Advice From Visa

Today’s post is the third and final post in my series on consumer advice from credit card companies.   Earlier this week, I examined Advice From Amex and Advice From MasterCard.

Today Is Visa’s Turn

While Amex had a very simple site, and Mastercard had a really slick one, Visa has buried their site under a menu.   First, you have to click on “Using Visa”, and then you get many options, one of which is “Personal Finance Resources”.  Then, they reference you to another site called “Practical Money Skills For Life,” a site is created by Visa.

What They Get Right

On the Visa.com site, I give the kudos for laying out the disadvantages of credit cards somewhat clearly:

• Potential higher cost of items (interest and finance charges, other fees) if paid back over time.
• Easy to spend beyond your means, resulting in financial difficulties.
• Not paying bill on time can negatively affect your credit history, making it more difficult to get a car loan, a mortgage, or even acquire car insurance.

As far as I can tell, that is the closest any of the three major networks come to telling you that interest and finance charges are bad because you end up paying a lot more for your purchases.   They also link to annualcreditreport.com, the only official site for free credit reports.

Over at their Practical Money Skill site, they do provide information on the CARD Act.

What They Miss

As with Amex, they fail to spell out how your FICO score is weighted.   Strangely, they boil it do to saying that: “The 3 C’s of credit refer to character, capital, and capacity. These are areas the creditor generally looks at prior to making a decision.”

Ok, that is about as vague as you can get.   Sure, they spell out what they consider character, capital, and capacity, but why beat around the bush?   Why not just spell it out like Mastercard does:

According to Fair Isaac, FICO score factors are:

Payment History – 35 percent

Amounts Owed – 30 percent

Length of Credit History – 15 percent

New Credit (number of recently opened accounts, number of credit inquiries, etc) – 10 percent

Types of Credit Used – 10 percent

They also go in some humorous directions on their site for advice for students. Take a look at their page for credit card resources for students. Their first suggested book is How to Get Out of Debt, Stay Out of Debt, and Live Prosperously by Jerrold Mundis. Sounds great, right?    It turns out the book is twenty years old, and according to the review posted on Amazon From Library Journal, “Mundis flies a countercultural flag: debt is “wholly unnecessary,” and “bankruptcy is not an option.” Again, just the kind of propaganda we would expect from a credit card company.

(Note, as you can see from the comment below, Jerrold Mundis has informed us that his book is available in an edition revised in 2003.  Nevertheless, Visa still links to the older version on their site.   While it was outside the scope of this blog post to read all three books, Mr. Mundis points out that his book actually does take a highly critical stance on credit card use, not what I would have expected from a book on Visa’s suggested reading list.  Thank you to Mr. Mundis for pointing this out.)

Their other two recommendations are from 1995 and 1999, almost equally out of date.   What’s even stranger is that neither of these books seems particularly geared towards students, they are just general personal finance books from the self help section.

But the winner for vague propaganda strewn advice is clearly their Credit Quiz.   It takes merely a glance to see that it is one of these quizzes that some bozo put together where they think all of the answers are A.

1. When do you tend to pay your credit bills?
(a) When I receive them
(b) As close to the due date as possible
(c) I skip some payments

2. What portion of your credit card bills do you pay each month?
(a) The entire balance
(b) A good portion of the amount I owe
(c) Only the minimum payment

3. How much of the credit line do you owe on your credit cards?
(a) None, I pay my entire balance each month
(b) Less than half
(c) I have charged up to the limit on most of my cards

4. How much of your monthly income goes to pay credit card bills?
(a) Less than 10%
(b) 11%-20%
(c) More than 20%

5. Do you know your credit card debt?
(a) Yes
(b) I have a rough estimate
(c) I’m afraid to add it up

The most bizarre thing is that they don’t tell you the correct answer is A, they just say “Did you answer “c” to any of the questions? Then you might need to re-examine your budget, financial priorities, and credit obligations”

Actually, There are a lot of problems with this quiz.  In the first question, I would say B is the correct answer.  So long as you pay your bills electronically, and everyone should, I would always have the payment sent on the due date so the money stays in your account as long as possible.  Why pay early?   Also, in number three, they pass up a clear opportunity to tell people to pay their entire balance in full every month, but instead allow the answer of owing “less than half” of your credit line to be sufficient.     No, I didn’t really expect that they would tell you to always pay your balance in full, but it is interesting to see how close they actually come to doing so.        The forth question, How much of your monthly income goes to pay credit card bills?” doesn’t really matter if you pay your balance in full.

Conclusions

They do mention the CARD Act, AnnualCreditReport.com, and some of the drawbacks.   Nevertheless, their bizarre credit quiz, their FICO score omissions, and their worthless reading list force me to give this site a C.