Credit Card Debt

Posts Tagged ‘American Express Card’

Chris Elliot has  a post on his travel blog about someone being hit with a “foreign transaction fee” when they booked through Expedia’s US cite.    To Chris’s surprise, the card holder had the fee removed by calling up the credit card company to complain.

Actually, there are no shortage of fees that can be removed simply by asking.    Those dubious “foreign transaction fees” are a good place to start.   If you have a good payment history, and you happen to miss a payment by accident, expect to have your “late payment fee” removed, just by asking.   A little harder is the annual fee, but many have had luck.   The last time I was asked to pay an annual fee, on my Starwood American Express card, I called to have it taken off.    Instead, I was offered several thousand StarPoints, which I felt had the equivalent value of the fee.

Just Because The Fee Is Removed, Doesn’t Mean Your Problems Are Gone

First, you need to get the name of the person who agreed to remove the fee.    Next, you need to write down their name, and the date and time that you called.    This is just in case you somehow do not get the credit that was agreed upon.   I have gotten in the habit of writing this information on the bill itself.   That way, I will be sure to retain it with my stack of bills that I file away every month.

Another problem is that they can remove the fee, but they may get you in other ways.   If you have a late fee removed, your credit card company may decide to suspend your account anyways!   This happened to the Capitol One account of someone I know.   They accidentally missed a payment, then they called to have the late fee removed.    No problem, said the representative.   The next day their account was put on hold until they made a payment.    That would have been nice to know when they spoke with the representative!

APRs

Yesterday, I addressed the question as to whether or not fees have been rising.  I have concluded that in general, they are not.   Sure, some fees are rising, but I think it is at worst consistent with long standing trends.    At best, you can find an equal number of fees being eliminated.

What is undoubtedly occurring is that APRs are going up.      I for one, do not think this is such a bad thing.   Hear me out.   I believe that most fees are essentially tricks and traps.   They are scams to get people to pay penalties, and they are incentives for credit card rules to be as tricky as possible.   If you don’t believe me, try explaining double cycle billing in a simple way.   Or try justifying bills being due on days that the bank is closed.

APRs on the other hand are an honest measure of interest rates.    I had a very interesting debate about APRs with someone from the payday loan industry last year on my personal blog.

While I am not a big fan of payday loans and triple digit APRs, to say the least, we did reach common ground on one subject.    We both feel that it would be more honest if “late fees”  were categorized as interest, with a corresponding APR.    As their representative put it:

REDIT ALTERNATIVE(14-day term)

$100 PAYDAY ADVANCE FEE = $15 fee = 391% APR

$100 OVERDRAFT PROTECTION = $29 fee = 755% APR

CREDIT CARD LATE FEE ON $100 BILL = $37 fee = 965% APR

$100 OFF-SHORE INTERNET PAYDAY ADVANCE FEE= $25 fee = 652% APR

$100 BOUNCED CHECK + NSF/MERCHANT FEE= $54.87 fee = 1431% APR

It makes sense that a payday loan industry person would have a problem representing their fees in APRs while other banks do not.

If banks have to find new sources of revenue as a result of the Credit Card Bill of Rights, I would rather they honestly represent these fees in their interest rates, rather than go after you with tricks and traps.

By Jason Steele
Yaab

A couple of days ago, I posted this story about a guy who beat debt.  One of his solutions was   “getting a charge card which feels like a debit card (and pays for itself with the amount I spend), so I never trap myself in to thinking I’ll pay things off later.” Emphasis mine.

What Is A Charge Card

Frankly, between debit cards and credit cards and ATM cards, it is easy to forget that there is another type of plastic option, the charge card.

This is a card designed for deadbeats, people who plan on paying their entire balance in full, every month.    Payment in full is required at the end of the month, or a penalty is applied.   Multiple penalties could result in the cancellation of your account.

Typically, the penalty is a flat percentage of your balance, one that is less favorable than had you paid interest on your credit card.

In the United States, American Express still offers their classic charge cards, including the iconic original green card.     Others offering charge cards include Diner’s Club as well as some individual merchants.

What Is The Point Of A Charge Card?

My opinion here is mixed.   First, I am a proud member of the “deadbeat” club.   I treat all of my cards like charge cards in that I pay every balance on time and in full every month.     That said, you would think that I would love the idea, considering it was designed for people like me.   On the other hand, I don’t see the point.    I love my Starwood American Express Card, which is a credit card, and I don’t see the need to have a Charge Card.

Some, like the person I wrote about, view the Charge Card as a hybrid between debit cards and credit cards.    Like a debit card, they do not pay interest, but like a credit card, they do have good insurance, chargeback protections, and rewards.    The only think that really separates it from a credit cards is that the penalties for not paying your bill in full are more severe.

The difference between charge cards and credit cards reminds me of how automobile safety evolved.  At some point in the 50’s auto manufacturers realized that people in car accidents were injured by protruding objects on their steering wheel and dash board.    They then tried constructing them of soft plastics and foam rubber.      Some people wondered if they should have gone the other way, and built sharp, pointy objects in the steering wheel and dash board.    The idea is that, knowing the danger, people will drive extra safe.

For many people, a charge card would merely be a large pointy object on their steering wheel.    They know that the consequences of not paying off their balance will be especially harsh, so they have more incentive to avoid it.

No Preset Spending Limits

Another supposed feature of the charge card is the idea that there is no preset spending limit.    I really don’t put much faith into that claim.   The spending limit might not be “preset” but it is still there.   The difference is that either they do not tell you what it is, or that it is constantly changing.    I suppose another difference is that you cannot be charged an “over the limit” fee.   In that sense, it is a good thing in that the worst they can do is deny your charge.

Ultimately, charge cards are a relic from a bygone era.   I like the idea behind the assumption that you should never carry a balance.    These are words that I live by.    On the other hand, there is no real compelling reason to choose a charge card over a credit card.    In fact, charge cards are more likely to require an annual fee, where as credit card holders usually do not pay them.    I am sure that the credit card issuers are free to waive the annual fee as they know that a certain percentage of card holders will ultimately become “revolvers”; people who carry a balance and pay interest.

By Jason Steele
Yaab