Credit Card Debt Management

It seems everywhere you look, the media is obsessed with the rapidly increasing value of Visa and MasterCard shares. Meanwhile, another credit card story has died down — the one about government purchase cards being abused by federal employees, allegedly for things like online dating services, lingerie and iPods. Well, now a group of federal legislators are aiming to bring the controversy back into the limelight (and, undoubtedly, increasing their own popularity among their constituents at the same time).

U.S. Rep. John Culberson (R-Texas) went so far as to say employees who misuse government purchase cards “should be fired immediately and face charges.”

It makes sense, considering the “average Joe” has to face criminal punishment of some type if caught misusing a credit card belonging to another person. The Houston Chronicle, where Culberson’s comments appeared, recently shed light on the fact that NASA employees were among those who misused the federal credit cards. According to the news article:

“The problems have persisted despite at least five internal reports issued since 1997.”

An interesting development in light of the ongoing effort by House members to pass a bill authorizing extensive audits of government employee spending and ultimately holding those employees more accountable. A companion bill in the Senate has passed committee, but has not seen much action on the Senate floor in recent weeks, according to the Chronicle. Maybe (hopefully) developments like the NASA debacle will be just the motivation needed to keep the bill atop the list of priorities.

Virtual credit cards are certainly nothing new in the world of online shopping. After all, they’ve been around almost seven years, but they may not have received due attention in the past. Also known as substitute credit card numbers or controlled payment numbers, this technology offers online shoppers a free and highly effective layer of protection against identity theft.

According to the Sound Money Tips blog, MBNA, Citibank, Discover and Paypal all offer this free service to customers. All you have to do is sign up, download the software, and enter your credit card info (viewable only to the customer and the bank).

Some services limit spending to one merchant or venue only. Other services do not place restrictions on spending, but do generate a different “temporary number” with each online purchase. This temporary number is the only thing hackers can see, whether they eavesdrop at the point of purchase or hack into merchant records after the fact.

Many consumers have snubbed virtual credit cards because they are viewed as unnecessary in light of the fact that credit card companies generally do not hold customers liable for fraudulent purchases. However, the bigger picture is that online credit card fraud can turn into a bigger case of grand-scale identity theft, from which it takes a lot of time and money to recover. And who really wants to deal with that?

The New York Police Department is telling victims of identity theft to keep their stolen credit cards open and active. From a financial advisor’s point of view, this would sound like the worst possible advice. However, from a detective’s perspective, it becomes much easier to track down the thief.

As might be expected, the plan is meeting with some resistance, according to the New York Daily News:

“‘Nobody trusts credit card companies or banks, so no one really believes they won’t be on the hook for some crook’s spending spree,’ said a Manhattan lieutenant familiar with (NYPD Deputy Commissioner of Operations Phil) Pulaski’s push to reduce grand larcenies.”

NYPD officials are saying they will attempt to work with credit card companies to gain a commitment for the companies to pick up the tab. It’s an “investment,” they say, well worthwhile in light of catching a thief run amuck. However, there is a mixed reaction in the credit card world as well. Visa, MasterCard and American Express stated that a consumer would never be expected to foot the bill for a criminal’s spending spree, even if the card was left open under the advice of law enforcement. However, Capital One spokesperson Diana Don had the following to say:

“We might be responsible for the expenses. We want to work with law enforcement to stop such thefts. It would be on a case-by-case review.”

This story still doesn’t answer the common complaint of law enforcement officials — jurisdiction. Might we assume that the feds would get involved in this effort as well? By many accounts, credit card fraud and identity theft often becomes an international issue, so that may be necessary. At any rate, it’s nice to see law enforcement officials trying to take a solution-oriented approach, even if it is still in the idea stage.