A reader asks:

About 15 to 18 years ago we were trying to build our business back up from a fire, it was a cafe.  My mother used alot of credit cards to purchase supplies we needed to build back. They were mostly in her name but there were about six she used my name. We have not used these cards since that time, about 18 years ago.  We stopped paying on the ones in her name about 6 years ago because we just could not make payments on all of them.  I was told due to her age and not using them for such a long time that we had actually paid the principal and to walk off and leave them. We still receive phone call but we never respond. My mother passed away a week ago and I used her Social Security check to make these payments on the ones in my name.  I still have the business but am struggling to keep it open. I have a brother who lived with my mom, who is on diaylis and I try to help him.  Can I walk away from these debts after paying all these years and not getting anywhere on the balances. I don’t want to hurt my business because it does feed us. What can I do?

-Sandra

First, I am sorry to hear of your loss.    Well Sandra, it seems like you have had a lot of struggles, and you have not been very organized with your finances.   It is good that you are now trying to figure out your finances.

Unfortunately, it sounds like you are now in a bit of trouble.   The most frightening thing I am reading is that you are using your deceased mother’s Social Security checks to pay off your debts.   If you are cashing checks in her name and using them to pay off debts, I am pretty sure that is not legal.   I think you should speak with an attorney immediately to discuss that matter, along with the issues related to your mother’s passing and the disposition of her estate.   Don’t be afraid to do that as soon as possible.    In fact, since credit card debt is unsecured, her creditors may not have any claim to it.   Again, speak to a lawyer as soon as possible.

In referring to your late mother’s credit cards, you say that “They were mostly in her name but there were about six she used in my name.”    I see a problem here in your approach to this matter.   The credit card cards “in her name” accumulated debt that is now part of her estate.    The credit cards that “she used in my name” are your debt.   With the exception of fraud, it doesn’t matter who “used” them, it only matters who’s name they are in.    As far as the bank is concerned, the debts are yours alone.

Another problem I am having with your thinking is that you repeatedly refer to “walking away” from debt.    This is an incredibly short sighted approach to financial management.   I don’t know who advised you to “walk away” from credit card debt, but that is very disturbing advice, to say the least.    As you have discovered, the banks do not forget about the debt once you have.    Not paying your credit card debt can result in collection calls, court judgments, and even garnishment of wages.    Even if you are immune from garnishment as a small business owner, you are still doing tremendous damage to your credit.   That will affect all sorts of things from mortgage qualification to your auto insurance rates.

You should contact all the banks that you still owe money.   You need to negotiate your remaining balance down to something that you can afford to make payments on.    If you are not sure how to do that, you might want to consider speaking to a reputable consumer credit counseling service.    To find one, start at the web site for the National Foundation for Consumer Councelors.

Good Luck to you at this difficult time.

Yesterday, I was listening to an NPR story about the success of the fast food franchise In And Out Burger.   One of the things that makes it so popular among it’s fans is it’s “secret menu”.    Apparently, there are items that you can order that do not actually appear on the menus in their restaurants.    Of course, the secret menu does appear on their web site.

Credit Cards Have A Secret Menu Too

Imagine you are working as a customer service representative for a credit card company.   Come on, it is not as bad as it sounds.   Many of my classmates at the University of Delaware were part time employees of a major credit card issuer nearby.  For them, this was a great place to get hands on experience at a major bank.

As a credit card customer service rep you are trained in how to deal with common problems and offer solutions.   As a college student, overseas subcontractor, or entry level bank employee you are not empowered to come up with your own financial schemes   If you were, who knows what that would lead to. Instead, you get to offer your customers items as needed from the bank’s secret menu.

Let Me Show You How It Works

Yesterday, I called CitiBank and told them I was considering canceling my American Airlines MasterCard.    I was then transferred to a different department that only deals with cancellations.    I explained to the representative that I don’t use my card much, and I was considering canceling it, but I was wondering if there is anything that he could offer me.    I knew from a discussion in a forum on FlyerTalk, that they were offering double miles for three months if you told them you wanted to cancel your card.    Sure enough, the representative checked his secret menu and found the offer.    I placed my order, and he did everything but ask me if I wanted fries with that.

In the case of my American Express Starwood Preferred Guest card, I “ordered” the 3,000 bonus points when I renewed.    That is enough for a free night’s stay at many locations, and I got it just for knowing what’s on the secret menu and making a quick phone call.

What Else Is On The Secret Menu?

It depends on the bank, and it might depend on  your status with them, but the menu is pretty long.    There are lots of examples of increased rewards.    Capitol One called me and offered to increase my cash back percentage.   How could I say no?   Certainly you can get your interest rate lowered by asking.     Penalties and late fees are frequently removed merely by asking.   The sky is the limit, so think creatively.   Perhaps you would like your due date changed?   No problem, just ask.

Sometimes The Secret Menu Is A Secret To Them As Well

In my CitiBank example, I knew the details about the entire offer, but the agent himself did not and he had to look it up!    The key is to be patient and polite.     Another important factor is to make sure you are talking to the right person.     When you mention that you might cancel your card, you are then transferred to a department known as retentions.   Their job is to keep you from canceling your account.   Make sure that you get someone in retentions before you place your order.   Of course, sometimes the steps that a retentions customer service representative will take can be absurd.

In my case, they were mutually beneficial as the company retained it’s customer and I got a better deal.

How Do You Find Out What’s On The Secret Menu?

Flyertalk forums are a great start, as is using “the Google”.     Take your favorite credit card and search for “retention bonus” or “renewal bonus”.    With my Starwood Amex, I received my bonus in return for renewing a card that I had held for years, yet in the case of CitiBank, the card was virtually brand new!   I knew to ask for the bonus because I had read other people’s account’s first.

The Bigger Lesson

These days, the media is trying to popularize the credit card industry’s  notion that “Obama passed the Credit Card Bill of Rights, so now banks are clamping down on customers.”      Don’t believe it! There is still a highly competitive market for credit cards, and banks will still bend over backwards to make their good customers happy.    When banks stop filling up mail boxes with credit card offers, then you will know things have changed.    Until that day, if you are the type who pays your bill on time, give your bank a call.     They probably won’t say no to any reasonable offer and they may even make you an offer you can’t refuse.

I’ll take a few thousand frequent flier miles over a “Double Meat Animal Style” any day!

There are two different ways that couples can manage their finances.   Some prefer to manage their separately, while others pool all of their resources.    For many reasons, my wife and I prefer to manage our financial resources jointly.    Both of our parents do the same, and it never really occurred to us to do otherwise.   This article is almost exclusively for couple who manage their finances jointly, although even those who manage their money separately might be able to employ some of these tips and tricks.

Double Your Sign Up Bonuses

One of the nicest features about reward cards is the sign up bonus.   Even a small spender can get a big sign up bonus from most credit cards.    Go ahead and apply for the same card for both of you, and double your bonus.    There are few good reasons not to, although I will mention one below.

Get Bonuses For Additional Cards

When looking into a new credit card application, always see if there is a bonus for an additional card.    If there is, get it.    The bonuses are modest, often 2,500 points or so, but every point counts.   You can cut the card up or cancel it later.

Consolidate Your Use

Miles are worth more when they are concentrated in one account, as few programs allow you to transfer miles between accounts for a reasonable cost.    Even if you and your partner have each the same card, you should both use only one account.    This is especially important if the account offers bonuses at certain spending milestones.    For example, my American Express Starwood card offers Starwood Gold status when we spend $30,000 in a calendar year.   Since we almost always travel together, it really doesn’t matter who’s name the status is in.

Conserve Your One Time Status Bonuses

Some credit cards offer status bonuses for certain uses.    For example, the American Express Delta Reserve card will give you 10,000 Medallion Qualification Miles (MQMs) after your first purchase.    One one of you should get a new Reserve card in one year.    With the desired status, both you and your partner can utilize almost all of the privileges of the person with status when traveling together.    This way, the other person can still utilize the MQM bonus in the future if you are in danger of loosing status.   This is the one situation that I referred to previously where I would recommend that a couple only has one card.

Don’t Pay Too Many Annual Fees

If both of you have a particular card, you should definitely cancel one of them, once you have to pay the annual fee.    Most cards offer to waive the annual fee for the the first year, so it is usually a good idea to get two cards for the sign up bonus.    On the other hand, don’t bother keeping both cards if they are asking you to pay an annual fee.

Simplify Your Bill Paying

If you consolidate your spending on one card, it is easy to simplify your bills.   This saves you time and reduces the chance of fee inducing errors.    While it is nice when couples share chores, it works best for us when only one of us pays the bills.    We pay our bills online, as everyone should, and only one of us really needs to worry about it.    In this way, we avoid either paying a bill twice or forgetting to pay them all together.

In conclusion, jointly managing your credit card portfolio, a couple can earn greater rewards and enjoy status bonuses more often, while reducing their bill paying time and increasing their accuracy.

It always bugged me the way employer’s in this country have an expectation that you should give them two weeks notice before resigning.   Certainly, very few employers will give you much notice before laying you off or firing you.     I have been laid off with less than a week’s notice, right before Christmas.   Furthermore, the “two weeks notice” custom is never much of an issue when they are hiring you in a pinch and they ask you if you can start as soon as possible.

Fortunately or unfortunately, there is no such concept in the world of credit cards.     You can you cancel your credit card at any time, for any reason, and no one will give you a hard time.    Likewise, your credit card company can cancel you with no notice as well.

What It Looks Like To Be Canceled

You never hear from people who complain that they were sitting at home one day, when they got a letter in the mail saying that their credit card company canceled them.    People usually find these things out, to their embarrassment, when they attempt to make a purchase.   That makes sense when you consider that most credit card users are likely to use their card frequently, if not daily.     Even more common are the stories that you hear about your card being canceled while out of town.

Today in The Consumerist, we are treated to this story, about someone who had several Chase credit cards canceled at once.    It goes without saying that the cards were canceled without any notice.    From the bank’s standpoint, what would be the point of giving notice?    They are canceling you because they no longer wish to incur the risk that you will default on your payments.    Giving you the opportunity to rack up more debt would defeat that purpose.  Fortunately for Joey, the subject of the article, he was not traveling out of town when he got cut off.

Consumerist Draws The Wrong Conclusion

The advice from The Consumerist is merely to fight back with a “polite, professional, and firm” letter.    I disagree.     Chase dumped you, and there is no reason to try and go crying back to them.   Move on, but learn some lessons from this experience.

Lesson One: You Can Lose Access To Your Cards For Any Reason

Yes, your credit card company can cancel you, but there are several other ways that your credit card can be invalidated.   You can lose your card, or just have another card on your account lost.    When that happens, some banks actually have to cancel all of the cards on that account.   I am looking at you Capitol One.   Sometimes, your magnetic strip dies, and your card is next to useless.   Sure, the clerk at the store could enter your numbers in, but I have found that many cashiers are too laze, and will just tell you to use another card.  You could also have your credit card number compromised by fraud.   Finally, American Express can just cut you off one day for their Financial Review.

Lesson Two: Diversify Your Holdings

In a world where your credit card company can instantly cancel you at any time, for any reason, there is no reason to have 4 of your 5 credit cards with one company.   I  depend on my credit cards as my primary method of payment.   I don’t carry cash or checks, and I rarely use my ATM card.    In order to ensure that I am not “cut off”, I always carry an American Express and at least one Visa or MasterCard.   If I have additional cards, I leave one at home, in case my wallet is lost or stolen.   If any company decides to cut me off for no reason, I can instantly whip out a different card and go about my business.

Lesson Three: Do Not Stockpile Rewards

One of the problems Joey had with his Chase cards being canceled was that he was forfeiting part of his rewards.    This is a major problem I have with  some reward programs that essentially hold your reward in trust.   Your reward may be available at a certain time of the year, like the Costco Amex.    See pitfalls here. In other instances, your reward may be available only when your account is in good standing, like in this example.   In Joey’s case, the rewards apparently were dispersed only when they reached a certain threshold.   I have set my Capitol One to disperse at the minimum threshold of $25.   With my Starwood Amex, I get StarPoints deposited into my account with Starwood Hotels once a month on the day that my statement closes.     In theory, the points are mine to keep even if I never pay my credit card bill.

Lesson Four: Another Good Reason Not To Carry A Balance

There are a million good reasons to use credit cards as a method of payment, and not a method of finance.    The key is to always pay every bill on time and in full; never carry a balance.    Now, there is a million and one reasons as you can easily move from one credit card to another when you don’t have your money tied up in any card for any time longer than your next due date.

I love the line that Harrison Ford/Han Solo says in the middle of the original Star Wars after listening to Princess Leia whine and moan about how she is being rescued.   He had been originally motivated to rescue her because he had been lead to expect a huge reward, but he just found her insufferable.

Some Rewards Just Aren’t Worth It

The idea of free travel is very alluring, but it often doesn’t work out quite as you would expect.    First of all, most awards are highly restricted.   I have had to cut vacations short in order to fit the airline’s award availability.      In that case, the reward ticket really wasn’t worth the amount it would have cost me to pay for it.   If I was paying for it, I would have been able to stay a couple extra days, rather than return early.

Other times, the reward comes with so many extra fees, that the only real way to think of it is as a discounted ticket.   This post over at Flyertalk got me thinking:

…I think we have to change our collective mindset. We have to stop thinking in terms of “free” (i.e., no cash, I know how much we put up with to earn those miles, been there done that) awards and start thinking in terms of discounted awards. That’s where the world is today, like it or not, with different airlines more or less up front about it. When we make “burn or ” decisions we can no longer just look at the fare and evaluate it in terms of the number of miles we’d need for an award. We have to look at the difference between the cash fare and the discounted cash-plus-miles award fare. Most of us realize this at some level, but I’m not sure it’s penetrated to the subconscious.

This makes a lot of sense.   You could think of your reward ticket as a coupon for a discount off of a fare.    That is what I had to do when I booked my last award trip on Delta.   I had to book three seats to one of their international destination.   I booked one award ticket in business class, using 230,000 miles, and the taxes were merely $47.    The other two tickets were purchased with the “pay with miles” option.   I merely subtracted the miles from my account  and my wife’s, at 1 cent per mile, from the cost of the the remaining two tickets we needed.    We still had to pay some for the tickets, but Delta miles are so devalued, this was a better use of the miles than redeeming 180,000 miles each for tickets that only cost $1,200.

Sometimes the Reward Just Isn’t Worth It

I frequently harp on United Airlines, however, but I have nothing on this guy.   By now, you have probably seen Dave Carroll’s video on how United destroyed his guitar, and than gave him a complete run around when he tried to file a claim, which ultimately denied.

The last time I flew United, it was on a reward ticket, and virtually everything they did was tremendously screwed up.    Like Dave Carroll, nobody would help me, even their supervisors told me to get lost.    Unlike Dave, I wasn’t able to write a song, instead, I just threatened to write every newspaper, magazine, TV show and website.     Only then, did they attempt to address their mistreatment of me and my family.   The complete story is here. Worse, I experienced terrible treatment on the reward flights that were on United aircraft.    That story is here. What gets me most is that on multiple occasions we were informed that we were being treated differently because we were traveling with award tickets.    This is a violation of their contract of carriage, as it makes no distinction between paid tickets and award tickets, but they do it anyways.

After that trip, we had learned are lesson.    The rewards just weren’t worth it.  We made the decision to stop flying United Airlines, and to stop accruing MileagePlus miles.    I like the idea of traveling for free, but no reward is worth the kind of aggravation that United Airlines seems to be designed to generate.    Flyertalk’s MileagePlus forum is filled with stories of people who have stopped flying United for similar reasons, people who now spend a lot of money on other airlines, and are openly looking forward to the permanent demise of that company.

Fortunately, You Do Have Alternatives

All the United hubs, with the possible exception of their Washington Dulles hub, have strong competition from other airlines.   Even in Washington, you have two other airports to choose from.    If you must fly United, you can choose to earn mileage in another Star Alliance airline’s program such as US Airways or Continental’s.     The Chase bank MileagePlus cards are an equally bad choice, as you are tying yourself to United Airlines loyalty programs.   Even if you try to use your miles for travel on other airlines, you still face Starnet Blocking.

Finally, don’t ever check anything valuable or fragile on United, or any other airline.

The chargeback is an amazing feature that you get with every credit card purchase.

What is a Chargeback?

Your credit card agreement protects you from having to pay for goods or services that are not received.  In essence, the credit card processor is acting as an intermediary for every transaction.   If you do not receive the goods or services, you don’t have to pay for them.   Likewise, when a card holder fails to pay their bill, the merchant still gets paid.    Interestingly, the right to a chargeback is guaranteed by the Federal Reserve under the Electronic Funds Transfer Act.

Why Is It So Powerful?

As I explained recently towards the end of this article, a chargeback is a merchant’s worst nightmare.  When you threaten a chargeback, you are not just calling into question the amount in dispute, but you are severely endangering a merchant’s relationship with their credit card processor.    This is especially true with an airline.    The rate of chargebacks a merchant gets can change their service fees that they pay to their processor.    Going over a certain percentage by just a single chargeback can cause their merchant fees to jump by a fraction of a percentage point.   That doesn’t sound like much, but it can cost a large company tens of thousands of dollars a year or much, much more.    Worse yet, in the case of an airline, a large percentage of the money you think you are paying to the airline is held back until the flight is actually flown.    This is why you can get refunds from your credit card company if the airline goes out of business after you your ticket.   These holdbacks have even caused an airline to go bankrupt. To make a long story short, airlines will do anything to avoid a chargeback, and the threat of a chargeback will prompt them to do the right thing.

Use and Misuse

As they say in Spiderman, “with great power comes great responsibility”.    I strongly recommend that you only request chargebacks after attempting to resolve your dispute directly with the company at issue.   In fact, I would make sure you speak with a manager and a supervisor, informing them that you will request a chargeback if they do not immediately deliver the product or service that they promised.

Ways A Chargeback Can Go Wrong

The chargeback is not a foolproof way of resolving all disputes in your favor.   In fact, the credit card companies can be rather clumsy in their handling of these issues.    In a recent matter I was involved in, I sent supporting documentation to the credit card company several times, yet kept getting letters saying that they had not received my documentation, and were closing the case.

In this article, The Consumerist goes over several reasons why your claim may be denied.    Most of the problems people will encounter are due to lack of documentation.     You should always retain package tracking numbers, and reservation cancellation numbers as if they were cash itself.   Without them, you will have no way to prove your claim, should it ever come to that.

Interestingly, there seems to be some difference between credit card companies when it comes to processing chargebacks.    Visa and American Express seem to be very customer friendly, while Mastercard seems to lay the burden of proof squarely on your shoulders.

Another interesting aspect on chargebacks is the statute of limitations.   In this case, a traveler was unable to issue a chargeback because his prepaid hotel was charged more than 60 days in advance.    This can be a big problem when traveling, as many vacationers will prepay items several months before they travel.     Currently, the trend is to ask for prepayment to get the best deals on hotels, car rentals, and travel packages.     In response to these trends, all you can do is try to prepay within the chargeback period.

Airline travel seems to be the major exception, as the failure of an airline regularly results in the refund for the unused travel for those who purchased by credit card.

Another Tool In Your Financial Arsenal

Business is business, and we all know that merchants and banks can and will take every measure they can to make as much money as possible.     When they feel that you have not played by their rules, they will take every legal means against you such as ruining your credit and foreclosing on your house.    When they are not playing fair, you also have several tools at your disposal.   When you conduct transactions with your credit card, one of the most effective and convenient of them is the chargeback.

Use it wisely.

One of our readers asks:

I travel around 150K miles a year with Delta. I am trying to decide between the delta reserve and the platinum amex. The choice of clubs helps with the amex Plat – but the MQM and companion tickets are better on the reserve?

Rick

With it’s acquisition of Northwest, Delta has become the world’s largest airline.   Many of it’s most frequent fliers, like Rick, have been wondering which of American Express’s premium offerings are right for them.    We here at AskMrCreditCard have posted reviews of both The Delta Reserve Card and the Amex Platinum card here in the past.

Which Card Is Best For Rick?

Mileage Accrual

In his case, he travels so much, 150k miles a year, that he will easily be making their highest tier, Platinum Medallion.      In his case, all of the medallion qualifying miles that make the Delta Reserve card so attractive are really superfluous.   On the other hand, if Rick is able to purchase tickets on his own card, either because he works for himself, owns his company, or is reimbursed by his company, the Delta Reserve card would be a major advantage.   It would give him double miles on all his Delta purchases, which must be considerable if he is traveling the equivalent of around the world six times a year.

On the Platinum side, Rick would accrue Membership Rewards points, which are more flexible and can be redeemed through a variety of loyalty programs, including Delta.    One down side is that you can loose your Membership Rewards points if your account is not in good standing with Amex, while your Delta points are strictly between you and Delta.

Perks

The Delta Reserve card has a few, generous perks, but it seems almost spartan in comparison to the Platinum card.    The Delta card will give you access to Delta’s lounges immediately, and a domestic companion ticket after one year with the card.    One of the most interesting perks is that you get standby and upgrade priority within your membership tier. If there is one seat left in first, and there are two Platinum Medallions waiting for it, the one with this card gets it.   With Rick’s Platinum Medallion status, he will always be the first in line for any list, if he has this card.

The perk list for the Platinum card is long and distinguished.   It’s highlights include complimentary premiere membership with Hertz, Avis and National Car Rental as well as Starwood Gold membership.   In addition, you get lounge access to variety of airline business lounges, even if you are flying in coach.

Annual Fee

If it wasn’t for the annual fees, I would say just go ahead and get both cards.  Unfortunately, they each have a substantial fee.   The Delta Reserve card is $450, while the Platinum card is a mere $395.

The Verdict

It all depends on how much you really like the SkyMiles program.   Personally, as an “Atlanta refugee”, I have had my share of experiences with Delta and it’s SkyMiles program.   I also know many people who are current Platinum Medallions.   If collecting the most SkyMiles is your goal, the Reserve Card might be for you.    Unfortunately, you will not really take advantage of the MQMs, since you are getting as many as you need anyways.     The lounge access  is worth $300 to you, and the value of the companion ticket should easily make up the difference in the annual fee, going forward.     Finally, that standby and upgrade priority can be very important. When you are trying to get out of a major business center on an earlier flight on a Friday afternoon, that may be the difference between having dinner at home with your wife instead of at the Cinnabon in LaGuardia.

As nice as the Platinum card is, I just don’t see it earning it’s annual fee for you, unless you are really going to be flying coach on a variety of airlines, other than Delta.   In that case, the lounge access will be nice.    There are also so many other perks, but I have the feeling that most card holders struggle to take advantage of a small fraction of them (private yacht service?).

If the lounge access and the perks of the Platinum are that important to you, there is one final option that I could recommend.     Get the Platinum card, but also get one of the more basic Delta cards such as the Gold card.    You can still get double miles on your Delta purchases, although you will miss out on the priority waitlist perk.   On the other hand, you can take advantage of all of the Platinum card perks, as well as a slightly lower annual fee.

Bon Voyage!