Credit Card Solution

Credit Card Rewards: Reverse Robin Hood?

Robin Hood used to steal from the rich in order to give to the poor. Now a public policy discussion paper from the Federal Reserve Bank of Boston gets close to suggesting that credit card rewards programs achieve much the same–except in reverse.

The paper, published last Wednesday, says: “On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year.” And it goes on to show that it’s low-income households that tend to use cash and high-income families who receive most through using their credit cards.

Credit Card Companies and Swipe Fees

The Fed’s hypothesis is based on how “interchange fees” (also known as “merchant fees” and “swipe fees”) are levied and funded. These interchange fee

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So I decided to give Credit Karma a whirl, considering they proclaim to be the providers of absolutely free credit scores and credit reports without the need for a credit card.

To sign up, you simply need to come up with a screen name and password, and then fill in some basic information, including address, phone number, and social security number.

Don’t worry, your social won’t be stored in their database, it’s only used to retrieve your first credit score.

You also have the option of providing your annual household income, which Credit Karma claims will help you receive a “more tailored report and savings data.”

After inputting the information and agreeing to the terms, Credit Karma generates a credit score.

They said mine came from Trans Union, one of the three main credit bureaus.

My current credit score is 787, which is considered “excellent,” ranking in the 91% percentile nationwide.

They also provide a little credit score range, in which I was in the second to highest credit scoring tier (I’m a little disappointed).

Credit Karma has a “credit report card” as well, which is a quasi-credit report with information such as credit card utilization, percent of on-time payments, average age of open credit lines, total accounts, total number of hard credit inquiries, and total debt.

Additionally, it compares to you to other users on Credit Karma to see where you stand, with metrics for age, state, and even the e-mail address your provided (Yahoo, Gmail, etc).

Finally, Credit Karma provides a credit score simulator to determine where your credit score might stand if you performed certain actions (similar to the Fico score simulator).

All in all, a useful tool to see where you stand credit-wise without having to deal with one of those free trials.

Despite it being a dumbed-down credit report, it’ll probably catch any red flags you may not be aware of, which would likely prompt you to order a full credit report or monitoring program so you could take necessary action, like credit report disputes and so forth.

Caveat: Credit Karma probably uses a slightly different credit scoring formula than the ones you actually pay for via the credit bureaus, so don’t be surprised if scores vary, perhaps widely depending on what is and isn’t reported.

Also, Credit Karma is advertiser supported, so you will receive offers from banks, credit card issuers, and the like if you sign up for the service. Just be sure to opt-out t

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The CARD Act went into effect this year with the intention of ending “tricks and traps” that credit card companies had been building into their fine print.   For example, payments would be due on Sundays or holidays when payments were not accepted.   Payments would then be credited the next day, with all of the requisite interest, penalties, and late fees.   I was a strong supporter of the CARD Act on these pages despite the criticism that credit card companies would find new types of tricks and traps.   I knew that the CARD Act would only be a cure for the existing abuses of the industry, not a vaccination against future abuse.   Like an especially malignant disease, the banking industry is destined to evolve new ways of defeating yesterday’s medicines.

The Latest Tricks and Traps

The Wall Street Journal has the scoop on how banks are changing to defeat the spirit of the CARD Act.   They start out by citing the increase in annual fees.  I have no problem with this as annual fees are not tricks and traps.   Sure, I don’t want to pay them, but at least these fees are clear, honest, and up front, like the recent announcement of the increase in annual fee for the vaunted Starwood Amex. On the other hand, I a

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