New Car? Put It On The Credit Card

Why should dealers tell you what you can and can't charge to your credit card? Cars represent a jackpot of credit rewards that every consumer is entitled to collect. There's nothing stopping from charging your new car straight to your credit card, if you storm the dealership armed with the right tools...

Dealerships loathe credit cards for two obvious reasons:
Fees: The 2% transaction fees easily costs a dealer several hundred dollars.
Financing: Dealers receive lucrative incentives for arranging financing. They don't want the credit card companies having all the financial fun.

Just because you can use a credit card doesn't mean you should. Dealers factor the method of payment into their negotiations, and asking to pay with a credit card could jack up the price and deprive you of leverage. Even worse, financing your car on the back of your credit card could be a risky financial bet. That said, if you can pay off the car relatively quickly, your credit card can provide a windfall of cash back or frequent flier miles.

Convincing the dealer to accept plastic requires a copy of the cardholder agreement and a few shots of tenacity and persistence. First, negotiate the price of the car. Then, calmly explain that you'll be paying with credit.

Sound outlandish and ridiculous? Fine, don't trust us. Trust Matt Fadiman, Vice President of Riverbank:

...as per both the MasterCard and Visa merchant agreements, a participating merchant must accept that credit card (assuming it is valid and approved) for all purchases. The merchant cannot, by policy or practice, decide which transactions it will allow and which it will not.

I do agree that in reality many dealerships will attempt to refuse to charge the sale on a credit card, but when pushed they will back down. I have purchased my last 4 cars all on credit cards. To say the least the dealer was not happy, but when presented with both a copy of the merchant agreement, and my declaration to pursue with the credit card company, they quickly reversed their position. My calculation is that between the rewards (cash back) and the zero percent rates on the credit cards, my savings were well in excess of $6,000.

Visa confirms that dealers don't have a choice:

U.S. merchants must follow basic card acceptance rules for all Visa transactions. Visa's rules do not allow merchants to impose a maximum transaction amount as a condition for honoring a Visa card. Our rules require merchants to always honor valid Visa cards regardless of purchase amount - large or small.

There are plenty of reasons not to pay with credit, though the thought of charging back a lemon is tempting. Would you ever put a car on your card?

UK watchdog to launch credit card website

The UK’s watchdog, the Office of Fair Trading has recently announced that it will be launching a credit card comparison website to help consumers to avoid the pitfalls of credit cards that use confusing financial jargon and end up costing the consumer more in interest and charges.

The watchdog has expressed concern over how consumers are paying an additional £400 million to credit card companies as a result of confusion caused by the language and small print that credit card providers use.

The watchdog is now taking steps to make sure that credit card companies do not continue to confuse and rip off consumers in this way, and one of these steps is to launch a credit card comparison website that will enable consumers to find the most suitable card for them based on their needs and repayment habits.

Consumers will simply have to enter their details and requirements online and the OFT website will provide a range of options that should suit.

There are concerns that consumers fail to shop around enough for credit cards, and it is hoped that the website will help to ease this problem too.

One industry official stated: “No one wants to throw money away, but consumers who don’t shop around for credit cards are doing just that. It is essential that consumers are given the right tools to make comparisons between credit cards more easily, and we can achieve this through some of the recommendations announced today which have received widespread support.”

In addition to launching the website the Office of Fair Trading has also stated that credit card companies must stop using complicated jargon in small print, and must provide clearer terms and conditions on marketing materials and statements.

Credit card providers slash limits without customers’ knowledge

Credit card customers have been left seething over recent weeks, as the result of a crafty move made by a number of credit card providers in a bid to cull credit card limits.

A number of credit card firms have slashed the credit limit on customers’ cards to just £100 over their existing outstanding balance, and they have done this without first informing the consumer, leaving many feeling embarrassed and humiliated after attempting to use their cards and being refused.

Some customers contacted their credit card providers after trying to make purchases and being refused, and were told that they were not informed prior to the credit limit cut in case they then went out on a spending spree in order to keep their credit limit as high as possible, as the limits have been cut to £100 over the existing balance.

One customer, a solicitor who had his credit limits slashed from £5000 to just £700, stated: ‘I had to endure the humiliation of having it declined twice in B&Q. There was a long queue behind, I was embarrassed, but luckily had other cards with which to pay it. I have had the card for 10 years and, surprise, surprise, I’ve never missed a payment and always paid off the balance at the end of the month. But what really made me angry was that after I asked them why they didn’t give me some notice, they said that if they did that, I could just rush out and spend wildly in an effort to keep my balance up. I found that incredibly insulting.’

Many of those that have seen their credit limits cut in this way have claimed that they have excellent credit and have never missed repayments.

McFall cut up credit card over insurance letters

The MP who has led the fight for a better deal for financial services consumers admits he does not own a credit card.

John McFall, chairman of the Treasury select committee, was fed up being hassled by his card company to take out payment protection insurance.

So he followed the advice of Matt Barrett, former chief executive of Barclay's Bank, who told Mr McFall's committee in 2003 he would not borrow on a credit card as the interest was too high.
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Mr McFall, former Whip and Northern Ireland minister, was in typically trenchant mood yesterday as he castigated the country's financial institutions for their complacency over the past year.

Mr McFall has helped the man and woman in the street grasp what happens to their money when they entrust it to the financial services industry. It should not be something, as he puts it, "that you need a Nobel Prize in physics to understand".

A former schoolmaster, he still ventures back into the classroom to prepare children for the financial jungle that awaits them. But it is his wife Joan who holds the purse strings in the McFall household - "that gives me more time to keep an eye on everyone else's financial affairs".

Being asked to buy payment protection insurance, which has profit returns of 80%, was a red rag to a bull for the current parliamentarian of the year. The letters went in the bin, and his card was cut up.

But he takes a reassuring view of the nation's personal financial situation: "The level of personal debt is put at about £1 trillion, but that is backed by £6-7 trillion-worth of assets - savings and houses they can draw on if it comes to the crunch."

But he isn't all barbed put-down - Mr McFall is probably proudest of what he has achieved through consensus and unanimous reports from his committee.

Credit card companies offer clearer information, more people have access to banking services, more free-to-use ATMs are being put in deprived areas, and shoppers lured into taking out high interest store cards now get a cooling-off period.

Do We Need a Credit Card Holders

US congressman Mark Udall thinks so; he has just presented legislation to the US Senate that out-lines his version of a "Credit Card Bill of Rights". The gist of the bill is to force credit card companies to send notice of a rate increase prior to raising your rates.

However, should congressman Udall get his bill through the Senate as penned it will wipe out a lot of the fine print we see on credit card statements and applications. For instance, the bill will freeze rates and terms on cards that are canceled by the credit issuer. This is so if the company revokes the card from the user they will be unable to hike rates and fees on the outstanding balances. The bill also asks to revoke the issuers rights to raise rates for credit activities unrelated to their account; as well as the halt of over the limit fees on approved transactions. Udall is very optimistic about his bill sighting support on both sides of the aisle.

Predictably, the bill is expected to meet fierce resistance from the credit card lobby. The argument is; "that without these necessary fees many people will have to do without credit cards and pay higher rates". Also, some in Congress are wondering if now is the right time to be passing financial legislation that could further injure the financial sector.

This writer believes that the time for these changes is long over due. The industry has been given ample time to "self-correct" and has failed to do so. The credit card industry is best described to the sub-prime mortgage industry before the collapse. If we have we not learned anything we have learned this; overcharging customers with shaky credit to produce volume is a recipe for disaster. Eventually the write-offs will increase and the economy will take the hit.

Just as in the mortgage market the credit card industry needs to shift, bite the bullet, so to speak. Instead of dreaming up elaborate new fees to raise revenues they should streamline their approvals to less deserving card applicants. Doing this they could lower their write-offs and simplify their fee structures for the deserving cardholders. Of coarse, this would mean lower revenues, lower corporate bonuses and cause mass CEO firings.

Ironically, this is what we are seeing in the sub-prime mortgage market these days. The difference is the mortgage market waited for the collapse and the credit card industry has the chance to head off destruction. Unfortunately, none of the top CEOs are willing to take the pay cut or the risk being fired for lower performances.

Don't get me wrong; I feel that the credit card industry is offering really good deals on credit cards. In fact the low interest cards that are on the market are the best that we have ever seen. The problem is there are just as many bad cards being offered as the good ones. The bad ones have a much higher default rate, which cost the company money. So instead of raising rates they opt for tricky fee schemes that affect everyone.

If Congress is successful passing this bill it will effectively make the credit card companies raise rates or lower the losses by approving fewer cards. This should be interesting to watch.