Credit Card Debt Management

Identity theft is one of the most serious crimes facing Americans today. Identity theft insurance plans are a booming business, celebrated for the assistance they give consumers in protecting their identity and helping to clean up the mess, should a theft occur. However, credit card companies themselves have also stepped up their efforts to help prevent, detect and resolve identity theft incidents.

A Javelin research study released earlier this month rated credit card issuers in each of these three areas, based on extensive surveys of fraud victims and the companies themselves. Overall, Bank of America earned top ranking, followed respectively by Discover, FNB Omaha and US Bank.

In the “Prevention” category: Bank of America, then FNB Omaha and Discover

In the “Detection” category: American Express, then US Bank and Bank of America

In the “Resolution” category: Seven card issuers shared top ranking — American Express, Discover, Bank of America, JP Morgan Chase, WaMu, Wachovia and State Farm Bank.

An article on BusinessWire points out that all leading credit card issuers do have zero-liability policies on fraudulent purchases, but only four of 10 issuers reverse charges within 24 hours. It further points out that a major protection for card holders is paperless billing. Receiving financial statements electronically drastically reduces the chances a thief will succeed by sifting through a person’s mail or trash. But ultimately, it’s good to have the credit card on your side.

So we’ve talked about why you should use a credit card to book a flight, but looking down the road a bit, that may not be such a great idea. Forbes predicts that the airline industry, in the midst of profit crashes and business closures, will make it routine practice to charge premiums on tickets purchased with credit cards. According to Forbes columnist Joel Widzer:

“Logically, the next step in cutting distribution costs is making a full-frontal attack on credit cards…It is estimated that for each ticket booked with a credit card, airlines are charged a merchant fee ranging from 2% to 3%, or around $10 to $15 per ticket, roughly $3 billion for the world’s airlines.”

This would be no surprise because the airlines have already created plenty of other miscellaneous taxes and fees to boost revenues. However, if they want to pursue a credit card usage surcharge, it might require a little tap-dancing. Visa and MasterCard forbid their partnering merchants to impose surcharges on consumers. American Express discourages it. I find this quite ironic since the credit card companies are themselves expert nickel-and-dimers, and I know of at least one credit card company that imposes a surcharge for processing bill payment by phone.

But I digress… At any rate, the airlines industry will probably find a way around this. As Forbes points out, a few of the slightly more obscure airlines already charge “handling fees” for credit card payments processed online. Widzer recommends that travelers establish themselves as a modestly elite customer with one airline to increase the preferential treatment they will be given. Loyalty pays, and it could even be in the form of carrying an airline rewards card.

With an unstable job market and increasing college costs, it’s a hard time to be a college student. It’s no wonder credit card companies’ aggressive on-campus marketing campaigns appear so enticing to students. A U.S. PIRG survey of 1,500 students at 40 colleges in 14 states revealed the following:

-2/3 of college students have at least one credit card.

-55% use their credit card for daily expenses.

-Average balance for students with no parental help = $1,301

-Average balance for senior students = $2,623

Granted, student credit card debt is nothing compared to student loan debt. However, the credit card debt certainly won’t help pay off the student loan debt or establish financial stability after college. Furthermore, experts say accepting credit that is essentially unaffordable in the college years marks the beginning of a highly damaging pattern of behavior that contributed to the recent housing crisis.

Silicon Valley’s Mercury News cited 19-year-old Holly Jackson as saying she feels overwhelmed by her credit card bills and may need to pick up a second job.

“I’m learning my lesson,” she said. “After I pay these off, I don’t plan on getting more. They’re awful.”

Undeniably, credit card companies themselves are not without fault. Their aggressive and misleading on-campus marketing campaigns have been legendary. Sen. Robert Menendez (D-NJ) recently proposed a bill that would require consumers under age 21 to “opt in” before they could be the target of credit card solicitations. Additionally, universities are stepping in to provide personal finance education. These are certainly steps in the right direction.