probably won’t be responsible. Why do I say probably and not definitely?

For Credit Cards
Well, when it come to credit cards… you are definitely protected – under federal law, the maximum liability you have is $50. However, pretty much every bank and financial institution has chosen to make that $0 liability… so you really have nothing to worry about when it comes to your credit cards.

For Debit Cards
But debit cards are another story… you are most likely protected, but not always. Your maximum liability increases to $500 with debit cards. Usually banks will not hold you liable for any amount, but they have been known to hold customers liable for the maximum amount permitted by law… it’s extremely rare, but it does happen. PIN-based fraudulent transactions on your debit card are known to be harder to fight. However the biggest danger I feel is with the checking account your debit card is linked to. If a crook spends your money, your balance will drop (at least temporarily) until you detect the fraud. If you have outstanding checks, that may cause them to bounce.

(Credit or debit, we have a card fraud forum to help victims)

The Safest Option?
The truth is you will probably not be held liable for debit card fraud if you detect it within a reasonable amount of time, so I wouldn’t worry about that. But as mentioned, the temporary drop in your checking account balance can pose a problem, especially if you use checks to pay your rent or mortgage. For that reason, I feel it’s safest to stick with credit cards.

What is Coast to Coast? It’s a late night AM radio show about various topics, but it’s most geared towards topics relating to paranormal, conspiracies, etc. Yes, the subject matter is sometimes a little bit “out there” but their shows are often entertaining even if I don’t agree or believe with what they’re saying. It’s actually the number one syndicated late-night radio show in the country, so check it out. Here in the LA/OC area, it’s on from 10:00 PM to 2:00 AM on KFI 640 AM.

Like I do most nights I’m working late on the computer, on Tuesday I tuned in to the show; it was all about the banking industry – mainly credit cards.  The host (Georgy Noory) interviewed/discussed the subject with a guest (whom I don’t recall his name) for the first 2 to 3 hours of the show. I would say about 85% of what the guest was saying was gibberish (conspiracies about the financial industry) but there was one piece of information he talked about which was very interesting; credit cards for China.

In a nutshell, he discussed how the American economy (and our credit markets) are already highly developed, and the real money to be made is lending to consumers in developing countries… people that are buying their first cars, remodeling their first homes, and getting their first taste of the material life.

His theory is that the over the next couple decades, that is where the credit markets will really flourish. Of course this is nothing new (it’s common sense and we discuss China on this blog frequently) but his prediction did include a new piece of information I never thought of.  Basically, it was that there is only so much money to go around (and lend) in the world. He believes banks will scale back their lending in America so they can lend it overseas at higher interest rates instead.

Furthermore (and here’s the conspiracy part) he says that’s the real reason we are getting our credit limits cut as of lately. Now this part, I don’t believe. Earlier this year, many banks were actually losing money on their credit card divisions due to all the defaults – that’s why I believe we are going through these brutal credit limit cuts lately (they’re trying to minimize their risk to prevent losses). But either way, it was an interesting theory I had not heard before.

Your thoughts?

The Dow has surged nearly 200 points today after the 3rd quarter GDP numbers were better than expected.

For big business, things seem to be on the up and up. Goldman Sachs (known as “Golden Sacks” in the investment circles) recently had an all-time record quarter in July. The company’s third quarter earnings would have even broke that record if it weren’t for the high executive compensation, which of course diminishes the net profits. All in all, it seems to be a pretty great year for corporate America, especially the finance sector.

Are You Better Off Than Before?
But how about you and me? Are we doing any better? Let’s see… unemployment keeps shooting up; it’s now just shy of 10% nationwide. Of course the true number of unemployed is actually higher that that, because it doesn’t count people who were self-employed (they don’t qualify for unemployment benefits) nor does it count those underemployed.

Let’s Say It How It Is…
The truth of the matter is that yes, the economy is improving, but it’s corporate America whom is benefiting the most. As for your average middle-class American, things aren’t getting better. And no, don’t even give me that “trickle down” theory of giving money to the top and big business so it trickles down to the little guy. We already tried that for eight years and look where it got us.

As far as credit cards go, being that the Fed hasn’t raised interest rates during this recession and the banks are getting the money at 0%, why are they insisting it’s necessary to raise our card’s interest rates lately by such drastic amounts? They’re being lent money for nothing by the fed, PLUS getting astronomically big bailouts… it just doesn’t make sense to me.

We all know there is the Gold, Platinum, Black. and Plum Card, but is there an American Express purple card that you didn’t know about? The answer may surprise you.

Believe it or not, it’s real! There is such thing as the “purple” card. But you need to hop in a time machine and go back around 50 years to see them in use.

When Amex began issuing charge cards starting in 1958, they were actually paper, not plastic. It wasn’t until the following year that they began using plastic for their cards.

By the early sixties all credit cards (Diners Club and American Express) in circulation and use were transitioned to plastic. In ’66, both Visa’s and MasterCard’s predecessors made their debut as the BankAmericard and MasterChard, respectively.

Who thinks they should come out with a new, revamped American Express Purple card for modern times?

Rep. Betsy Markey of Colorado proposes that reform take effect sooner.

There’s no doubt the recent Credit Card Accountability, Responsibility and Disclosure Act of 2009 which was passed this year is beneficial for the long run. But unfortunately for now, it is actually hurting consumers.

The Problem
Banks left and right have been scrambling recently to jack up interest rates while they’re still permitted to do so. Almost all of us have been a victim of this in one way or another. I have cards with several different financial institutions and all but one have had their APRs shoot up since the reform was passed. I currently have no balances, but I can only imagine how devastating this would be if I did.

The Solution
Recently Representative Betsy Markey (D-Colorado) along with lawmakers made requests to the banks to voluntarily stop their rate hikes for now. Why? Well due to this rampant practice of out of the blue rate jacking, lawmakers are deciding whether they should change the date the reform goes into effect. Right now creditors have until February 22nd, 2010 – at that time, it won’t be so easy for them to raise a customers rate.

Will this be a solution? In my opinion, it could make matters worse. If congress is successful in changing the compliance date to December 1st, that would mean all of the banks would scramble to raise rates over the next few weeks (while they’re still permitted to do so). Hopefully, I’m completely wrong about this and they don’t do that if this change takes place.

Discover Sets An Example
Discover Financial has stepped up to the plate and voluntarily decided to freeze rates until the reform takes effect, whether that be in December or in February. So if you have a Discover credit card, you’re safe. Now, if only everyone else would follow their lead!