Caveat Emptor: beware trade-in fraud

Imagine trading in your vehicle, driving away in your new vehicle, only to find out the dealership hasn’t paid off your trade-in. And you’re stuck with the bill.

That’s what happened with several couples, the Detroit Free Press reports. It happened when Walt Michael’s RV Superstore failed to pay off a couple’s trade-in RV. When the dealership went under, the couple was stuck with the RV payoff amount. Even though the trade-in RV was sold by Michael’s, the Free Press reports.

The Free Press recommends paying off your trade-in vehicle before turning it over to the dealership, or making sure the dealership agreement includes a promise-to-pay provision that says the dealer is 100% responsible for the trade-in amount. Also, ask around to see how the dealership does businesses. Check with the Better Business Bureau to see what others have to say, or to check for problems in the past.

As always, caveat emptor: buyer beware.

Help us fight for Interchange

Your debit or credit card transaction goes something like this: You buy something at a retailer, either online or in your hometown, and you go to pay with your card. Your payment gets split, with a tiny percentage going to Visa or MasterCard, and the rest going to the merchant.

But now Congress is looking to change the whole system in a way that hurts American 1 and other financial institutions.

Merchants pay a fee for the privilege of using Visa/MasterCards payment infrastructure. That’s called interchange. Visa and MasterCard pay card providers, like American 1, a bit of that interchange for being a part of their system.

Everyone wins. The merchant gets an ease-of-use system for payments, Visa gets some income from the merchant, and we, as a credit union, get a fraction of that income for providing the debit or credit cards. Interchange is great because it helps credit unions of all sizes to issue debit and credit cards. We see interchange as a merchant’s fair share of the costs of this convenient system.

But it’s more than just convenience. Merchants, the ones taking the Visa or MasterCard payment, pay a small fraction for this service and reap most of the benefits, all while assuming none of the risk. American 1 has to cover the costs for fraud, card errors, and serving debit and credit card accounts. All the while, merchants benefit from the increased purchasing power such card systems provide. When you have a Visa account, for example, it’s easier to pay for more and bigger stuff. The merchant gets all that income, and only has to pay a small, single-digit percentage back to card issuers to maintain the system.

If credit unions like American 1 didn’t provide debit and credit cards to our members, imagine what would happen to local businesses. Or online retailers. Now think about all the other credit unions and banks across the nation. We all have to provide debit and credit cards, and providing that system costs money. The only way we can pay for this convenient system is to charge a fair interchange fee.

Now, Congress is looking to change the interchange fee structure, which means American 1 and other card providers could get less income for providing debit and credit cards. If this happens, our debit and credit card system could cost you, the member, more.

If interchange were reduced and could no longer adequately support American 1’s card system, you, as members, may end up paying more to use your debit and credit cards, or we may no longer be able to offer cards at all. Members of Congress should oppose merchants’ proposals to reduce interchange.

So we’re fighting back with a petition. You can stop in to our Home Office or Argyle Branch locations this week to sign the petition telling Michigan’s senators, Carl Levin and Debbie Stabenow, that we don’t want them messing with interchange income. Use those links to e-mail your senator, and your local Congressional representative, and tell them we don’t want any reduction in interchange income.

Big banks get desperate on credit cards

So that big Credit CARD Act that’s due to hit financial institutions next year? Big banks are scrambling to set up more fees and more interest rate hikes to get your money before the act goes into affect.

Bank of America is testing an annual fee on 1% of their cardholders (that’s 800,000 people, all together).

“We’re testing this to see what the feedback is,” said Bank of America spokesperson Betty Reiss. “In terms of any plans going forward, we haven’t made any decisions yet.”

Here’s a clue, Betty: feedback is going to be negative.

Lucky for them, BoA has chosen not to raise their card rates, but an annual fee means if you’re holding a Bank of America card, you could be paying more.

Meanwhile, Wells Fargo is going to raise rates on its card-holding customers, says the South Florida Business Journal, by up to 3%. The new ouch-worthy rate will affect “most” of Wells Fargo’s credit card customers, whatever that means. “Most” usually means “more than half,” so it’s going to hurt a lot of people.

How the Credit CARD Act affects American 1

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 took affect on Thursday last week, implementing major changes to how credit unions and banks relate to credit-holding members.

If you hold a Visa, line of credit, home equity line of credit, or SimpleLoan plan with American 1, your terms may change – but not much.

Unlike many of the big bank credit cards we’ve highlighted in the past, the new Credit CARD Act changes don’t apply to American 1 policies because we didn’t adhere to many of the abusive practices the law seeks to fight. For instance, we don’t raise your credit card interest rate if you make a late payment, and we don’t change the terms of your credit agreement very often.

But still, the law does affect several of our policies. The most noteworthy is that all open-ended loans, like credit cards and lines of credit, now have a due date on the 25th of each month. Before, we let you pick your own due date. The Credit CARD Act, however, requires us to give 21 days notice before your payment is due, which means we’re moving everyone to one due date to comply with the law. Your account statement, mailed at the beginning of each month, will now serve as your due date notification.

We put together a Frequently Asked Questions section to highlight how the changes will affect you. It’s not comprehensive, but we do want to answer any questions you have, and help you manage the new due date rules.

As always, don’t hesitate to contact us with any questions you have.

Exposed: American Express raises fees

One of our employees here at the credit union received this letter from American Express informing them that – guess what? – AmEx is raising rates and fees.

Big surprise, right? We’ve seen this before.

AmEx calls it a “price change notification,” which translates as “you’re going to pay more to use an American Express card.” For example, our American 1 employee will pay prime rate plus 21.99% APR on any cash advances, which – as of today – equals 25.24%. Here at American 1, our cash advance rate is the same as our everyday Visa rate.

This letter is another example of big bank credit card companies raising their fees and interest rates to bail themselves out of the mess they got themselves into. And you pay the price for their mistakes.

For more information on big bank credit cards, visit our Top Secret Visa site.

Big banks raise credit card fees ahead of law

Big banks are trying to beat the new Credit Card Accountability, Responsibility and Disclosure Act, which means more bad news for big bank credit card holders, according to the Washington Post:

Chase, for instance, will raise the minimum payment required of some of its customers from 2 percent to 5 percent of the statement balance starting in August. Chase and Discover have increased the maximum fee charged for transferring a balance to the card to 5 percent of the amount, up from 3 and 4 percent, respectively. Bank of America last month raised the transaction fee for balance transfers and cash advances from 3 to 4 percent. Card issuers including Bank of America and Citi also continue to cut limits and hike up rates, which they have been doing with more frequency since January.

Banks blame everything from decreasing credit scores to the “additional increases in the cost of credit.”

Some in Congress are fighting the rate and fee hikes, so stay tuned.

…and just a note, American 1 doesn’t charge for balance transfers.

NYT: Credit Unions less likely to charge extra credit card fees

Wondering how the Credit Card Accountability, Responsibility and Disclosure Act – signed into law last month – will affect your American 1 Visa card?

Hardly at all.

That’s in line with what the New York Times found in its own study. The newspaper found that the outrageous fees banks charge on their credit cards, the same fees that the new act combats, aren’t an issue with credit union-issued credit cards:

Credit union cards demonstrate that punishing fees are not an essential ingredient of profitable lending. This should help assuage fears that the credit card act will bring disaster for credit cards. Rather, it should nudge them toward the gentler credit union model that many Americans already enjoy.

As we update our disclosures and Visa card brochures, we’ve already noticed that little will have to be changed on American 1’s end. That’s good for us and good for you, and that’s just the way we like it.

Head to our Operation: Your Best Interest site to learn more about deceptive big bank credit card practices.

Protecting your online purchases

In the ongoing effort to prevent ID theft and online fraud, American 1 is now requiring that members who make purchases from online vendors using Verified by Visa (for credit card transactions) and MasterCard SecureCode (for debit transactions) sign up for each program.

These two programs require that you enter a seperate, secure passcode when you make online purchases at participating vendors. When an online merchant prompts you to enter your SecureCode or Verified by Visa code, you have to be signed up with the respective credit or debit program to make your purchase.

Not all online merchants (Amazon.com, PayPal, etc.) currently require you to use Verified by Visa or SecureCode when making a purchase. For the ones that do, however, you’ll be required to sign up for the program. Use Visa’s online form to activate Verified by Visa, and MasterCard’s unique American 1 page to get the process started.

You can choose to “decline” the transaction, but if you do, your transaction will be declined.

In other words, this service is now mandatory for online transactions where the merchant offers it. But again: not all online merchants currently utilize these programs.

We’re doing this to combat online fraud. There have been more and more members that have been affected by identity theft, especially using Visa and MasterCard cards, so we’re using these security programs to fight back.

Yes, this means you’ll have one more passcode to remember. But, in the long run, it will help protect you in case someone steals your credit or debit card number.

If you have any questions about Verified by Visa or SecureCode, contact our Card Services Department at (888) 213-2848.

Exposed: Bank of America’s fee increase letter

Here it is: an official letter from Bank of America spelling out all the bad news.

For one, they’re raising their fees in several areas. Two, they’re expanding their definition of the “Foreign Transaction.” And three, they’re eliminating a credit card rewards program for average cardholders.

Talk about a bummer. You can download the entire letter here, but we’re going to go into more detail below.

Let’s start from the top: Bank of America is raising fees on this entire list of card features. And no matter what the fee ends up, the minimum you’ll pay on each is $10. Do all seven? That’s at least $70 extra on your bill. Who can afford that?

The thing is, American 1 doesn’t charge a fee on any of those listed items. None.

As you can see above, BoA is expanding their definition of a “Foreign Transaction” so they can charge you their 3 percent fee plus any other fee that applies. That fee is triple what American 1 charges.

Finally, Bank of America is cancelling their Basic Air Rewards for everyday cardholders.

After doing some digging, we found out that Basic Air Rewards are still available – but only to Visa Signature and World MasterCard accounts. If you’re a basic BoA cardholder, you’re stuck with FlexAir Rewards.

American 1 does it differently: our ScoreCard rewards points are available to everyone, no matter what card you have.

This letter from Bank of America just shows why having one of their cards in your wallet can cost you. Find out more at our Top Secret Visa site, and think about transferring your BoA credit card balance to an American 1 Visa.

Learn the secrets of car dealerships

The world of auto sales is like another planet: so many secrets and plans and methods. Purchasing a vehicle involves patience, stamina, and a bit of self-education.

Thankfully, we can help with the last one.

Over at the Consumerist, you can learn about the “four squares” method of making deals at a car lot, which involves directing your attention away from things like the actual price of the vehicle you’re buying or financing. As with most Consumerist posts, a lot can be learned from the comments section, so be sure to check out the readers’ stories at the end of the article.

One of the posters pointed to Car Buying Tips, an encyclopedia of car dealer trade secrets and tactics. For some good fun, check out the mail the site gets from angry dealers.

The most important lessons I caught were (a) get pre-approved at a credit union to know how much you can/should spend, (b) haggle over the purchase price before anything else (trade-in, monthly payment, options) is talked about, and (c) do your research. A well-informed buyer is the most powerful person on a car lot.

Dave, a reader over at the Get Rich Slowly blog, offers some advice from working at a dealership, too. Here’s a realistic one:

Do not try to bluff or BS anyone in the dealership — they are a lot better at it than you are, and they do it far more often.

Our Member Relations department is happy to answer any questions you have about this stuff. Working with dealers as much as we do, we’ve learned a thing or two. We even have a guy, Dale, in the department that used to sell cars. He has some fun stories to tell.