Credit Cards

When Small Charges Can Signal a Big Crime

Counting every penny on your credit and debit card statements can help detect fraud

Most people looking at their bank statements would probably notice if their credit or debit card were used without their approval to purchase a big ticket item, and they would quickly call their bank or card issuer to report the error or fraudulent transaction.  But consumers are less likely to be suspicious of very small charges, including those less than a dollar…which is why criminals like to make them.

“These transactions might be signs that someone has learned your account information and is using it to commit a crime,” said Michael Benardo, manager of the (Federal Deposit Insurance Corporation) FDIC’s Cyber Fraud and Financial Crimes Section.  “That’s why it’s important to be on the lookout for fraudulent transactions, no matter how small.”

He added, “When thieves fraudulently obtain someone else’s credit or debit card information and create counterfeit card, they might test it out with a small transaction—like buying a pack of gum or a soda—to make sure the counterfeit card works before using it to make a big purchase.  If this test goes unnoticed, by the true account holder, thieves will use the card to buy something expensive that they want or that they can easily sell for cash.”

For more information, click here.

Teaching Suggestions

  • Ask students if they know someone who had his/her credit or debit card compromised. If so, how they detected the illegal charge and how the problem was solved.
  • Under what circumstances should you close the compromised account?

Discussion Questions

  1. Why is it important to regularly scrutinize your monthly credit and debit card statements?
  2. What can be consumers do to protect themselves from such frauds? What is the best way to catch this type of fraud?
Categories: Chapter 5, Credit Cards, Debit Cards, Identity Theft | Tags: , , | Leave a comment

Protecting Your Privacy and Security When Making Mobile Payments

For most consumers, the biggest benefit of mobile payments is convenience.  No need to pull out your wallet for cash or plastic—especially if you’ve got your phone at hand anyway.  No need to type your payment information to buy online.  But what if your financial and other personal information isn’t safe?

Security is important since you usually carry your mobile device with you, it’s on most of the time, and it may contain sensitive information.  Consumer Federation of America (CFA) offers advice on how to avoid security pitfalls, what features keep your mobile device and your payments safe, and how to prevent others from making mobile payments without your permission.

For more information, click here.

 Teaching Suggestions

  • Ask students to read the privacy policies of the companies whose services they are using to make mobile payments.
  • What are your options if you don’t like a company’s privacy policy?

Discussion Questions

  1. Should you voluntarily provide information that is not necessary to use a product or service or make a payment?
  2. Why is it important to use extreme care when you use free public Wi-Fi?
Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

Newcomer Money Guides

While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions.  These guides offer brief suggestions to those who are new to the U.S. banking system.  The guides also include guidance for submitting and resolving problems with a financial product or service.

The Newcomer Guides include these topics:

  • Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
  • Checklist for opening an account, to assist with starting a bank or credit union account.
  • Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
  • Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.

Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.

For additional information on money guides for newcomers:

Article #1
Article #2
Article #3

Teaching Suggestions

  • Have students ask people to create a list of financial planning terms that people find confusing.
  • Have students suggest methods to have people learn about confusing financial planning terms.

Discussion Questions 

  1. What financial problems might be encountered by people with limited English-language skills?
  2. What actions might be taken to assist various groups to better understand banking services and money management activities?
Categories: Bank Fees, Budget, Chapter 2, Chapter 4, Credit Cards, Debit Cards, Debt, Financial Services, Savings | Tags: , , | Leave a comment

New Credit and Debit Chip Cards

Banks and card issuers have been sending out new credit and debit chip cards, usually as existing cards expire or need replacement.  If you haven’t gotten your new cards, don’t worry.  The rollout will continue at least through 2016.  If you want to know when yours new chip cards will arrive, contact your card issuers at the phone numbers on your cards.

Your new cards look like your old cards with one exception.  New cards have a small square metallic chip on the front.  The chip holds your payment data—some of which is currently held on the magnetic stripe on your old cards—and provides a unique code for each purchase.  The metallic chip is designed to reduce fraud, including counterfeiting.

Here’s how it works: To buy something in a store, instead of swiping your card, you’ll put it into a reader for few seconds.  Then you might have to sign or enter a PIN.  With each transaction, the chip generates a unique code needed for approval.  The code is good only for that transaction.  Because the security is always changing, it’s more difficult for someone to steal and use.

There will be no change in how you use your card online or by phone.  That means chip cards won’t prevent crooks from using stolen card numbers to buy online or by phone.  So it’s a good idea to still guard your card information closely, and check statements for suspicious activity.  If there is a problem, your consumer protections remain the same.

For more information, click here.

Teaching Suggestions

  • Ask students if they have received a new chip credit or debit card. Show how the new card differs from the old card.
  • Do you believe that new cards will help reduce fraud? Why or why not?

Discussion Questions

  1. How might scammers try to take advantage of the millions of consumers who have not yet received a chip card?
  2. How can you protect yourself from the scammers?
Categories: Chapter 5, Credit Cards, Frauds and Scams, Identity Theft | Tags: , | Leave a comment

Attention College Students: Student Loans, Debit and Prepaid Cards

College students often make financial decisions that can have consequences for years.  Getting a student loan or credit cards can influence long-term financial success.  Here are the ways to strengthen your decision-making skills:

  1. Do your research before applying for a student loan. If you have to borrow to pay for some or all of a college education, review the different types of student loans.  Choose one that’s low-cost and has a flexible repayment terms, which will generally be a federal student loan.
  2. Understand the pros, cons and costs of debit and prepaid cards. Debit cards enable you to withdraw money from your checking accounts for purchases or cash.  Prepaid cards are used to access money that has been loaded (added) onto the card, which is not connected to a bank account.
  3. Use credit cards responsibly: While credit cards are a convenient way to establish a credit history, they can make it easier to spend money. Purchases that cannot be paid in full by the due date will incur interest

For more information, click here.

Teaching Suggestions

  • Ask students if they have an outstanding student loan. Was the process of financing an education daunting and time consuming?
  • Ask students to visit the College Affordability and Transparency Center website (collegecost.ed.gov) for choosing the financial aid package that best suits their needs.

Discussion Questions

  1. Why is it important that you find the most affordable education that fits your budget, future career, and long-term financial goals?
  2. What might be the benefits of understanding the pros, cons, and costs of debit and prepaid cards?
  3. Are school-affiliated cards the best deal for all students? Why or why not?
Categories: Chapter 5, Credit Cards, Debt, _Appendix A | Tags: , | Leave a comment

Review a Copy of Your Free Credit Report

Credit reports, produced by credit bureaus, detail your financial history, and are used to develop credit scores.  Under federal law, you can get at least one free report from each of the nationwide credit bureaus every 12 months.  If you find an error, contact the credit bureau directly and correct the record.

If you cannot qualify for a regular credit card, consider a no-fee or low-fee secured credit card.  This is a credit card for which you would keep money (as collateral) in a deposit account at the financial institution issuing the card.  For example, if you want a card with $1,000 limit, you might deposit that amount into a savings account at the bank offering you the card.  The lender would report how you manage the card to one or more of the credit bureaus, and often it will provide you the opportunity to obtain an unsecured credit card after a certain period of on-time payments.  Secured cards may have fees attached to them and may have a higher interest rate, so be sure to do your homework before signing up.

To order your free annual report from the three major credit bureaus—Equifax, Experian, and TransUnion visit www.AnnualCreditReport.com or call toll free 1-877-322-8228.

You have the right to see and correct reports from “specialty” credit bureaus that, for example, track a person’s history of handling a checking account.

For more information, go to:

Building a better credit report

Specialty consumer reports

Teaching Suggestions

  • Ask students to visit several websites that may provide current information about credit files.
  • Bring to class examples of credit related problems of individuals or families. Suggest ways in which these problems may be solved.
  • Ask students to talk to a person who has discovered an error on his or her credit report. What was their experience to get it corrected?

Discussion Questions

  1. What steps can you take to improve your credit score?
  2. Which federal laws protect your rights if your credit application is denied?

 

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

Tips on Choosing and Using Bank “Rewards”

Bank reward programs tied to credit or debit cards or other products can provide you with appealing offers for things such as points to be used for travel and shopping or cash added to your account.  But finding great deals is only half of the equation.  Before jumping into any rewards program, consider these tips for maximizing the potential benefits and minimizing mistakes:

  • Comparison shop different rewards programs, including their fees and other costs, before deciding to apply for one.
  • Choose a rewards program that fits your lifestyle. The best way to maximize benefits and avoid spending problems is to choose a program that rewards you for purchases or deposits you would make even without the gifts.
  • Remember what it takes to earn rewards. Many credit cards provide rewards when you use them to make purchases, but it’s important to know exactly how much you can earn.

For more information, click here.

Teaching Suggestions

  • Why is it important for consumers to understand that to make the most of any rewards program, they need to make sure that they do not overlook other, more important account features in addition to the rewards?
  • Ask students to comment on the statement: “While rewards can be beneficial, don’t spend just to earn rewards.”

Discussion Questions

  1. Where should you look for credit cards and other bank products that provide rewards tailored to your particular needs?
  2. What are some of the perks that credit cards allow for their customers?
  3. Does overall spending and debt accumulation increase among consumers who use a rewards credit card?
Categories: Chapter 5, Credit Cards | Tags: , | Leave a comment

Internet Fraud

How many people are scammed into sending money or giving personal information each year?
Answer: Millions!!

Types of Internet Fraud

  • Internet auction fraud—involves the misrepresentation of a product advertised for sale on an Internet auction site, or non-delivery of merchandise.
  • Credit card fraud—the unauthorized use of credit/debit card, or card number, scammers fraudulently obtain money or property.
  • Investment fraud—an offer using false claims to solicit investments or loans, or providing purchase, use, or trade of forged or counterfeit securities.
  • Nigerian letter or “419” fraud—named for the violation of Section 419 of the Nigerian Criminal Code, it combines the threat of impersonation fraud with a variation of an advance fee scheme in which a letter, e-mail, or fax is received by a victim.

Tips for Avoiding Internet Fraud

  • Know your seller – If you don’t know who you are buying from online, do some research.
  • Protect your personal information – Don’t provide it in response to an e-mail, a pop-up, or website you’ve linked to from an e-mail or web page.

For more information, click here.

Teaching Suggestions

  • Bring to class Internet-related problems and examples of individuals or families. Suggest ways in which these problems might be solved.
  • Compile a list of places and organizations where a person can call to report Internet fraud.

Discussion Questions

  1. While the Internet makes everyday tasks faster and more convenient, like stopping, banking, and communicating, why it’s important to be safe, secure, and responsible online.
  2. What are some basic precautions we can take to protect our computer and personal data from theft, misuse, and destruction?
Categories: Chapter 6, Credit Cards, Frauds and Scams, Identity Theft | Tags: , , , | Leave a comment

Revising Dave Ramsey’s Baby Steps

Dave Ramsey has taught and encouraged millions to get out of debt and to achieve an improved financial situation through his “seven baby steps,” which are: (1) establish a $1,000 emergency fund; (2) pay off debt; (3) save three to six months of expenses; (4) invest 15 percent of income in pre-tax retirement funds; (5) plan for the funding of the college education of children; (6) pay off mortgage as soon as possible; (7) build wealth and give.

An alternative perspective to this approach might be:

  1. Create a larger initial emergency fund.
  2. Instead of paying off the smallest debts first, pay off the ones with the highest interest.
  3. A minimum of six months for expenses is needed, with twelve months more realistic.
  4. Take advantage of any 401k matching offered by employers.
  5. College may not be the right educational choice for everyone. Also, those who go to college should be responsible for a portion of education costs.
  6. Home ownership may not be appropriate for everyone. When buying a home, paying off a mortgage may be a higher priority than saving for college to reduce the amount of interest paid.
  7. Making money, saving money, and donating to charity should be the main focus.

For additional information on personal financial planning actions, click here.

Teaching Suggestions

  • Have students survey others regarding their use of these personal financial planning suggestions.
  • Have students obtain additional financial planning suggestions using online research.

Discussion Questions 

  1. What do you believe are the most important actions that should be taken regarding wise personal financial planning?
  2. How would you communicate these financial planning actions to others?
Categories: Chapter 1, Chapter 2, Credit Cards, Debt, Financial Planning, Wise Shopping | Tags: , , | Leave a comment

Prescreened Credit and Insurance Offers

Many companies that solicit new credit card accounts and insurance policies use prescreening to identify potential customers for the products they offer.  Prescreened offers–sometimes called “preapproved” offers–are based on information in your credit report that indicates you meet criteria set by the company.  Usually, you receive prescreened solicitations via mail, but you may also get them in a phone call or in an email.

For additional information, go to

http://www.consumer.ftc.gov/articles/0148-prescreened-credit-and-insurance-offers

Teaching Suggestions

You may want to use the information in this article to discuss

  • Why some people prefer not to receive prescreened offers in the mail, especially if they are not in the market for a new credit card or insurance policy?
  • What might be some advantages of receiving prescreened offers?
  • Ask how many students have received prescreened offers and what did they do with them.

Discussion Questions

  1. Can prescreening hurt your credit report or credit score?
  2. How can you reduce the number of unsolicited credit and insurance offers you receive?
Categories: Chapter 5, Credit Cards, Credit Scores | Tags: , | Leave a comment

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