Costco bank and Wal-Mart credit cards?

If you love a good deal, you probably shop at Costco or Wal-Mart. But what if you would love a good deal on a credit card or loan? Both discount retailers have recently launched ventures into the world of personal finance. Wal-Mart has established its own banking charter for their in-store financial offices and offers credit reports, credit cards and debit cards online.

Costco has not sought its own banking charter, instead it has partnered with a wide variety of financial service companies. Costco offers auto loans, home loans, health insurance, car insurance and investment products online for its members.

What are you really saving by signing up with these services? Probably not as much as you would think. The Wal-Mart credit card offers standard rates (11-17% APR) and Costco's discounts on auto loans and insurance are difficult to calculate. If you are shopping for a financial service, it is possible that you could save a bit by going through Costco or Wal-Mart. In any case, you should still shop and compare rates at a variety of places before deciding who has the best deal.

Identity thieves and drug lords

The connection between methamphetamine and identity theft is growing stronger according to the authorities. According to an Associated Press article, meth users and producers are commonly turning to identity theft as a source of income.

"It's been said the two crimes go together like rats and garbage," said Jack Lucky, a Riverside County prosecutor who nearly became a victim of identity theft himself before his personal information was found at a meth lab.

As many as 60-85% of identity theft cases cited by police officers had meth ties. If convicted, these double criminals may only have to serve one year in jail for their crimes. Currently, this connection is most prevalent in the west but is expanding across the country.

Credit cards: friend or foe?

Kathy Mitchell at Consumers Union (the group that publishes Consumer Reports) sent us a note today about a new cartoon her group has posted about credit card woes this holiday season. If you are starting to feel the pinch of high APR's, the universal default clauses and hidden credit card fees, check out this fun (and catchy) credit card ditty online.

The credit card industry certainly is getting some unwanted attention this week. First, Consumers Union started their online petition for credit card reform and then ABC's Boston Legal broadcast a passionate and lengthy criticism. To be fair, I really do think the credit card industry is pretty honest as a whole. Credit cards are convenient and affordable if you use them correctly. But when you use them incorrectly, it's all too easy to end up in deep, deep debt trouble.

The new higher minimum payments going into effect this January are a great fist step. And the things that Consumers Union and Boston Legal's producers are fighting for are great for consumers and reasonable for the industry. A few new limits on the way that credit card companies do business will probably benefit us all.

What do you think? Weigh in in the comments section or by email to emilyblog@credit.com.

Guarding against mortgage fraud

All good things must come to an end, right? As we approach what looks like the end of the housing bubble, new fraudsters have moved in to take advantage of the housing price surges. According to the FBI, mortgage fraud reports filed by lenders alone have increased 600% since 1999. These con artists take advantage of lending loopholes to take money from unsuspecting consumers and lead them to foreclosure.

Want to read more about mortgage fraud? Check out the Mortgage Bankers Association webpage www.stopmortgagefraud.com or the Mortgage Fraud Blog that is moderated, ironically, by a mortgage banking lawyer named Rachel Dollar.

Shopping online safely

There are still ten shopping days left until Christmas...plenty of time to do some last minute purchasing online. Shopping online is safer than ever but there is always a slight risk of identity theft or other fraud. In order to combat this problem, more and more companies are starting to offer secure credit card numbers just for online shopping. Let's compare the options:

• Discover Card - Discover Card has a Secure Credit Card Number tool that cardholders can download and install on their computer. When you want to shop online, just click on this tool to instantly generate a secure, one-time credit card number.
• MBNA - MBNA's Shop Safe program also involves downloading software, but as an added bonus cardholders can also set time and amount limits to ensure that their one-time use credit card number isn't misused.
• PayPal - You can use an online PayPal account as a secure gateway between your credit accounts and your online shopping. Online retailers see your PayPal account number instead of the actual credit card number that you are using for the purchase. This service is nice because it works with all kinds of credit cards, not just one brand.
• VISA - Instead of a disposable credit card number, VISA uses an online password system called Verified by Visa to help cardholders shop safer. Plus, no software to download!

The downside to these services is that they are usually fairly complicated to use. In fact, American Express and MSN have recently stopped offering these types of online shopping systems to customers. If you are shopping online without one of these masking programs, remember to use a credit card instead of a debit card, to look for the "https" in the URL and to monitor your account statements closely.

ABC's Boston Legal takes on credit card industry

Did you catch Boston Legal last night? The show featured a lengthy criticism of the credit card industry that was fascinating. One of the show's writers must have had a very bad experience with their credit card company. According to the show's summary:

Alan Shore tries to bail out his secretary, Melissa, who is in serious credit card debt, and seeks the assistance of the firm's quirky but brilliant bank and finance genius, "Hands" Espenson.

From skyrocketing rates to the universal default clause, this episode took on everything that consumers dislike about the credit card industry. Pretty gutsy stuff. It's already generating a lot of feedback on the show's message boards too. It looks like a transcript of the show will be posted online here in a few weeks. I'll be sure to link to it from CreditBloggers.com when it becomes available.

Credit card minimum payments could double in January

Banking regulators are recommending that credit card companies increase their minimum payments from 2% to 4% of the debt starting in January 2006. This change is designed to make consumers who only pay the minimums each month reduce their interest costs and pay off their debts faster. Borrowers who have a lot of credit card debt and are only paying the minimum each month may feel the pinch when this new policy goes into effect next year and should start rearranging their budget now.

Of course, paying the minimum amount due will still be a pretty terrible idea even after these changes are implemented. Bankrate.com has a free online calculator that can help you calculate how long it will take to pay off your debt and how much interest you will have to pay if you only pay the minimum each month. You might want to sit down for this...the results are shocking.

For example, a $5,000 credit card balance at 18% APR with a 2% minimum payment ($100) would take 46 years to pay off and will cost you a whopping $13,000 in interest. Just thinking about this gives me heartburn! Increasing your minimum payment to 4% ($200) reduces the repayment period to 12 years and drops your interest costs down to $2,900. Better yet, increase your monthly payment to 100% and avoid interest charges altogether. 

Financial New Year's resolutions

According to a recent survey, 58 million people are planning to make a financial resolution this New Year's Eve. For most people, this resolution is probably to reduce their credit card debt (still precariously high at an average $8,400 per person). But some people may be making more creative financial resolutions for 2006. If you haven't set your resolution yet, think about one of these:

• Boost my credit scores - You'll get the best rates on insurance, credit, loans and more if your credit scores are above 700. You can improve your credit scores  by reducing your debts, removing negative inaccuracies from your credit report, maintaining a healthy balance of credit and loan accounts and avoiding unnecessary applications for credit. Credit.com has a very detailed series of articles online that show you exactly how to improve your credit scores.
  
• Refinance my auto loan - Still paying $300 a month for that super expensive new car you bought last year? Why not consider refinancing your auto loan in 2006? You may be able to reduce your payments and save a bundle. Especially if your first loan was at a high rate or you have improved your credit scores since then. Read a previous CreditBloggers post about auto refinancing here.
• Protect my identity - Identity theft is terrible crime. Protect yourself in 2006 by buying a shredder, installing virus protection on your computer and subscribing to a credit monitoring program. Just a few simple steps can help you dramatically reduce your risk. You can read more about identity theft here.
• Open an IRA account - Save for retirement and reduce your taxes by opening an IRA in 2006. Opening this investment account can seem complicated, but it's actually pretty simple. Start by reading The Motley Fool's guide to IRAs and then choose a trusted broker to open an account with.

What's your financial New Year's resolution? Send an email to emilyblog@credit.com or enter your resolution in the comments section below!

Identity theft in the military

It’s a fact: military personnel have a higher risk for identity theft than most civilians. This danger is greater because military personnel often spend long amounts of time overseas, their Social Security numbers are used publicly at times and they tend to relocate frequently.

Fortunately, the military has recently started working to combat identity theft crimes. Until recently, all military ID cards, veteran ID cards and earning statements included full printed Social Security numbers. Now, the first five digits of Social Security numbers are masked most military documents and there have also been new protections for the privacy of online information on government websites. Although these new security measures have helped to reduce identity theft, military personnel still remain particularly vulnerable to these crimes.

There are also two new resources available just to help military personnel combat identity theft:

• Active Duty Alerts – Military personnel deployed for active duty now have the added security of being able to place a special fraud alert on their credit reports. Simply contact one of the three credit bureaus (Equifax, Experian or TransUnion) to request that an active duty alert be placed on all three credit reports for one year. This alert notifies creditors that you are on active duty and that they should contact you before opening new accounts.
  
  
• Military Sentinel – Military personnel can file an identity theft complaint online at www.consumer.gov/military/. This website exists as a partnership between the Federal Trade Commission and the Department of Defense. Reporting the crime here won’t help resolve the case but it does help with tracking and policy decisions.

Identity theft in the military is an unfortunately common crime. Luckily, lawmakers and military agencies have started to acknowledge the problem and take actions to protect personnel. Identity theft rates are dropping, but military personnel should still take the initiative and be extra cautious about protecting their identities.

Asking for credit card help

Yesterday we talked about the importance of contacting your lender when you are having trouble paying your mortgage. Mortgage lenders don't want you to foreclose and offer a variety of options to help you get through your financial crisis. Plus, the foreclosure process is expensive and often worthless for banks.

Today, contacting credit card companies when you are facing a crisis seems to be a hot topic instead. Just like you should contact your mortgage lender at the first sign of trouble, you should also contact your credit card company when you are facing a financial crisis. Most of the big creditors have special departments set up that can offer reduced payments, lower interest rates and fee removal for customers who are experiencing a temporary problem such as a job loss, natural disaster, divorce or illness.

How successful your call will be depends on your creditor's policies and your personal situation. Bank of America and Citibank are two companies that offer assistance. Other creditors may not be as helpful or may only offer assistance in specific situations. 

Remember, creditors want to keep you as a customer. You are much more lucrative to them as an active cardholder than as a charged-off debt sold to collections. Stand up for your rights and don't be afraid to ask your credit card companies for help when you are facing a financial crisis.