Bank and Credit Card Practices – What You Need to Know

Banks and credit card companies employ a lot of underhanded practices that make it seem like the public is benefiting but in actuality, these tricks do more harm than good. If you have encountered a situation wherein you’ve been misled or deceived, banks and credit card companies may be held liable as there are laws that regulate such practices.

Criteria for Deceptive Acts

The Federal Deposit Insurance Corporation (FDIC) has outlined certain measures to curb misleading practices. Banks and credit card companies are mandated by law to sufficiently explain the characteristics of a given promotional offer. The information found on advertising literature must be complete. For example, a credit card reward program should not only harp on how much cash a consumer is paid back, but should also detail the provisions and circumstances under which this reward is applicable.

Some credit card companies highlight the cash back offer but fail to disclose details such as up to how much a consumer must spend before the reward is granted, the duration of the promotion, whether this reward is given as a lump sum and so on. Omission of such important details is a clear indication of deception.

Information on advertisements must not be ambiguous so that the consumer understands what a particular service or product entails. Additionally, any follow up communications with the customer must be able to further clarify the terms and conditions of services or promotions to ensure the customer really understands the intended message.

A Word on Overdrafts

The FDIC along with other regulatory agencies has come up with guidelines as to how services such as courtesy overdrafts should be marketed and communicated to customers. These rules are quite simple but clearly, a lot of banks don’t follow these rules.

First, all fees associated with the overdraft program must be divulged. This includes transaction fees, interest rates, penalty fees and so on. Banks should also disclose in what instances these fees will be imposed. Will the customer be charged per transaction, is there a daily charge and so on.

There are even rules on proper notification regarding overdraft protection usage. I f possible, the bank should inform customers if a particular transaction will bring about any overdraft fees and they should be given an opportunity to opt out of the transaction. The bank should also provide notification to the customer once he has accessed the overdraft program. Details such as overdraft amount, fees incurred from the transaction, how much the customer needs to repay the draft should be outlined in the notice.

What to Do

If you believe you have been subjected to misleading practices you can issue a complaint to the bank. You should first try to resolve the matter directly with them before attempting any other measures.

Should this fail, you can ask for assistance from the consumer helpline of the Federal Reserve. You can file a complaint online, through fax or through snail mail. Your complaint letter should contain your name and account details, the name of the bank and the representatives that you’ve dealt with as well as a detailed explanation of your problem.

The History of Credit Cards

Credit Cards Replacing Paper Money

A credit card is a small piece of rectangular plastic that is no thicker than a sheet of paper, though it cannot be folded. Initially credit cards were metal tokens in the shape of coins, then they changed to metal plates to celluloid then fiber and now plastic with perhaps a photo of the holder and a magnetic strip on the reverse containing security information such as a personal identification number enabling the card to be used at money dispensing machines (ATM’s) and merchant establishments.

What is meant by ‘Credit’?

Credit is the system of buying some produce or service without having to pay for it at the time of the transaction. The payment is made at a pre-determined later date with the addition of a fee to the bill amount. This is like loaning someone money to buy something without actually giving them the cash but instead giving them the product they want to buy. So, the system of credit is not new to humanity in fact, it is as old as civilization itself or perhaps even older. The entrepreneurs of the inhuman kind have been proclaimed responsible for identifying human needs and wants as a rollicking business, and so they invented the credit card system. Though, disputed by many, The Diners Club is credited to be the ones to invent the credit card in 1950.

When Were Credit Cards Invented?

In contradiction to the theory that ‘The Diners Club’ started the credit card system, the Encyclopedia Britannica records the origin of credit cards in the United States as far back as the 1920’s. During this time firms such as oil companies and hotel chains started issuing credit cards to their regular and valued customers who were free to use their services and pay them at a later date. These cards were only useful for purchasing goods and services from the companies and establishments that issued the card. However, references to credit cards have been found as early as 1890 in Europe. It was only in the late 1930’s that companies started accepting each other’s credit cards and this is when things began to get complicated for accountants.

Computers Promoted The Use Of Credit Cards

In the beginning there were no computers to record the credit card transactions and the process of verifying the credit balance of the card was done manually through a regularly updated credit card directory, much like a telephone directory. This system was time consuming and tedious and provided many loop holes for credit card fraud. Today, with computerization, the use of a credit card is instantaneous. All one needs to do is to ‘swipe’ the card through a slot machine and the amount entered. If there is adequate balance in the account of the holder the transaction is completed and the customer billed a month later. Usually credit cards allow for a 50 day credit free period. If the outstanding bill is paid during this time the customer does not have to pay any interest on the transactions, else there is a whopping 2.9% charge per month on the bill amount.

Who Issues Credit Cards?

Banks and financial institutions are the main issuers and promoters of credit cards. The invention of the first bank-issued credit card is credited to John Biggins of the Flatbush National Bank of Brooklyn in New York. This was the year 1946 and Biggins did not know at the time that he had hit upon an idea that would take the world of credit by storm in times to come. From this first credit card called “Charge-It” many cards have flooded the market such as the all famous “American Express” credit card and the Diners credit card. The Bank of America issued the BankAmericard in 1958. This card is now known as the “VISA” card. Around the same time the popular MasterCard came into being. These are the two prevailing cards being used today. The era of plastic money had begun.

7 Tips For Credit Card Management

The invention of credit cards was a giant leap forward for humans. People around the world use their credit cards for all kinds of purchases and payments. The credit cards give the people, the freedom of purchasing what they want, without having to depend on their bank balance. Credit cards are used by all kinds of people in cities and towns across the world. It is a fact that a credit card can be a boon as well as a bane at the same time.

At times, people do not know how to effectively manage their credit cards. This is why, their credit score is severely affected and they find it hard to acquire financial assistance from banks and other lenders. In order to make sure that your credit score is not affected, you need to effectively manage your cards. You need to be careful about making payments and using the card for any purchase.

When you make your credit card payments on time, your credit score improves and you can obtain higher amount of credit. On the other hand, if you fail to make the payments on time, your credit score is negatively affected and you may not get any further credit from financial institutions. Here are a few important tips which will help you in effectively managing your credit cards:

1. Plan your purchases – Before purchasing or buying any product, determine if it is necessary to buy it. You must make a list of your priorities and stick to that so that you can arrange for the money needed to pay your credit card bills. At any point of time, make sure that you do not purchase something too expensive as it will make you cross your monthly budget or the credit limit on your card.

An effective way of way of planning your purchases is to make a shopping list. At the beginning of the month, try to make a list of things you need to buy with the card and stick to that list as much as possible.

2. Always check your statements – Check your statements on a monthly basis as the statements will help you understand your spending pattern. Based on your observation, you can try to avoid unnecessary purchases. Also, checking the statements will help you in knowing the minimum payment due for a particular month, so that you can make that payment on time and avoid extra charges or fees.

You can easily check your statements online, and you can also use your smartphones to keep a track on your card usage. Mobile alerts can be very helpful in ensuring that you do not end up paying more than what you are supposed to, when you use your credit card for any transaction.

3. Try to make full payment – Try to make full payments, whenever possible. When you pay your credit cards in full and within the due date, you do not have to pay any interest on the billed amount. Besides, paying the credit card balances in full will help in improving your credit score. Even if you are not able to pay your credit card balances in full, you should always make sure that you pay the minimum amount due, within the due date.

Apart from saving a substantial amount of money on interest, you will also be able to improve your credit score and increase your chances of obtaining more credit in the future.

4. Keep a track of supplementary cards – At times, you might forget the fact that you have provided supplementary cards to your family members and these cards are linked to your credit card account. The way these cards are used can have an impact on your credit card account. Hence, you should keep a track on them and also ensure that the transactions completed with them are paid for within the payment due date.

Besides, you also need to keep a track of these cards so that you can ensure that the credit limit of your card is not exceeded. If it is exceeded, you will end up paying an over limit fee and other hefty charges.

5. Look out for promotional offers – Why pay more when you can get the same product by paying less? Be a little smart when using your plastic money and make sure that you utilize the variety of offers and promotions provided by the card issuers from time to time. These promotions can provide you with access to discounts, deals and privileges across different segments such as dining, travel, shopping and so on.

You can not only save money through these promotional offers but you can also enjoy a variety of other exclusive privileges which will enhance your experience of using a credit card. Make sure that you always visit a website where you can find information about such promotions so that you can take full advantage of them.

6. Make multiple payments in a month – Do not just limit yourself to making a single payment within the payment due date every month. Instead, try to make multiple payments even if you pay small amounts. It has been observed that the credit card issuers and the credit bureau tend to send payment reports more than once every month, if there is a lot of payment activity in an account.

When you make multiple payments you make sure that the lot of positive information about your credit card usage is being sent to the credit bureau and in the process your credit score will get a big boost. For example, if the minimum payment due for the month is S$1500, do make a payment of S$1500 and apart from that also make other amounts in the same month.

7. Avoid cash advances – You will be provided with the feature of withdrawing cash with your credit card but you should avoid utilizing this feature. When you withdraw cash with your card, you will be charged a cash advance fee and you will also not get any interest free period to make the payment.

Cash advances will increase your minimum payment due and the overall balance of your card and will make it difficult to pay off the balance in full. It can also have a very negative effect on your credit score and so it is important that you try to avoid cash advances as much as possible.