Chase Blueprint: Suggested Payment Calculator
By way of a post on the Payments Views blog, The Era of Responsible Credit Card Borrowing Begins Today, I heard that Chase recently launched a new Blueprint service for their credit cards.
In a nutshell, Blueprint is a fancy suggested payment calculator. For customers who carry a balance, Blueprint lets them set up some rules and helps them calculate how much they should pay based on those rules.
In an ideal world, nobody carries a balance on their credit cards and everybody always pays in full. Because we are not in an ideal world, Blueprint has its place.
It's a Two-Way Street
Bob Sullivan is the author of the book Gotcha Capitalism in which he wrote about the many ways businesses trip up the consumers with small-print fees. He also writes a very popular blog The Red Tape Chronicles hosted by MSNBC.
I like Bob Sullivan. I reviewed and recommended his book. His blog posts are usually in depth, which I like. I linked to some of them in the past. But sometimes, his consumer advocacy also becomes much ado about nothing. A recent example is his post Chase dumping former WaMu card holders.
Chase took over Washington Mutual (WaMu) last year. Customers who had bank accounts and/or credit cards with WaMu became Chase customers. Chase had a review of the accounts they took over. They decided to close some of the credit card accounts they inherited from the WaMu portfolio. What's wrong with that?
Personal Line of Credit vs Credit Card
My personal line of credit is all set up. I tested it by making a transfer from it in the morning and transferring the money back in the afternoon. I don't think I will owe any interest that way. It worked as advertised.
A personal line of credit and a credit card are both unsecured open-end ("revolving") credit products. In a nutshell, a personal line of credit is like a credit card without a grace period or rewards, but with better cash advance features. Lines of credit are very common for businesses whereas credit cards are more common for individuals (there are also business credit cards). Based on my own personal line of credit with Wells Fargo and my three credit cards from American Express, Chase, and FIA Card Services (Bank of America), I summarize the differences in the table below. Red indicates inferior product features.
| Personal Line of Credit | Credit Card | |
| Secured | No | No |
| Document income for application | Yes | No |
| Purchase | Yes, by check or card | Yes |
| Grace Period | No | Purchase: 20 – 56 days Cash advance: No |
| Credit Limit | Lower | Higher |
| Credit limit for cash advance | 100% | 20% |
| Cash Advance Fee | None | 3%, min. $10 |
| Rewards | No | Purchase: Yes Cash advance: No |
| Annual Fee | Waived | No |
| Interest Rate | Prime + 8.5% | Purchase: Prime + 6-10% Cash Advance: Prime + 16-22% |
The Credit Crunch Finally Hit Me
In last week's post Emergency-Proof Your Emergency Fund, I said I decided to apply for an unsecured personal line of credit from Wells Fargo, where I also have a checking account.
I submitted the application online. The questions were as expected: name, address, Social Security Number, employment information, income, size of the credit line requested, and the purpose of borrowing. They said a decision typically takes two business hours. I waited all day but I didn't hear anything. I finally called and they said my application was declined! If you can believe it, they asked me if I would like to be referred to Wells Fargo Financial, their subprime unit. Me? Subprime? No, thank you.
The underwriter said the reason for the decline was that the size of the credit line I asked for was too high for my income. Fine, tell me what you can give me. No, they just flat out declined me. It's been widely reported that credit card companies are cutting people's credit limits. They have spared me so far. Ah, the credit crunch finally hit me.
Credit Scores After Canceling Oldest Credit Card
My mortgage lender sent me my credit scores. That's the only time I look at them. Otherwise I don't bother. I compared the latest scores with what I got from my last refi in February 2008.
| Credit Bureau | Model | Feb. 2008 | April 2009 | Change |
| Equifax | FACTA Beacon 5.0 | 803 | 794 | -9 |
| Experian | Fair Isaac (Ver. 2) | 780 | 796 | +16 |
| TransUnion | FICO Classic (04) | 797 | 784 | -13 |
| Average | 793 | 791 | -2 |
Two years after I canceled oldest credit card and lowered my total available credit limit by about 25%, my credit scores are still going strong. They changed very little since I looked at them a year ago.
Standardize Credit Card Contracts
I heard law Professor Adam Levitin of Georgetown University on NPR's Fresh Air program last week. Professor Levitin is one of the contributing authors on the blog Credit Slips, which I read regularly. I also linked to and quoted Professor Levitin's posts several times in the past. In his interview (listen online, download mp3), Professor Levitin talked about the recently enacted credit card law — Credit Card Accountability Responsibility and Disclosure Act of 2009 (aka Credit CARD Act, clever, huh?) — which placed limits on certain credit card practices like retroactive interest rate increases and marketing to consumers under age 21.
Professor Levitin said the legislation's approach is wrong. He said if you ban A, B, and C, they will come up with D, E, and F. He suggested instead of banning specific practices, we should standardize most part of the credit card contract. Credit card companies can still price their products however they want. They just fill in the blanks in the standard contract with their numbers. That way consumers can compare the contracts and decide which product is best for them.
I relate to my recent experience in refinancing my mortgage. Much more is at stake with a mortgage than with a credit card. Yet when I signed the long promissory note, I only focused my attention on a few places: principal, interest rate, term of the loan, interest rate fixed or variable (fixed), prepayment penalty (none), due date (1st day of every month), grace period (15 days), and late fee (5%). The rest was pretty much standard. I agree with Professor Levitin when he said credit cards are much more complex with many more prices than a straight-up loan. For people who carry a balance, it's very difficult to compare and understand all the different prices.
Credit Card Cash Advance Saved the Day
I took a cash advance from a credit card last week. I had never done that before. I'm very happy I was able to do it. I'm also very happy with the cost and the efficiency of how it was done, even though I borrowed at 39,608% APR.
I had been in the process of doing a mortgage refinance. At 9:30 in the morning that day, I got an e-mail from my loan advisor with my final HUD-1 closing statement. Documents signing was scheduled at 11:00. I had been waiting for this for quite a while. I had money ready in my Fidelity mySmart Cash account. Not a problem, except they required a certified check. In my previous refinances, I've always been able to submit a personal check. So I erroneously assumed that it would also be the case this time, without asking the loan advisor ahead of time. My bad. I needed about $4,000 for a certified check. I had to have it in about one hour.
I also have a checking account with Wells Fargo, although I only used it for depositing paper checks. I went into a Wells Fargo branch and asked them if they would allow me to deposit a personal check (from Fidelity mySmart Cash) and make it immediately available for the certified check. Despite my having a "top of the line" relationship checking account with Wells Fargo, they said no, which I could understand. I was basically asking them to advance money to me before they collect on the check. I called Fidelity. They said in any single day I can withdraw maximum $500 from an ATM and do a cash advance against the Visa debit card in a bank branch for up to $2,499. Theoretically I could do both and get $2,999. Because the Wells Fargo ATM charged $3 fee, withdrawing $500 plus the $3 fee would throw me over the $500 limit. I had to withdraw $480. Together with the $2,499 cash advance, I got $2,979.
One-Time Credit Card Numbers for More Security
The sixth largest payment processor in the country Heartland Payment Systems disclosed recently their system was compromised by hackers with a piece of data sniffing software watching credit card data pass by between Hearatland and credit card networks. That system processes 100 million transactions a month. This had gone on for months until Visa and MasterCard alerted Heartland about unusual patterns of fraudulent activities. The Wall Street Journal quoted a credit card industry analyst as saying this could be largest credit card data breach ever.
While credit card companies typically reimburse customers against unauthorized charges, having your credit card number stolen is still a hassle. You have to get a new card number, update your recurring charges, and change your bill payment set up. It'll be best if your card data aren't stolen in the first place. If you have the right card, you can make your credit card number more secure by using one-time card numbers.
You need a card by Citibank, Bank of America, or Discover. These banks offer software that generates a one-time card number, officially known as a "controlled payment number." You can configure the expiration date and the maximum amount allowed for the one-time card. Once used, the card is tied to the merchant where it was used. If you gave the card number to XYZ.com online or your dentist's office over the phone, only XYZ.com or your dentist's office can use it. If you put the maximum at $50, they can only charge up to $50. If the card number is stolen, the thief can't use it elsewhere. They don't have your real card number.
How Long Can You Live On Your Credit Cards?
It's old news that credit card companies are cutting people's credit limits. I also read on FatWallet some banks paid people more than $500 for paying down their balance. I checked my three cards. None of them cut my limits. Maybe they just haven't got to me yet. Besides merchant fees, they are not getting any other revenue from me. I guess they are still OK with that. Every month I use about 15% of my available limits among three cards, and that includes paying a mortgage and a car loan with a card. If they want to reduce my credit limit, go ahead. I think the limits are too high to begin with. I like the questions reader Pelon asked in the comments to a previous post:
"What is a healthy borrowing level for the economy? What were we at before the credit market started to freeze-up? Where are we now? Are we trying to prop up something that is unsustainable or trying to get the market back up to a healthy level?"
Pay Mortgage with Credit Card For Free
Can you pay your mortgage with a credit card? The answer is YES. I've been doing that every month for two years. No, I'm not talking about third party programs which charge you a fee of more than 2% of the payment amount. That's not smart. I don't pay any fee or interest. Although I don't get credit card reward points for the mortgage payment, I receive free float. January mortgage payment is charged to the credit card on January 1. The credit card bill isn't due until after Feb. 15. When every mortgage payment is deferred by a month, it's equivalent to having one monthly payment in my pocket as an interest-free loan forever.
You need a credit card by FIA Card Services. FIA Card Services is the new name for MBNA after Bank of America bought it. Eligible cards include Fidelity Investment Rewards Visa (I have this card), the new Fidelity Retirement Rewards American Express, or the new Schwab Bank Invest First Visa, and perhaps some other cards also offered by FIA. The last two cards both pay 2% cash back on all purchases, which is the best you can find. These cards have online bill payment service just like checking accounts do. FIA calls it Bill Pay Choice. Set up your mortgage payment as a recurring bill and the card will pay your mortgage every month. Bill payments are treated as regular purchases, not cash advance. I then set up auto-debit from the card to my checking account for the full balance on the due date (call customer service for a form). That guarantees the card balance is paid off in full and on time every month. It's all free and fully automated.
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