New “layaway programs” from major retailers this holiday season could cost consumers the same as “sky-high” interest rates on credit cards, warns New York Senator Charles Schumer, who is calling on stores to prominently display interest rate equivalents to layaway plan fees.

With the prospect of layaway fees that can equal “an 81% credit card APR for a $100 purchase,” Schumer is urging the Retail Industry Leaders Association (RILA) and the National Retail Federation (NRF) to work with member stores to clearly display the interest rate comparisons.

Short-term layaway plans have long been an option for consumers with little or no credit available, especially during the holiday season.

Schumer, a Democrat, said if retailers don’t voluntarily implement such a disclosure program, he would ask the Federal Trade Commission to open an investigation into whether the fee structure is deceptive and misleading.  Schumer said the layaway programs often deceive consumers by “referring to the program in terms of fees instead of interest rates, making it difficult to compare to interest rates consumers are familiar with on their credit card.”

There has been no formal response to Schumer’s request from the Retail Industry Leaders Association or the National Retail Federation.

‘The holiday season is supposed to be about giving and not taking, but these layaway programs are taking advantage of people and charging them outrageous interest rates, under the guise of making it easier and more affordable to shop,” Schumer said.

Schumer cited examples of layaway plan fees and their credit card equivalents for products sold by Wal-Mart, Toys “R” Us, and Sears.

Here are three examples provided by Schumer:

• Walmart: The layaway program offered by Walmart requires a $5 service fee for a payment plan, a 10 percent down payment, and requires final payment and pickup by December 16. Walmart also has a layaway cancellation fee of $10.  A shopper who purchases a $69 “Let’s Rock Elmo doll” today will pay fees equivalent to interest payments for a credit card with a 105 percent APR.

• The layaway program offered by Sears requires a $5 service fee, 20 percent or $20 down payment (whichever is higher), and requires final payment by Christmas. Sears also has a cancellation fee of $15. A shopper who purchases a $99 Leapfrog Leap Pad today at Sears will pay fees equivalent to interest payments for a credit card with an 81 percent APR.

• The layaway program offered by Toys ‘R’ Us requires a $5 service fee, a 20% percent down payment, and requires final payment/pickup by Christmas. Toys ‘R’ Us also has a cancellation fee of $10. A shopper who purchases a $199 NOOK Color at Toys ‘R’ Us will pay fees equivalent to interest payments for a credit card with a 39 percent APR.

The timeframe for layaway plans are usually 30 to 90 days. There are normally no interest rates charged. However, if you miss a payment or fail to pay the minimum due, you might have to double up on your next scheduled payment.  At some stores, the merchandise is returned to the shelf as soon as seven days after a missed payment.

Consumer groups are urging the shoppers to carefully review layaway plan agreements.

The federal government does not specifically regulate layaway plans, but the FTC can go after retailers for “unfair or deceptive” practices.

Airline credit cards may bring benefits

Airlines are offering sign-up deals for their credit cards that you might like. Here are a few.

               Ever run low on cash and youre so hungry you think you might die? You tell yourself youll use your credit card just this once to buy that pizza you have been wanting all day. You tell yourself that youll only use it just this once, knowing youll use it in a week to do the exact same thing. An article by Megan Smith, called How College Students Get So In Debt That it Could Take up to 20 Years to Pay Off all the Debt That They Add up, talks about how credit card companies are the ones to blame for college students’ rising debt, due to the fact that they market everywhere around college campuses. College students really need to think twice about using credit cards, and only use them correctly and for the right reasons. They need to make sure that they read the terms and conditions and know what the long term effects are going to be for using the card. Now lets take a deeper look into some of the problems that college students nationwide are facing when it comes to credit cards.

     Smiths main claim is that the card companies are the ones responsible for what is happening to these college students. For example, Smith asserts that companies should be legally required to tell the student the length of time it will take to pay off the card. Knowing how long its going to take to pay it off and how much they need to pay each month is a very good idea. This could encourage the students not to spend so much on not needed items. Legislation should pass these laws so that America as a whole is better off and our future will not be affected. Imagine being 30 years of age and still paying off a slice of pizza you bought when you were 19 in college. It may sound crazy, but problems with credit card debt can lead to this scenario. Learning how to use credit cards responsibly now can save you from having to dig yourself out of debt after you graduate. It also helps prevent you from having a bad credit history in the future, which will impact other things you would like to do, like buying a car. Loans students take out for college need to be paid back after graduation; if you add a large monthly credit card bill to that amount, you may find yourself in a very difficult situation financially.

            Credit cards for college students are set up to help young people and/or students build up their non-existent credit history for the future. While reward features and other benefits are typically scaled back for these cards, credit cards for students and teens can still be pretty valuable. Zoey Zlatnik said, I only use my credit card for emergency purposes only.

         If used wisely, students can use credit cards to take the first step towards building a solid credit history. Utilizing a credit card from one of the leading issuers, such as Citibank, Discover, Chase or American Express is a good place to start.

     When you sign up for a credit card, you are responsible for paying the bills. Follow these rules of credit management to lead a financially healthy life: Consider using a debit card instead of a credit card. Money is deducted directly from your checking account, so you cant spend more than you actually have. Read all application materials carefully, especially the fine print. What happens after the teaser rate expires? What happens to your interest rate for a cash advance? Pay bills promptly to keep finance and other charges to a minimum and always pay the balance off if you can. Use credit only if youre certain you are able to repay the debt. Avoid impulse shopping on your credit card. Save your credit card for a money emergency.

       Zack Pelker, a junior at Seckman, went on to say, Im going to use a credit card in college, but I will only use it in situations that are necessary. 

     Many agree what Mr. Pelker mentioned. Credit cards can be bad if you dont know exactly how to use one, but there are many benefits to using credit wisely.

Hi Erica,
My brother is an entrepreneur with multiple business ventures. A couple years ago, I helped him out with one of his projects and agreed to co-sign two business credit cards for the venture because my credit is better than his. Since then, I’ve gone back to devoting myself full-time to my day job, but my name’s still on the cards. When I recently pulled my credit reports, I was shocked by the number of late payments on one of the cards. I’ve confronted my brother and am getting my name off both of them. But what else can I do to recover my credit? Would it make a difference if I wrote to the credit reporting agencies and explained that those weren’t my charges? Craig

Dear Craig,
I’ve noticed that the term “business card” is bandied about rather loosely. While your brother may have needed a line of credit to kick-start his venture, the card you helped him get was probably like any old unsecured credit card at least as far as payment and legal responsibility is concerned. Accounts established for small businesses usually just mean that they allow cardholders to do things like rack up extra points at certain retailers, such as office supply stores, provide their employees with supplementary cards with controllable credit limits or enjoy extended grace periods on purchases.

Returning to your situation, the spotty payments your brother made is showing up on both his and your credit reports and there’s not much you can do about it. You are a co-signer, so his, as well as your, charging history will be evident on all cardholders’ reports. Consumer credit reporting agencies are bound to list accurate and timely data, so asking them to remove the evidence will be for naught. As with most derogatory information, the late payment notations will remain for a total of seven years.

Be aware, too, that if your brother lets the debt slide deep into delinquency, the creditor has the right to take the matter to court. You could be held equally liable for the balance due, even if you never charged a penny. Again, when you co-signed, you promised that you will cover the obligation in the event your brother doesn’t.

To mitigate further damage, I agree that closing all accounts you and you brother are connected to is a sensible idea. It was kind of you to help him out, but clearly his poor credit management skills has caused you harm. It doesnt say much for his business acumen either. Do know, though, that to close a card with an outstanding debt co-signed or not most creditors require a balance to be at zero first.

You may also consider writing a brief statement of explanation and attach it to your three credit files. This will allow you to tell your side of the story. Your tale of brotherly woe won’t make a difference to your FICO or other credit scores, but if someone were to pull it and read what you wrote, they may be positively influenced by your story.

Regarding your credit score, it’s usually best to leave old, active accounts alone. However, because the history with one of the cards has been so bad, it’s more of a liability than an asset. If you have other individual accounts that you’ve owned for many years, canceling the one with late payments as well as the other should have little effect on those numbers.

Your credit rating will bounce back by letting time heal the wounds that your brother inflicted and by borrowing and repaying perfectly on your own from this point forward.

And, in the future, don’t co-sign on anyone’s cards again, business or personal. Be there for your friends and relatives in less risky, more productive ways.

Like many other commercial banks in Bahrain, BMI started selling cards as a credit card without annual fees. Then, after one or two years they impose annual fees and insurance charge without even giving the customer an option to continue or not.

A letter drafted by the bank on September 14 arrived on September 25 stating that you have to pay BD 30 with effect from October 1, 2011. I went to the Manama branch for cancelling the card and very casually the customer service staff pointed out that whether there is any pending amount in the statement of the card or not, pay five per cent of the credit limit and cancel it. Without this payment the card cannot be cancelled even if there is no payment due.

Is there any banking regulatory authority in Bahrain that can investigate such discrepancy and restrict banks from issuing credit cards using such marketing gimmicks?

How can this bank demand a five per cent deposit of the credit limit to close the account when there is no money due to the bank? Are they paying interest on this?

They can simply cancel the cards and send the statement even after a month, which the customers are obliged to pay if there is any final dues.

Think of what one will do if a person is on annual holiday at this time or out of Bahrain on some official visit!

Pradipta Guha

l BMI chief executive officer Jamal Al Hazeem said: We wish to inform our customers that the new annual fee that will be charged on the card is in accordance with the policies and procedures of the bank and a communication on the same was sent to all our customers. However, the date for implementing the fee has since been postponed to December 8, 2011.

We would like to take this opportunity to inform our customers that banks in Bahrain are not unique in their position when applying new charges on services offered.

Cases in point are American banks like Bank of Americas $5 monthly fee starting January 2012 for debit card purchases or Citibanks $20 monthly fee on customers if they fail to maintain a minimum balance of $15,000 in their combined accounts. The charges levied by banks either on products or services always take into consideration the prevailing market practices and conditions.

The five per cent of credit limit requested as a deposit to close the card of the customer is to account for any unbilled transactions or interest during the current cycle which requires the bank to provision for it. This amount will however be returned to the customer after the completion of the billing cycle.

I have personally attended to customers expressing any grievance on the subject and a majority of them have been resolved to their satisfaction. I would request all our customers to kindly call our 24-hour customer care centre on 17508080 so that we are able to track their specific requests and resolve any misunderstandings effectively and immediately..

Dear Jerry:

In my wallet are some old credit cards. Although the accounts are in good standing, I do not charge anything on them. The cards have been unused for a long time.

In terms of my credit rating, one colleague told me I should cancel the old credit cards since I no longer need them. And to me, it seems logical I would cancel them.

Do you agree?

G. L.

Bismarck, ND

No. As for what influences your credit rating, logical is not always accurate.

Consumers often believe they should close their inactive credit card accounts. They think it will enhance their credit rating. In reality, the opposite can be correct. Even if you never use your old credit cards to charge merchandise, make a cash advance, or anything else, it can benefit your credit rating when you keep the cards on file. There are two main reasons.

Firstly, longstanding accounts like your old credit cards extend the age of your credit report. In this instance, older is better.

Secondly, by keeping the accounts open, it gives you have a higher amount of available credit. As long as you do not misuse that credit, it will help your credit rating. Having the extra available credit (without using it) is a positive factor on your credit report.

Meanwhile, you need not carry the old credit cards in your wallet. Just keep them in a safe place.

Dear Jerry:

As holiday time approaches, many of us make annual contributions to charitable organizations. I would like to know the specific amounts these charities spend on research, administrative costs, and everything else. I would like to know what portion of the donation actually benefits the cause.

Where can the public locate accurate information on how these organizations use their dollars?

C. Z.,

Fort Worth, Texas

The American Institute of Philanthropy (AIP) is a reputable charity watchdog. Since founded in 1992, it has been independent, nonprofit, and thorough.

You can visit AIP online at www.charitywatch.org. Alphabetically and by category, its top-rated charities (A+ to B) can be accessed. For complete information on those and the lesser-graded charities (B- to F), consult its Charity Rating Guide amp; Watchdog Report. It is published three times per year and tells you how 500+ national charities are spending their money.

For a sample copy, send AIP a $3 check to cover postage and handling. The mailing address is American Institute of Philanthropy, P O Box 578460, Chicago IL 60657. Its telephone number is (773) 529-2300.

AIP annual membership requires a $40 donation. Every four months, AIP members are entitled to the printed and online version of its updated Charity Rating Guide amp; Watchdog Report.

A prohibitive number of organizations spend almost 100 percent of their funds on administrative costs, fund-raising, inefficient management and other misuse. Millions of consumers have wasted billions of dollars on these charities. You need not be one of them.

Jerry Romansky is a syndicated columnist. Readers are invited to write in English or Spanish: Ask Jerry, PO Box 42444, Washington, DC 20015. E-mail askjerry@earthlink.net and (because of spam situation) write the name of your newspaper in subject heading. Questions of popular interest are answered in the column. Unpublished letters cannot be answered individually.

Frequent flyer credit cards used to be the golden eggs of the business-traveler market.

Any air carrier that gave their customers the chance to rack up miles with the swipe of a card was guaranteed to turn a respectable profit.

These days, though, offering frequent-flyer cards has become less of a business strategy for airlines and more like a standard of practice.

As a result, several air carriers have decided to up the ante with their credit card rewards and now offer priority boarding to cardholders as well.

Although priority boarding seems like more of a gimmick than a bonus, the chance to avoid the mad dash for prime carry-on space can be a tiebreaker for business travelers debating between two different airline credit cards especially if you dont fly enough to get priority boarding as part of an executive rewards package.

Heres a look at a few of the priority boarding credit cards offered by some of the leading air carriers:

• United. United has partnered with Chase and Visa to issue their flagship United MileagePlus Explorer Card. In addition to the standard card bonuses 25,000 bonus miles for signing up and one mile for every dollar spent after the MileagePlus card also offers travelers priority boarding, a free checked bag for every flight and two yearly passes to the United Club, the carriers executive boarding lounge. While these bonuses are attractive, the card also carries a $95 annual fee which can make it an expensive piece of wallet-filler for travelers who dont fly every month.

• Continental. Continental Airlines offers several MasterCards that come with priority boarding privileges, but most people without a corner office will be looking at the Continental OnePass PLUS card. Since Continental was acquired by United earlier this year, dont be surprised that the OnePass PLUS bonuses are identical to the MileagePlus Visas frequent-flyer miles, priority boarding, United Club passes and all. The annual fee, too, is $95. At the other end of the spectrum and for a $395 annual fee Continental offers the Presidential Plus card. In addition to increased mileage bonuses and full access to the United Club, the card also grants VIP privileges at hotels, car rental agencies and other businesses around the world.

• Delta. Delta is the largest US airline, so it makes sense that they would partner with American Express to issue their Gold Delta SkyMiles line of credit cards. The most basic model, the Gold, comes with priority boarding, frequent-flyer miles, a free checked bag and 20% off of all flight-related purchases. Although the annual fee for the card is also $95 and the APR can be as high as 20%, the availability and price of Delta flights can make this card a good value.

Priority boarding cards are almost identical in terms of benefits and fees, and so if youre considering signing up for this type of credit card, you should go with the airline you fly most often.

While the annual fees attached to these cards will make them costly for infrequent travelers, people who spends a lot of time in the skies for work or for play may appreciate the perks.

This post originally appeared at Credit Card Assist.

Welcome, ladies and gentlemen, to the 2011 Money Blue Book World Series of Credit Cards! With baseball post-season in full swing (so to speak) weve decided to have a little fun ourselves and compare some of our best credit cards in seven different categories under a baseball theme. Grab some peanuts and Cracker Jack and enjoy the game!

Student credit cards

Leading off in Game 1 are two of our best student credit cards. We can genuinely say that the two rivals competing in todays game have youth on their side. This game pits the Capital One Journey Student Rewards card against the Discover Student Open Road card. Although you wont find this contest on ESPN, its sure to be followed avidly on the nations campuses of higher learning.

If youre a student, you probably dont have much credit history. Student credit cards are designed to make it easy for you to build your credit score without letting you get too overextended (although, of course, you can still get into trouble if you let payments slide).

Both teams deserve high marks for their star-studded lineups of top credit card features. Lets run down those lineups before the first pitch of todays game and give you a chance to grade each cards merits in this student credit card competition.

Student rewards

Because students are known to be a fun-loving bunch, lets look first at the rewards of using each card. The Capital One Journey Student Rewards credit card bills itself as a credit card for students who want to build credit and get cash back rewards for purchases.

Cash back. Capital One delivers on that promise by paying you 1% cash back on all purchases on the card. In addition, you get a 25% bonus on cash earned each month when you pay your balance on time. If you shop retailer-packed Perk Central, youll earn 15% more on top of that.

With the Discover Student Open Road Credit Card, rewards are a little more complicated. Youll earn 2% on up to $250 spent on gas and restaurants each month, which could save you money if youre following your school team on the road. Other purchases earn you 0.25% until youve spent $3,000 for the year, after which youll get 1% automatic unlimited cash back bonuses on tailgate party supplies, season tickets, team jackets or anything else you purchase on the card. Cash back rewards rise to 5 to 20% at Discovers exclusive online mall.

Low APR student credit cards

Transfers and purchases. For both balance transfers and new purchases, the Capital One Journey Student Rewards card has an APR of 19.8%, which may vary based on the prime rate. With the Discover Student Open Road Credit Card, the APR is 0% on balance transfers and new purchases during an introductory period of nine months, after which it climbs to 12.99 to 19.99% depending on your credit history.

Cash advances. On cash advances, the APR for the Capital One Journey Student Rewards card runs 24.9%; the Discover Student Open Road card charges a full percentage point less, 23.9%.

Late fees. If you make a late payment on the Capital One Journey Student Rewards card, a penalty APR of 29.4% applies. If a payment is more than 60 days late, youll pay the penalty rate indefinitely. With the Discover Open Road card, the penalty APR is smaller: from 17.99 to 24.99%, depending on creditworthiness and other factors. The penalty APR will apply indefinitely if levied due to a missed payment.

Payment flexibility

Purchases. With both Capital One Journey and Discover Open Road, your due date is 25 days after the close of each billing cycle. You wont be charged interest on purchases as long as youve paid your previous balance due in full each month.

Cash advances. For both cards, interest is charged on cash advances beginning on the transaction date, and if interest is charged, the minimum amount is 50 cents.

Transaction fees

Annual fees. Neither card charges an annual fee.

Cash advances. With the Capital One Journey Student Rewards card, the fee for each cash advance is $10 or 3% of the amount of the advance, whichever is greater. The Discover Open Road card charges the greater of $10 or 5% of the amount of the advance.

Balance transfers. Unlike many cards, there is no fee to transfer a balance from another card to the Capital One Journey Student Rewards card. For the Discover Open Road card, the balance transfer fee is the greater of $10 or 5% of the amount of the advance. Balance transfers are accepted at the discretion of the card issuer.

Best student credit card

Both cards are excellent choices. The Capital One Journey Student Rewards card gets the nod for a simpler rewards structure – effectively 1.25% on all purchases if you pay your balance on time every month. Also, if youre transferring a balance, Capital One eliminates the usual 3% balance transfer fee.

The Discover Student Open Road card pays higher rewards in gas and restaurant categories, although less in other categories until you reach a preset limit, but youll pay no interest for the first 9 months.

Which student credit card would you pick as the winner? Let us know in the comments area.

The original article can be found at MoneyBlueBook.com:
Student credit cards: Capital One vs. Discover

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Many bankers visited hundreds of high schools across the United States sometime this week. They were there in recognition of Thursday’s “Get Smart About Credit Day,” featured in Chase’s Calendar of Events and other publications.

Unfortunately, the bankers’ primary goal was to teach kids to use credit cards. What our kids really need to learn is how to use debit cards. Big difference.

With credit cards, many of us spend money we don’t yet have and sometimes can’t cover the bills when they come due. With debit cards, we can only spend money we already have earned and put in the bank, so our bills are covered.

Kids should learn about credit from the time they get their first allowance, rewards for their report card grades, or for assigned chores.

A portion of those earnings should be put in a bank account, with a parent as a co-signer.

To ensure the future financial success of our children, the earlier we start that process the better. Good in grade school. Helpful in high school. Critically important in college.

Fortunately, our college and university system is such that our graduates can compete in careers with their counterparts from anywhere in the world. Unfortunately, many of them are handicapped by being debt-laden for years with borrowings that parents might have avoided with more long-range planning.

One of our responsibilities as parents is to teach our kids and help them to understand the importance of not getting into major debt until our earnings meet or exceed our obligations.

Bankers and other financial leaders whose institutions have suffered during this prolonged recession have an obligation to put credit and debt in perspective for all of us–young and old, rich or poor.

Other views on teaching kids about credit and debit

“Asking bankers to teach kids about the virtues of credit is like asking cigarette manufacturers to extol the virtues of tobacco. Let’s teach kids the importance of saving, and the power of compound interest.”

–Ric Edelman, financial adviser and radio show host

“Having ‘the talk’–the money talk–might make you squirm. But it’s better to do it while your kids are under your watch, before they do things they’ll financially regret.”

–Dayana Yochim, personal finance expert, “The Motley Fool”

By John North,

Contributing Writer

3:13 PM Saturday, October 22, 2011

Debit cards have become a great alternative to credit cards, offering safety and convenience to people who dont like carrying cash or writing checks. Unlike credit cards, you can make purchases using debit cards without the worry of interest rates and over-the-limit and late payment fees. Unfortunately, that convenience may become more expensive.

On Oct. 1, Congress passed a bill capping swipe fees banks charge retailers for debit transactions. The average fee was 44 cents per transaction, but the new law caps the fee at 21 cents. While there may be little or no increase on merchandise cost as a result of the reduction, you could see more banking fees as financial institutions find ways to recover their losses.

Banks estimate theyll lose hundreds of millions of dollars a year in debit card transaction fees and are looking to recoup money from customers by modifying various checking account fees. In fact, some of the nations largest financial institutions already have announced flat monthly fees of $3 to $5 a month for debit card use.

Some financial institutions may charge per transaction fees every time your debit card is used. Rewards programs, such as frequent flyer miles, associated with debit card use may be modified or eliminated. And, financial institutions may require higher minimum account balances to waive debit card and other fees.

The Better Business Bureau advises you review your bank statements to determine what fees youre currently paying and watch for notices from your financial institutions about changes in account terms. If you dont understand a notice you receive or see an unexpected fee on your account statement, contact your bank and ask for an explanation.

You also may want to ask your bank if there are programs to waive fees for accounts with minimum balances. It also pays to shop around to find a financial institution with low or no-fee debit cards. Check out financial institutions with the BBB by visiting www.bbb.org or calling (937) 222-5825 or (800) 776-5301.

John North is president and CEO of the Better Business Bureau.