Credit Card Debt Management

MasterCard (MA) shareholders are undoubtedly excited to see the stock’s performance this year, an amazing 45% increase thus far. On Friday, the stock hit a record high of $320.30 — more than double its 52-week low of $120 in August 2007 — before settling at $308.65 at the close of Friday trading. The good news came after the company reportedly announced its expectation of double-digit net revenue growth in 2008.

According to Thomson Financial News:

“The Purchase, N.Y.-based company said it continues to see gross dollar volume growth rate slowing in the U.S. in the second quarter, but growing in the rest of the world, according to slides from the company’s investor meeting Thursday. In the long-term, Mastercard said it expects average annual net income growth of 20% to 30% and net revenue growth of 12% to 15%, according to the slides.”

It might not the best entry-level point for newcomers to the MasterCard stock, but Visa (V) might be worth considering. It closed Friday at $86.36, up 1.11% from the day before and almost double its IPO cost of $44 a share in March. That’s remarkable growth and still a relatively reasonable price per share, considering the respectability and stability of the Visa corporation.

Both Visa and MasterCard are considered relatively stable investments for a couple reasons. Other than the fact that we live in a credit-obsessed society and these two companies stand among the industry giants, they also have a great business model. Unlike the banks and competing credit card companies AmEx and Discover, Visa and MasterCard don’t stick their necks out with loans. All they do is collect fees off credit card transactions. Therefore, they have very little exposure to the bad debt so prevalent in these turbulent economic times.

In other credit card news, American Express (AXP) finished last week down 10.9% YTD at $46.35. Discover Financial Services (DFS) finished at $17.15, up 13.73% YTD. Capital One Financial Corp (COF) finished at $48.12, up 1.82% YTD.

Do you sign the back of your credit cards? There are varying schools of thought on this, the latest being a Small Life Blog post explaining why you should sign the back.

Apparently, a recent Money magazine article claimed that the practice of shopper identification verification by merchants is forbidden by Visa, MasterCard and Discover, and strongly forbidden by American Express. A credit card with a signature on the back is identification enough, the companies say. Therefore, while shoppers may hear a request to provide photo ID at the cash register, they are under no obligation to provide it and the merchant cannot retaliate by stopping the transaction.

This bit of information was verified by Small Life Blog with a quick check of the actual credit card companies’ web sites. What’s their rationale? Protection against identity theft: a cashier may get your credit card number, security code, and expiration date, but when you add in the address and zip code that appears on your driver’s license, they can do major damage.

It’s an interesting perspective, but what are the odds a merchant is going to be able to gather and memorize or write down all this information in the split second they see it? The print is so small on driver’s licenses that they probably can’t even see it anyway, or you can just hold it out for them and cover the address with your thumb. You might also use another form of identification, like a gym membership card.

Indeed, it seems to me like this is the least secure of all strategies. I subscribe more to the ideas expressed in the lifehacker blog — do not sign the back of your credit card, but instead write “Check Photo ID” in the little white space. The likelihood that a credit card thief could wind up with your credit card in their possession and try to use it fraudulently seems much greater than the likelihood that a merchant is going to record all your personal data off your credit card and photo ID. I only subscribe to this belief because I’ve seen it in action during a high school stint as a retail sales clerk, when a savvy cashier interrupted a credit card thief’s shopping spree. Frankly, I appreciate it when cashiers ask for my photo ID and have no problem with providing it. Though it may take a little more time to show your photo ID, it could really protect you long-term.

Those who made international purchases with a Visa, MasterCard or Diners Club, between the years 1996 and 2006, may have a refund coming their way. According to Stars and Stripes, a publication geared toward U.S. military personnel, international shoppers could get $25 or between 3 and 5 percent of all such purchases. It’s all part of a class action settlement in a lawsuit claiming the card companies did not adequately disclose information about the foreign transaction fee attached to each international purchase. According to the article, a separate lawsuit is pending against American Express.

The total bounty is $336 million. Those wanting to claim their piece of the pie need to do so before May 30. Purchases made through post exchanges or commissaries are ineligible, as they are considered part of U.S. commerce. However, eligibility may be granted to purchases made from international vendors on a U.S. military post, or purchases made stateside from an international vendor with a foreign transaction fee attached.

According to the article, many servicemen thought the settlement notices they received were hoaxes. It’s not a hoax — it’s for real! Those who think they might be eligible should go to CCFSettlement.com for more information and to claim a portion of the money.