Credit Cards Weblog

Most credit card payments made online can technically be reversed by a customer via the card issuing bank. Fraudsters take advantage of this and request reversal of their payment after the product has been delivered. This leads to huge losses for online merchants. According to a report, the level of such fraud is nearly 18 cents to 24 cents for every $100 worth of Internet billing. Online merchants till some time back, considered this fraud as a cost of doing business online as legal recourse to this issue was time consuming and a costly affair. However, some online merchants have now started taking the matter for legal settlement and won their cases.

Traditionally, online merchants have built in various checks to reduce such frauds, including address verification or physically calling and confirming the order. Some online merchants have also hired services of companies like RMS that attempt to detect the chances of online fraud before it occurs. Visa has also launched services like ‘Verified by Visa’, which reduce the chances of fraud. Some online merchants insist for a card to be a Visa verified card for the transaction to be completed.

A large number of merchants are reluctant to build in security checks as they believe that such checks can acts as a barrier and the customer may be deterred from completing the transaction.

Online jewellery merchants are the biggest targets of such fraud as jewellery is the most liquid asset that can be purchased. Pornography sites are the second biggest targets.

The reason why card issuers reverse online payments is because of the occurrence of a large amount of online fraud and the uncertainty in the mind of the customer on the issue of online payments. It is essentially a confidence building measure. However, fraudsters take advantage of this and make it a business.

It is time that banks and card issuers make payment reversal a more scrutinized process so as to protect the interest of the merchant as well.

Click here to read further on this issue.

Master card has decided to delay its Initial Public Offer (IPO) to the second quarter of the year as the company’s CEO, Bob Selander is recovering from a prostrate cancer surgery. The CEO’s condition makes it difficult for him to undertake the much needed promotion before the IPO.

MasterCard is the second largest credit card brand in the US and through its IPO it plans to raise about $2.5 billion on the NYSE. The IPO is expected to the largest after Internet search leader, Google’s IPO in 2004.

Other reasons being cited for the delay include Visa facing a interchange lawsuit and MasterCard’s plan on the MasterCard Foundation, which experts believe to be a tactic to thwart efficient governance. The outcome of Visa’s interchange lawsuit can have repercussions for MasterCard that can impact its IPO.

Credit cards attract one of the highest interest rates amongst all financial instruments. At times people find themselves mired in massive credit card debts and look for alternative sources of funding to retire this high cost debt. Personal loans are one of the lower interest sources of funding that can be considered.

However, there is an alternative source that is cheaper than traditional sources and is a very innovative Internet base model set up by an entrepreneur. It is called prosper.com. Transacting on Prosper.com is more like borrowing from a friend. The site enables both, borrowing and lending online, and works out more lucrative both for the borrower and the lender.

Prosper.com allows users to make deposits with it, which it holds with Wells Fargo. Online borrowers need to submit their details and undergo a verification process before they are given the loan.

Since prosper.com is an online company, it has very low overheads and does not need spreads like banks to manage costs. Hence, it is able to better the returns to investors and lend cheaper to borrowers.

It is a very good idea for students to acquire and maintain credit cards. Not only can the card help them in case of urgent requirements, but will also enable them to establish a credit history. However, students will need to exercise due care so as not to lead to defaults. An established credit history will help students tremendously in getting other loans at lower rates.

While shopping for a credit card, students should find cards with interest rates lower than 20%, with no annual fees. Students should also evaluate the add on features of the cards in accordance with their requirements. These features could vary from gasoline points to airline miles or cash back. Finally, students must plan out their expenditures on credit cards so that they do not land themselves in trouble.

To get more tips on what students should do for obtaining credit cards, click here.

The new contactless card being promoted by Visa, Master, Amex and Discover seems to be making good headway. A large number of merchants have already installed special card readers for contactless cards. These include AT&T Park, 7-Eleven, Walgreens, McDonald's, and cinema theaters like AMC, Loews, Regal and Cinemark.

It is being touted that contactless cards may offer more security because the card does not need to be physically handed over to anyone to be swiped. New shapes and methods being tested have made it possible for the card to be embedded in cellular phones or even key chains. The technology permits the customer to hold his card just above a radiofrequency reader and the transaction gets completed. An average transaction time is less than fifteen seconds adding to time-efficiency as well.

To read more on this topic, click here.

Many customers are discovering how difficult it can get to cancel automated charges that they had requested on their credit cards or bank accounts. One of the key reasons for this is that the customers do not know the exact rules for executing the cancellations. These rules can also vary from bank to bank and can also be different for credit cards and bank accounts. A large number of lawsuits have been filed by customers against this practice and in December 2005, America Online, a unit of Time Warner Inc agreed to pay $25 million arising out of customer law suits.

Since last year, automated bill payments have surpassed other forms of payments in the US and the trend indicates that this is set to grow. Banks and credit card companies are working to enhance the scope of payments to include big ticket items like rentals and lease renewals.

Banks have squarely blamed customers for the issue and say that the customers’ inability to follow appropriate rules is leading to the problem. Meanwhile, Visa and MasterCard have stated that they have strengthened their systems to enable automated payment cancellations to happen smoothly.

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After the recent massive breach of security at a US merchant, a senior Democrat, Barney Frank, who is on the house financial services committee is planning to initiate a legislation that will compel credit card companies to reveal the name of the merchant responsible for breaches. It has been estimated that nearly 200,000 customers may have to be issued fresh cards due to this breach.

According to Barney, the objective of this disclosure is not to tarnish the image of the merchant, but to create a conducive atmosphere so that all concerned parities can work in tandem to resolve the issue. He also said that keeping the merchant’s identity under wraps can lead to greater problems as the merchant can be implicated for not having cooperated in the investigation.

The affected banks and financial institutions, Bank of America, Wells Fargo and Washington Mutual have also refused to divulge any information about the merchant.

Click here to read what the FT has to say about this.

According to a recently published report, credit card companies are wooing customers to pay taxes with their credit cards and offering a host of incentives in lieu. These include, double the number of points one usually earns and higher flying mileage.

However, paying by card has its pro and cons. For one, the fee for paying taxes on the credit card is a staggering 2.49% of the tax paid. Moreover, the outstanding amount on the card account, if not cleared within the billing cycle, attracts an interest rate of 30%.

At the same time, people prefer using cards form a security point of view. The number of users paying taxes through their cards had increased to 1.5 million in 2005 up 54% from 2004.

To read more on this topic, click here.

Interchange fees, charged when the transaction stretches between banks and other service providers like Visa or MasterCard, is a fee levied to complete a transaction. At present, there is no regulatory authority setting the fees and it is being alleged that certain banks along with MasterCard and Visa are colluding to set these rates at unreasonable levels.

Reportedly, the interchange fees being charged in the US is one of the highest in the world, in spite of the fact that the electronic payments system here are one of the most efficient.

High interchange fees directly impact bottom-lines of merchants and retailers and according to them, the practise is against US Antitrust laws.

Click here to read what action merchants are taking to address this situation.

Most people don’t realize that their credit card rate is not fixed and they can work their way to get it lowered, provided they have maintained a good payment history.

There is so much competition between competing credit card issuers that you are actually in a position to take advantage of it. The last few years of low interest rates have also meant that consumers have cashed out enough home equity and kept away from consumer finance. This was not very favourable for the credit card industry and with ensuing competition, you hold sufficient leverage to push your interest rate down.

Some of the tactics that you need to employ include, telling the card issuer over a phone call that you have other credit card offers at much better interest rates. If the person at the other end of the call does not listen, ask for the supervisor. Once you reach the person, who has the decision making authority, you will in all probability be able to bulldoze your way through.

Click here to read how some people have had their interest rates slashed.