FICO Standard is a service by myFICO that allows you to get your credit report and score from either TransUnion or Equifax. Unlike credit monitoring services, you pay a one time fee and you can choose to get a credit report and score from either of these two bureaus. You can access the reports and scores for 30 days online. Aside from simply giving you the reports and scores, myFICO has decided to provide a little value add in the form of :

FICO Score Simulator – This is a tool that provides you with a what if scenario if there are any changes in the following:

Cost – The cost of getting a report and score from either one of the bureaus is $15.95.

Verdict – The FICO® Standard is a service that is perfect for those who simply want to know their credit scores from either TransUnion or Equifax. Unlike credit monitoring service, you do not have to pay a monthly recurring fee just to access your report and scores. For those who have a need to either apply for an auto loan or a mortgage in a couple of years but do not want to pay for a credit monitoring service, then this product provides the option for a one time fee.

The media has been speculating for some time about what changes to the industry the CARD act will bring.   Since the law has now been in effect for 24 hours, we can now pass judgment on it for all time.

Surprise Surprise, Reward Cards Are Going Strong

In the run up to CARD, there were no shortage of misinformed “experts” who seemed sure that the banks would stop issuing credit cards to “deadbeats” who always pay their balance in full and never accrue interest.    At best, we deadbeats would get to keep our credit cards, but our rewards would disappear.   I didn’t believe them then or now.   Here is a report from American Public Media’s Marketplace program, which airs on NPR stations.    The reporters conclude, surprise!, that right now the people who pay their bills on time and in full are the bank’s best customers.   They even interview a deadbeat customer who is raking in the cash back by using American Express’s Blue card.   I can sympathize with the feeling that you are literally wearing your card out.     Let’s just say that my Starwood Amex has seen better days.

But They Will Hit Us With Fees….

There is a popular meme in the press that goes something like this; “With the new regulations, consumers can expect a slew of new fees from their bank to make up for their losses from practices outlawed by CARD”.      The next thing they do is point to a handful of anecdotal examples.   Take this article for instance.

…the industry reacted so aggressively to the legislation. Among the moves it made:

_ Resurrected annual fees.

Annual fees, common until about 10 years ago, have made a comeback. During the final three months of last year, 43 percent of new offers for credit cards contained annual fees, versus 25 percent in the same period a year earlier, according to Mintel International, which tracks marketing data. Several banks also added these fees to existing accounts. One example: Many Citigroup customers will star

I have decided to start a post on places that do not accept American Express Credit Cards. Don’t get me wrong, I love my American Express Platinum and Blue Cash Card. But there are just some places that do not accept them and I end up using my Chase Freedom. I hope this thread will serve as a sounding board for places that do not accept American Express. Please contribute if you have found such places either in the comments below or you can send me an email here with pictures and I will add them to the post as they come in.

But to start, I just came back from Breckenridge in Colorado for my ski vacation and it turns out that North Face there does not carry Amex!

As I am sure you have heard from most major news sources, today is the day that the CARD act becomes effective.    We have waited a long time for this, and I have covered it from just about every angle.   Since there are no shortage of stories about what the CARD provisions contain, I thought I would explore the lighter side of it.

Minimum Payments

One of the aspects of CARD is that banks are required to tell you how long it would take to pay off a balance if you paid the minimum payment.   Over at the humor site Cracked, they have their own table to explore what would happen if you paid off your minimum balance.   According to their calculations, it would take over 2,000 years, at which time the earth will be destroyed when Bank Of America “uses payments on  your account to build a space based railgun” to destroy the earth.   By that time you will have “paid an amount greater than all of the goods and services  currently produced on the planet.”   They include a hand chart as well.

Special Rules For Young Adults

According to the CARD act, consumers under the age of 21 must have a cosigner or an independent
means of repaying the debt, such as a job.  Before the cardholder reaches age 21, the cosigner is required to approve any increase in the credit limit in writing.    When I first heard of this provision, I was very offended at the notion that they would be treating people under 21 differently.    Then I realized that this provision exists because the banks have been treating younger adults differently.    Rather than just grant them credit in the hopes that their parents will bail them out eventually, applicants under 21 are actually required to show proof of some sort of income.

Wow, imagine that!   You can’t get a loan until you show that you might actually have a chance of paying it back.    Why does this only apply to consumers under the age of 21?    Perhaps we would not be in a huge banking crisis if this kind of rule had applied to everyone.

Now, I am not a professional banker,but this seems like something they should be teaching in banking 101.    I imagine the teacher of an introductory class lecturing  future bank officers saying something like:  “You see class, if you loan money only to people who can pay it back, the bank will not fail.”     Then, these wide eyed freshman look puzzled for a few moments before asking the professor to repeat that statement as they furiously paraphrase the lesson for their notes.   Seeing as we did have a major banking crisis, I am guessing that such a scene does not regularly occur, hence the need for such a ridiculous law.

The Democrats Lose Even When They Win

I have made no secret of my belief that the CARD act was a major political win for the Democrats.     I think you would have a hard time finding anyone who is not employed by a bank that thinks this act is not a positive step.     Yet, President Obama and the Democratic party has been eerily silent on this modest, but significant win for consumers.    Here is an article detailing how the Democrats are ignoring their achievement.

I am not one for the meme that Democrats are spineless wimps, but come on.    Here is a big legislative victory for consumers, and they are just sitting on their hands!   Step up to the plate and take some credit when credit is due!

The problem with our federal debt is that when shit hits the fan, debt prevents us from doing the right thing and starting the healing process to become healthy again. If we had savings rather than debt, then we could have spent that emergency fund without incurring debt. Because the government has so much debt, having extra stimulus packages results in having more debt! It’s like saying geez, we already have $50,000 in credit card debt, but we really need to tap out the extra $20,000 in lines that we have! And “hope” that our financial situation improves. I am deeply concerned about the level of Federal Debt and budget deficits we are running. Why on earth can’t we run a budget surplus!!!

This carnival of debt reduction is designed to highlight the plight we as a nation are in and hopefully make us aware that we cannot continue in our ways. I’ve decide to apply steps that we pf bloggers have always advocated to reduce debt and apply that to our nations debt situation.

1. Step 1 : Let’s figure out how much debt we have? – Well, I guess that is the first step we take, which is to figure out exactly how much debt we have. At present, the Federal Government has about $12 trillion in debt. And that excludes future obligations like social security and medicare. Furthermore, we are starting with a one trillion dollar budget deficit this year.

2. Step 2: Calculate our debt statistics – I guess we could use a Debt To Income Ratio Calculator to calculate this number. But all we need is to pull out simple statistics and we have the figure. And here it is : ($12.4 trillion / $2.1 trillion) = 590% of income. Our debt is almost 6 times income tax receipts!. Financial advisors (or rather the common wisdom) is that one takes out a mortgage whereby the mortgage payment every month not exceed 30% of your gross income. Projected interested by (according to the CBO) is about $207 billion, which is about 10% of income tax receipts (still relatively manageable).

3. Figure out where to cut expenses – The biggest projected expense in the Federal Budget are defence, medicare and social security. But cutting the biggest expense of all appears to be so politically difficult. These are the biggest areas where any significant cuts have the biggest impact on our budget and projected debt going forward. But politicians cannot get elected if they ran on a platform of cutting social security and medicare. Hence, all the debt reduction programs in the world cannot help good old uncle Sam. There simply isn’t the political will to tell the citizens of the necessary cutbacks we have to face.

What can we do to force the federal government to face the music? – Recently, President Obama announced he will be cutting the budget by a couple of hundred billion on discretionary spending. It was symbolism really as it really amounted to nothing. Yet, he said he will not touch social security and medicare. When is he or any politician going to confront the truth? Perhaps one way is to actually look at how much interest you are paying daily!.

Or perhaps we need a US dollar crisis, where the world loses faith in our currency and dumps them for other assets, to wake us up. By then, interest rates would have soared, the housing market would have collapsed again and yet, oil and other imported goods will soar. Perhaps, there will even be hyperinflation if we do not stop printing money.

Is defaulting on our debt an option? – Consumers like us can default on our debt. So can countries. Russia and other South American countries have been defaulting and structured their debt. It is hard to imagine Uncle Sam doing this as most countries reserves is held in dollars. For individuals, if you cannot pay your interest payments or evenyour taxes, there are negative consequences. And the same goes for countries. Credit ratings will be slashed and access to capital markets will be hampered. Interest rates will rise and cost of credit will increase. But defaulting on our debt will almost mean the end to the US dollar as the world’s reserve currency. It will almost spell the end of our military reach, which is only possible because foreign creditors are lending us money despite us having negative savings and a budget deficit.

Will we be able to endure sacrifices? – At the end of the day, it really boils down to the sacrifices we as citizens are willing to make. Are we willing to tolerate a substantial period of tighter credit conditions? If you are federal government employee, are you willing to forgo wage cuts and perhaps a cut in your “pension plan” (which is all underfunded by the way). If you are a senior citizen, would you be willing to sacrifice and living with cuts in your social security benefits and medicare benefits? We probably would have to go through sacrifices not just in the near term, but also also for a substantial period because the key to reducing our federal debt is to be consistent in paying them off and not incurring any more expenses.

A couple of other scary thoughts – Failure to rein in federal spending will simply have the consequence of having interest payment as a large portion of our budget. Unlike a mortgage where there is an amortization schedule, all of our federal debt is issued as a plain vanilla bond. Also, because of the positive yield curve, the treasury has a temptation to borrow more short term debt rather than locking in long term debt at a fixed low rate. When the treasury pays interest payments, they have to pay interest on every single bond that they issue no matter what the interest rate. This is unlike the new C.A.R.D Act where interest payments are allocated to higher interest first

Fruits of taking the bitter medicine – Despite the scary prospect of cutting spending, having more recessions and not so great growth for a few years, by taking care of our budget deficit, reducing our debt load, we will come off better at the end. We may suffer deflation in asset prices, perhaps even our wages. Our standard of living may decline. But when we have much more manageable debt load, with less long term unfunded liabilities, a low cost structure, we will be able to better compete in the world markets, have an economy is that is less reliant on credit and consumer spending. We could become a much more viable economy is as little as perhaps five to seven years. The Asian countries suffered for about three years but turned their economy around after that. That is why the bank bailouts, stimulus packages pisses me off because we are simply delaying the day of reckoning!

I want to end off by urging everyone to read this piece by Charlie Munger (partner of Warren Buffet about this wonderful land called Basicland.

By now, everyone should have received notifications from their credit card companies explaining how their rules were changing to comply with the CARD act, which becomes effective on Monday, February 22d.    Some of those notifications went out of their way to spin the new protections as being wonderful new features, that your credit card company is proud to offer.

Don’t Buy It

Let’s face it, the banks lobbied HARD against the CARD act, and only failed to defeat it because of their unprecidented political weakness in the immediate aftermath of the global financial crisis.   Furthermore, if they really were proud to offer you these protections, they would have done so some time before they were legally required to.    The C0nsumerist has posted a chart, via BillShrink on which banks have enacted which protections ahead of their legal requirement.    While some banks have enacted some of the provisions already, none have complied with the fair allocatoin of payments, the education on the dangers of minimum payments, or the protection of younger cardholders.    For example, as of January 14th, American Express is still employing due date gimmicks up to the time they are legally required to give them up.

Keep This In Mind As More Financial Regulations Are Debated

The credit card industry is one of the most competitive markets out there, yet the banks clearly move in lock step with each other.    Changes that benefit consumers are only made after being legally required to.    Anyone who argues that the market will sort it out, or that further regulation will ultimately harm consumers is really only speaking for the banks.

We just got back from Breckenridge in Colorado and we had a blast of a time. Unfortunately, Mrs Credit Card, on her last run, got injured and it turns out that she has probably tore her ACL (anterior Cruciate Ligaments). She was on the beginner slope with my two younger kids (who BTW ski better than any of us) and going through this little trail called dragon trail where there were trees on each side. Anyway, she was in the medical center for a couple of hours, had her x-rays taken and is now on crutches (though she could walk). But she is still a trooper and doing her stuff. Her appointment with the doctor is this coming Wednesday.

Her injury and possible surgery means that I have to do the bulk of the housework, cooking, getting the kids ready for school and walking the dog. I help out usually but this is going to be full time for me at least for the next six months.

I’ll be posting some pics that we have taken over the next couple of days. And one more thing : I’ll be hosting the next carnival of debt reduction this coming Monday. For those of you who have read carnivals that I host, you know I’ll come up with something interesting. But please, only submit debt reduction related posts please. You can submit them here at the carnival of debt reduction website.

I’ll update you folks on Mrs Credit Cards situation. Have a great weekend.

Debit cards have been rapidly gaining in popularity.    People want to avoid debt, which is a laudable goal, and they see debit cards as a fool proof way to start a debt-free lifestyle.    I have a major problem with debit cards in that they lack the security derived from a credit card transaction.   Far from just providing payment and financing, credit cards act as an intermediary between yourself and the merchant.   If the merchant fails to deliver the goods and/or services you have paid for, your credit card company will refund your money.    Although it is rare that I have to request a chargeback, I know the possibility of a chargeback is what keeps many merchants honest.    When they hesitate to do the right thing, merely the threat of a chargeback often obtains the desired result.  With a debit card, once you authorize a transaction, you have no more recourse against non-delivery of goods or services than you would had you paid with cash or a check.

Furthermore, the security inherent in a credit card is very important to me.    If my credit card is stolen, or it’s numbers skimmed, I am not on the hook for anything.   If someone were to fraudulently obtain my debit card numbers and PIN, they could clear out my bank account very quickly, and the onus would be on me to prove fraud.  In the mean time, I would be bouncing payments from my bank account to billers all over the country.   If someone fraudulently charged huge amounts to my credit card, my bills would continue to be paid from my bank account, while I sorted out the mess with the credit card issuer.

One of the best arguments against going exclusively to debit cards is that credit cards allow you to build your credit score.    These days, having a good credit score can affect more than just your ability to buy a house or get a car loan.   Although I object to credit scores being used to judge people who are not asking for a loan, employers and insurance companies are increasingly using credit ratings to make decisions.   It is wrong, but it is reality.

There Has To Be A Better Way

I was thinking about this the other day, and I realized that there has to be a product that provides all of the protections of a credit card, but with none of the risk of debt.  While, such a card would be of no use to people who are able to pay their bills in full every month, most people just don’t fall into that category.   Whenever I think that I  have come up with a great idea, I always assume someone else must have thought of it first.

What I had in mind is called a secured credit card.    Like a debit card, you can’t spend money unless you already have it in your account.    It differs from debit cards in that you have all of the protections offered by a credit card, and you can build your credit score by using it.      The Consumerist has an interesting article on the subject.   Be sure to pay attention to this line:

BIG WARNING: Since secured credit cards cater to the unbanked and financially unsophisticated, this market is rife with hidden fees and punitive rates. Scope out potentially lenders super-carefully and take a fine-tooth comb to the fine print.

This sentiment echoed my impressions of the secured credit card market.    I saw it as a fee ridden product that had more in common with the local payday loan store than a regular credit card.    On the other hand, this is a great tool for people who want the purchase protections of a credit card, without the potential for debt.    A quick internet search turns up this Secured Mastercard from CitiBank. With this product, you make a deposit into an interest earning CD, and that becomes your credit limit.   You get many of the same purchase protections that you expect in a Mastercard, including rental car insurance.

Are secured cards the answer for everyone?    Undoubtedly no.   On the other hand, if you are not able to control your credit card spending, yet you still wish to have the advantages of a credit, this may be a product worth looking into.

The CARD act becomes effective next Monday!    When I started writing for AskMrCreditCard a year and a half ago, George W. Bush was the President, and it was unknown if newcomer Barack Obama would be able to hold off the established candidate John McCain in the upcoming election.    Increased credit card regulations had been proposed, but had gotten nowhere.  Now, the new regulations are less than a week away and I am getting giddy with anticipation.    Ok, not really, but it is exciting for a credit card guru like your’s truly.

Notifications Are Coming

Some of what I find interesting is all of the notifications that I have been receiving.    Some are written as technically as possible, just like any other notice that your rates are going up or that they are imposing new fees.   Only be actually reading the content of the notification do you find out that all of the changes are in your favor.    Other notices that I am seeing are spinning the regulations as a great new feature that the bank is thrilled to be offering you, its valuable customer.   Unsaid is how much it spent in lobbying to fight the bill.    Also unmentioned is why they are waiting until the last possible moment before required by law to offer these features.

In the end, I suppose I like the sterile, if honest, technical explanation over the highly spun sugar coated notice.

There Actually Are Capitol One Branches

Just after writing that there is no such thing as a Capitol One branch bank to which one could post their  inane grievances in the form of graffiti ,  I happen to visit Austin, Texas for a weekend of food and fun, only to notice several Capitol One branches around town.    Nevertheless, I was able to restrain myself from taping a piece of paper to the ATM expressing my outrage that they didn’t print the APR on my Capitol One Visa card.

While in the Austin area, we stopped into the famous Salt Lick restaurant in nearby Driftwood Texas.   My wife speculated that no one would visit a barbecue restaurant on Valentine’s day,  while I had a hunch that she had misjudged the dating and eating habits of Texans.  We knew that we found something special when we saw hundreds of cars parked behind the restaurant, foretelling the hour and a half wait to be seated.  Let’s just say that the wait was worth it, as we eventually enjoyed some of the best barbecue we had ever tasted.  We even took some to go, vacuum sealed it, and brought it home with us to Denver.

What does any of this have to do with credit cards?    It just so happens that the Salt Lick does not take credit cards.    No matter, when your product is that good, people will bring cash.    Just remember, merchants are not required to have credit cards, they choose to.   Other chose to be cash only.   To each their own.

myFICO.com, the folks who originally came up with the FICO credit scoring model also has it’s own “credit monitoring service”. How does this compare with other folks who have similar offerings? Let’s find out.

Credit Reports and Scores from TransUnion – FICO actually made an arrangement with TransUnion to provide customers with their credit reports and an updated credit score quarterly (there’s no point getting updates everyday because your reports and scores simply do not change everyday).

Along with the quarterly reports also comes with charts and analysis to help you improve your credit score.

Database Monitoring – Aside from just monitoring your TransUnion report, public databases will also be monitored for potential ID theft situations.

ID Theft Insurance – myFICO also provides up to $25,000 in ID theft insurance and provides you with a kit that will tell you what to do should your ID ever be stolen. You are provided with a customer service number to call and you will be provided with tools like dispute letters, worksheets etc.

Cost – The best feature about this offering is its cost, at on $4.95 a month. If you decided to pay on a yearly basis, it will be at a better price of $49.95.

Verdict and Opinion – For those who are looking for a credit monitoring service or credit score monitoring service, the FICO® Quarterly Monitoring offers a very cost effective solution. Sure, it only monitors your TransUnion score and report. Having said that, at worst, your other credit scores will differ only by about 40 points or so. You can also get your annual free copy of your Experian and Equifax reports.

The disadvantage of this offering is that you do not get all three credit reports and scores. Hence, I think this will appeal to those who are price conscious because at $4.95 a month versus $14.95 a month for most other offerings, it represents quite a substantial savings versus other “full service” offerings.