Chapter 5

The Credit Card Mistake That’s Costing Millenials

Posted on September 17, 2014 by Melissa Hart

“A new survey from BMO Harris Bank shows consumers are confused on how credit card balances affect credit scores. . .”

While using a credit card is one of the easiest ways to build credit, there are plenty of misconceptions about how best to do that.  According to this survey

  • 39 percent of Millennials—people between ages 18 to 34—believe carrying a balance increases their credit scores. In fact, carrying a balance does not improve credit scores and can actually hurt scores.
  • 23 percent of those surveyed indicated that a person’s educational level affects his or her credit score. In fact, a credit score is based only on the information in your credit report, and educational level is not included in your credit report.
  • 27 percent of those surveyed thought checking their credit scores would lower their credit score. In fact, the opposite is true:  If you regularly check your credit scores, it’s likely you’ll make financial decisions that will improve your credit score.

For more information go to http://finance.yahoo.com/news/credit-card-mistake-thats-costing-103040745.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss why a credit score is important.
  • Stress the importance of “managing” credit card debt.

Discussion Questions

  1. What affect will your credit score have on the finance charges you pay for credit purchases?
  2. How can your credit score affect your ability to purchase a home or an automobile?
  3. Assume you have a low credit score and have been turned down for a home mortgage. What steps can you take to increase your credit score?
Categories: Chapter 2, Chapter 5, Chapter_11, Credit Cards, Credit Mistakes, Credit Scores | Tags: , , , | Leave a comment

Home Depot Data Breach May Top $50 Million

Posted on September 10, 2014 by Melissa Hart

“Home Depot spokeswoman Paula Drake said ‘protecting our customers’ information is something we take extremely seriously.’” 

At the time of this blog, it is not clear how many Home Depot stores or shoppers were involved, but this breach could be one of the largest data breaches to ever hit a retailer.  It is also estimated that the cyber thieves made an estimated $50 million from this breach by selling credit card numbers and personal information.

Home Depot and many other retailers including Target, P. F. Chang’s, Neiman Marcus, and other companies, have all experienced similar data breaches in recent months.  To combat this problem, many companies are beginning to use a new “chip and pin” technology.  Already in use in Europe, the new technology contains a chip in your credit or debit card with account information, requires the user to use pin identification, and is nearly impossible to counterfeit.  Because the new technology has dual verification, card transactions are much, much safer for both retailer and customer.

For more information go to http://www.cbsnews.com/news/home-depot-data-breach-may-top-50-million/

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of students monitoring credit and debit card activity on a regular basis.
  • Obtain a credit or debit card with the new chip and pin technology.
  • Encourage students to determine their liability if their credit or debit card information is stolen.

Discussion Questions

  1. Assume you are trying to decide between two different credit cards. One card does not have chip and pin technology and does not charge an annual fee.  The other card does have chip and pin technology, but charges an $85 annual fee?  Which card would you choose?  Explain your answer.
  2. Besides choosing a credit or debit card with chip and pin technology, what other steps can you take to make sure you are not a victim of identity theft?
Categories: Chapter 5, Frauds and Scams, Identity Theft | Tags: , | Leave a comment

Consumer Finance: Medical Credit Cards

Posted on August 30, 2014 by Melissa Hart

Medical credit cards are offered by financial institutions to pay for services not covered by health insurance, such as, dental and cosmetic procedures, or for veterinary care.  Medical credit cards received increased attention after the New York attorney General and the Bureau of Consumer Financial Protection brought enforcement actions against Care Credit LLC, an affiliate of GE Capital Retail Bank.  It is alleged that Care Credit failed to provide disclosures and gave inaccurate information to 4.4 million cardholders.

Medical credit cards from large banks offer a revolving line of credit with an established credit limit with some form of promotional financing (special terms and conditions, which are valid for a specified period of time). The most commonly used financing option is deferred interest, with no interest charged for promotional period, but interest charged retroactively if the balance is not paid in full before the end of the promotional period, usually 6 to 24 months.  Among large banks the Government Accountability Office reviewed in May 2014, the most commonly used cards had an annual percentage rate of 26.99 percent or more.  These banks also offered revolving line of credit with fixed monthly payments, with an APR of zero to 17.99 percent.

For more information , go to

http://www.gao.gov/assets/670/664256.pdf

Teaching Suggestions

  • Ask students what are other alternatives in financing medical expenses that are not covered by health insurance.
  • Have students survey friends or relatives to determine the use of medical cards.

Discussion Questions

  1. Why would someone get medical credit cards when mainstream credit cards, such as Visa, and MasterCard, offer relatively lower-rate credit cards?
  2. What might be advantages or disadvantages of using medical credit cards?
Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

When is Debt Collection Illegal?

Posted on August 27, 2014 by Melissa Hart

If you do not pay your bills, you’ll probably get calls from debt collectors.  Their job is to force you to pay or make arrangement s to pay.  But any debt collector who harasses or threatens you is breaking the law.

In August 2014, the Federal Trade Commission alleged that Credit Smart used illegal tactics to pressure people into paying debts.  According to the Federal Trade Commission’s complaint, the company threatened to garnish peoples’ wages and sue them for nonpayment.  The Federal Trade  Commission’s complaint alleges that sometimes Credit Smart told people they owed debts and interest without having  a reasonable basis to say so, misrepresented themselves as working for attorneys or a financial relief counselors, and failed to tell people they were debt collectors.

For additional information, go to

http://www.consumer.ftc.gov/blog/when-debt-collection-illegal-0

Teaching Suggestions

  • Ask students what is the best way to solve debt problems before the delinquent account is turned over to debt collectors.
  • What can people do to avoid debt problems in the first place?
  • Why should people with debt problems seek the assistance of Consumer Credit Counseling Services?

Discussion Questions

  1. How can companies, such as Credit Smart, harass people when they know it is illegal to engage in such practices?
  2. What are the major provisions of the Fair Debt Collections Practices Act that specifically prohibit certain actions by debt collectors?
Categories: Chapter 5, Debt | Tags: | Leave a comment

Russian Hackers Might Have Your Information

Posted on August 23, 2014 by Melissa Hart

You first heard the reports in August 2014: reports that Russian hackers have stolen more than a billion unique username and password combinations, and more than 500 million email addresses, grabbed from thousands of websites.

How do you know if your information was part of this hack?  You really don’t, but don’t take any chances.  Change the passwords you use for sensitive sites like your bank and email account–really any site that has important financial or health information.  Make sure each password is different so someone who knows one of your passwords won’t suddenly have access to all your important accounts.

Can you make sure this doesn’t happen to you again?  Unfortunately, you can’t.  But take all precautionary steps and lessen the odds scammers will get a hold of your information.

For additional information, go to

http://www.consumer.ftc.gov/blog/russian-hackers-might-have-your-info-now-what

Teaching Suggestions

You may want to use the information in this blog post and the original article to discuss

  • Ask students if anyone they know has had sensitive information hacked.
  • Have students present proposals on how to protect themselves from hackers.

Discussion Questions

  1. Is creating new passwords enough to keep your information safe?
  2. Is there anything else you can do to protect your sensitive information?
Categories: Chapter 5, Identity Theft | Tags: | Leave a comment

Is Your Credit Card Denied By Mistake?

Posted on August 9, 2014 by Melissa Hart

When your credit card issuer suspects fraudulent activity on your credit card, it triggers a red flag to deny the charge.  Generally, it is a great protection.  But if you are making the purchase and not a thief, it can be frustrating.  Some purchase patterns that could cause your purchase to be denied include:

  • A purchase for a small dollar amount, followed by a large purchase. Credit card thieves sometimes make a small dollar “test purchase” followed by big ticket items, so this raises a red flag.
  • Multiple purchases back-to-back in a short span of time.
  • Making purchases in a new city, in a different part of town, or in stores where you do not normally shop.

Though inconvenient, these protections are to keep you from being a victim of fraud.  Take these steps to prevent or deal with a credit card purchase being denied by mistake:

  • Inform your credit card company if you will be using your card out of town (especially internationally).
  • Update your billing address if you move, so that the company recognizes the new pattern of purchases as a new normal.
  • Make sure the company has your cell phone number so that it can contact you faster to verify or authorize a purchase.
  • Contact your credit company immediately if your purchase is denied.

For more information go to http://www.usa.gov/topics/consumer/consumer-action-handbook.pdf

Teaching Suggestions

  • Ask students if their credit card was ever denied in error.
  • If the transaction was denied, how did they resolve the problem.

Discussion Questions

  1. What are a few reasons that your credit card purchase might be denied?
  2. What can you do to avoid such an embarrassment at the check-out counter?
Categories: Chapter 5, Credit Cards, Credit Mistakes | Tags: , | Leave a comment

Text Message Spam

Posted on July 16, 2014 by Melissa Hart

Spam text messages are not only annoying but also illegal. Many con artists use text messages to obtain your personal information by offering a free gift card or vacation. As a result, you become very vulnerable to identity theft.

To avoid becoming a victim of text message spam, register your number on the Do Not Call List.  Also, never click on links in spam messages, which often carry malware or send you to fake websites.

Never reply to these text messages or give out your personal information.  Report the text spam to your cell phone carrier by forwarding the message to 7726 (SPAM).

You can report unwanted commercial text messages and other complaints related to consumer fraud to the Federal Trade Commission at https://www.ftccomplaintassistant.gov/#crnt&panel1-1

For additional information on text message spam, go to:

http://blog.usa.gov/post/89152807112/protect-yourself-from-text-message-spam

http://www.consumer.ftc.gov/articles/0350-text-message-spam

Teaching Suggestions

  • Have students conduct research to obtain information on various types of scam and frauds.
  • Have students create an in-class presentation or a video communicating actions to take to avoid becoming a victim of consumer fraud.

Discussion Questions 

  1. Why do some people easily become victims of text message spam and other consumer frauds?
  2. Describe various types of frauds and scams.
  3. What actions can be taken to avoid becoming a victim of consumer fraud?

 

Categories: Chapter 4, Chapter 5, Chapter 6, Identity Theft | Tags: , , | Leave a comment

Learning about High-Cost Financial Services

Posted on July 12, 2014 by Melissa Hart

Brian Page, a teacher in Reading Ohio, wants his students to understand the drawbacks of check-cashing services, pawnshops, rent-to-own stores, payday loans, and other shadow banking services.  As a result, he scheduled a field trip for his students to visit these sources of high-cost financial services in their community, which are used by many unbanked consumers.

At LoanMax, they observed people getting loans with their auto titles serving as collateral.  One missed payment could lead to repossession of the vehicle. Next, at CheckSmart, students learned about payday lending and tax refund anticipation loans.

At CashAmerica people were making loan payments on money borrowed, which used jewelry, electronics, and sports memorabilia as collateral. Finally, the visit to the Rent-A-Center store demonstrated the exorbitant costs of furniture, appliances, and electronics when using a rent-to-own payment program.

For additional information on teaching about high-cost financial services, go to:

http://www.nytimes.com/2014/05/24/your-money/a-high-school-field-trip-to-a-pawn-shop.html?src=me

Teaching Suggestions

  • Have students talk with someone who has used one of these high-cost financial services. Obtain information about their experiences.
  • If appropriate, have students visit a high-cost financial service provider to obtain information about their services and fees.
  • Have students create a video presentation with suggestions on how to avoid using costly sources of financial services.

Discussion Questions 

  1. Why are an increasing number of people using high-cost financial services such as pawnshop loans, payday loans, and rent-to-own programs?
  2. What alternatives might used by consumers instead of these high-cost financial services?
  3. What actions might a person take to avoid these high-cost financial services?
Categories: Chapter 4, Chapter 5, Credit Mistakes, Financial Services | Tags: , , , | Leave a comment

Beware of Credit Card Surcharges

Posted on July 2, 2014 by Melissa Hart

Did you know that retailers are permitted to charge or surcharge up to 3 percent on your credit card purchases?   However, if a retailer imposes a surcharge, it must be clearly disclosed in the store and on your receipt.

These checkout fees may also give you a discount if you pay with cash. Retailers in CA, CO, CT, FL, KS, MA, ME, NY, OK, and TX are not permitted to charge credit card surcharges.

Retailers are also allowed to set a $10 minimum purchase amount for credit card purchases. However, they can’t charge fees or set minimum purchase amounts on debit card purchases.

For more information on credit card surcharges, go to http://www.knowyourcard.org.

Teaching Suggestions

  • Ask students if they have personally experienced credit card surcharges on their purchases.
  • Have students make a short presentation with a summary of what actions might be taken to avoid credit card surcharges.

 

Discussion Questions

1. Should retailers charge extra 3 percent surcharge when they display a sign “Your VISA and MasterCard are accepted here”?

2. What can you do to avoid credit card surcharges?

Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

Buyer Beware: Grey Charges

Posted on June 25, 2014 by Melissa Hart

You just opened your credit card statement. “What’s this charge?” may be your first thought when you see a small charge on your credit card statement that you can’t figure out. This is known as a “grey charge” and there are several types of grey charges you should be familiar with:

  • Unintended subscriptions. You thought you made a onetime purchase, but it was really a subscription.
  • Zombie fees. Membership fees that you had cancelled, but charges still appear on your statement.
  • Free trial to a paid subscription. When a free trial is over, the seller converts it to a paid subscription.
  • Negative option. You bought one product, but did not realize that you were buying others at the same time.

What can you do to protect yourself from grey charges?

  • Before you buy, read the terms of service. Disclosures about fees may be hidden, so read the entire document.
  • Mark your calendar as a reminder to cancel free trials by a set date.
  • Read your credit card statements carefully. Pay attention to the names of companies and charges for small amounts.
  • Contact the seller to have the grey charges removed.
  • Dispute the charges with your credit card company.

For additional information on grey charges go to: http://www.consumer.ftc.gov

Teaching Suggestions

  • Have students check their credit card statements to discover any grey charges.
  • Have students make a short presentation with a summary of actions that might be taken to avoid grey charges.

Discussion Questions

1. What are several reasons to check your credit card statements?

2. What can you do if grey charges appear on your credit card statement?

Categories: Chapter 5, Credit Cards | Tags: , , | Leave a comment

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