Tom Dziubek and Flexo speak with Mark Frauenfelder, the creator of Boing Boing and the editor-in-chief of the MAKE magazine. Frauenfelder also writes for Credit.com, and within this interview he shares details about some of this website’s new services including the Credit Report Card (reviewed here).
Frauenfelder is a proponent of the do-it-yourself (DIY) lifestyle, and he explains the source of his interest in this lifestyle as well as details about a forthcoming book on the subject.
[00:00] Introduction from Flexo [00:32] Interview with Mark Frauenfelder
– [00:55] Boing Boing
– [01:50] Mark’s move to the Cook Islands
– [03:59] MAKE magazine
– [05:15] Mark’s involvement with Credit.com
– [08:12] Services offered by Credit.com
– [09:05] Credit.com vs. credit reporting bureaus
– [10:12] Personal information on Credit.com
– [11:21] Improving your credit with the Credit Report Card
– [13:57] Building cigar box guitars
– [15:45] Beekeeping
– [19:21] Upcoming book on do-it-yourself (DIY) experiences [23:42] End
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With the current and upcoming changes in the credit card industry due to the Credit CARD Act and other regulations put in place by the Federal Reserve, banks and credit issuers are maneuvering as much as possible to be in a good position to continue making money off their customers. Public corporations have responsibility to their shareholders to protect their bottom line, and with the threat of reduced profits due to new regulations you can be sure these companies will try anything within the realm of possibility to survive.
Bank of America has announced some anticipated changes to their credit cards that shows what the future might look like: more credit cards will carry annual fees. These new fees, according to the bank, will range from $29 to $99. And unlike most fee-bearing credit cards, the customers receiving these charges may not have cards that offer premium services like a concierge or extensive rewards.
One of the criteria Bank of America will use to determine which customers are lucky enough to receive the fee is “profitability;” in other words, those of us who don’t send the bank extra in the forms of interest payments and late fees or those who use their credit card infrequently — the responsible users of credit — are likely to be assessed the fee. Bank of America could easily determine which customers are not profitable for the company and charge this annual fee to make them profitable.
For now, there are many fee-free credit card choices for responsible users. The climate might change soon, however. Even the most diligent credit card users, those who manage to use cash back rewards and other benefits while paying off their balance in full every month, might find that the new environment will point to a cash-only spending plan for the best deal.
For a few years, Credit Karma has been offering a product that lets consumers see what lenders and employers see when they look at the consumers’ credit reports. After securely and privately providing your personal information, Credit Karma retrieves your credit report from one of the credit reporting bureaus, either Experian, Equifax, or TransUnion.
Credit Karma then analyzes your details and assigns a grade, A through F. The various categories receiving grades relate to the items that determine your credit score. Lenders review these items when deciding whether to extend credit to you, how much credit to extend, and at what cost.
This is a free service, supported by advertising.
Yesterday, Credit.com announced they will also be offering a similar free service, providing a credit report card to help you evaluate and improve your credit report.
So which service is better? I took both services for test drives.
Credit report cards
Here are some of the most obvious differences. Credit.com assigns grades to the following categories: Payment history, debt usage, credit age, account mix, and inquiries. Credit Karma’s categories are similar: Open credit card utilization, percent of on-time payments, average age of open credit lines, total accounts, hard credit inquiries, total debt, and debt-to-income ratio. More categories, and therefore more information, is more helpful.
To look further into the health of my credit, Credit Karma offers charts in each category, placing my result within the spectrum of results from the Credit Karma Community, all users of the website. So I can see, for example, that the grade of “C” Credit Karma gave me for “Total Accounts,” which includes how those accounts are divided among revolving credit accounts and loans, puts me in a group of users who received an average score of 683, significantly lower than my score.
This tells me I’m doing well enough in the other categories to make up for this deficit but improving my mix of accounts will improve my score further.
I also received a grade of “C” from Credit.com for the “Credit Mix” category. Credit.com doesn’t offer a chart, but it does include details about my types of credit (23 revolving credit accounts, 0 mortgage loans, 1 auto loan, 6 student loans) and excellent suggestions for specific actions I can take to improve in this category.
Here are some screen shots. Click on the thumbnails to see the full-size images. [click to continue…]
Frequent readers know all about how a depressed economy and new laws are serving as convenient excuses for banks to be raising interest rates and otherwise penalizing clients, even those who pose no risk.
Ann Minch was presented with multiple notices of an interest rate hike. Even though she says she’s never missed a payment, she ended up with a 30% interest rate on her Bank of America credit card. She decided she’d had enough and started a protest in a simple YouTube video. YouTube videos are increasingly proving to be a successful way of getting the attention of a corporate behemoth that has wronged you. And it worked for Ann Minch.
Bank of America responded to her revolt, and because she was armed with knowledge and the right attitude, they finally agreed to set her interest rate back to its previous 12.99%. Many of our readers have found in similar situations that persisting with customer service, asking for as many supervisors as you have to, is often successful as well.
Ann explains in the video that she’s starting a new Web site to make the Debtor’s Revolt larger and more effective.
Interestingly, she also hints at a plan to avoid some tax increases, but isn’t very specific. I’d be curious to know what she’s referring to. Assuming she’s talking about federal taxes, I don’t know of any current proposals to raise taxes. In fact the current administration has lowered taxes for 98.6% of working households. The Bush tax cuts are meant to expire next year, but I’m not sure to what extent that will affect most people. Hopefully she’ll be more specific about that in the future.
My girlfriend is an elementary school teacher in the New York City public schools. One of the benefits of her employment is the reimbursement for the purchase of supplies and materials used in her class. Any teacher will tell you that they are required to pay for many of their own materials, and the amount of the reimbursement is subject to a maximum that never covers their full expenses.
The reimbursements until recently were distributed via check, an old-fashioned method of payment. More recently, the City of New York switched to prepaid Visa debit cards, offered by Chase Bank. This must be the result of some sort of a deal between the city and the bank because it does not make much sense for the employee.
Debit cards are meant to be used for spending, but these reimbursements take place after the spending is completed. If you want to use the reimbursements to pay yourself back for your spending on items for the classroom, you must visit a Chase branch to convert the card to cash. We tried taking the debit card to her personal bank of choice, TD Bank, but they claimed to be unable to do anything for us with the debit card.
These prepaid debit cards seem to be the latest trend for rebates. Verizon Wireless, the cellular carrier of choice for both me and my girlfriend, offers rebates on a number of its phones. The last time she needed to purchase a new phone, the rebate came not in the form of a check as it had on prior occasions, but in the form of a prepaid debit card. These cards are touted for their “convenience,” but absent direct deposit I would prefer a check.
Verizon Wireless offers a feature where you can replace your debit card by entering your information online, thus deactivating the card and issuing the old-fashioned paper check to the address on your account. This is a better option but introduces an extra step that many people will simply ignore.
Checks find their way directly into bank accounts while debit cards only make appearances in stores for purchases. If your spending is tight, this might not make a difference. If you use the debit card to purchase something you would have had to purchase anyway, without the debit card, the form of payment won’t affect the amount you spend. Most people’s spending is not tight and controlled. When you send debit cards out to 80,000 teachers, I would believe that many will be used for extra spending and some will not be cashed or used at all. The same is true for wireless phone customers who receive those rebates.
There are reports that the debit cards issued for consumer rebates are unreliable. Some have no problems while others find that cards are declined when they should not be. Even worse, some of these prepaid debit cards have monthly fees. The new rebate debit cards offered by Staples charge a $3 monthly “account maintenance fee” after six months. In states where they are allowed, which I believe is every state except California, fees can eat away at your rebate card balance until you are left with nothing. It is best to cash these rebates or convert them into a check and deposit the funds as soon as possible.
Have you seen more rebates offered in the form of prepaid debit cards? What are your experiences?
Every so often I address questions and comments I receive via email or Twitter. If you have a question, please contact me using the form on this page. I try to respond to everyone, but it might take a while before I read every email I receive.
From A. Parker:
What is the difference between the options when a cashier asks you whether you would like to use your debit card as “credit” or “debit?”
Merchants often pay the middlemen between them and banks less for “debit” transactions, which generally require you to enter a PIN. You will likely see merchants, if they show favor between “debit” and “credit” transactions, lead a customer towards “debit.” To use a debit card as “credit,” you are not actually using it like a credit card. Your bank account will still be debited immediately, overnight, or on the next business day. In most cases, you will be required to sign for the transaction rather than entering your PIN, but signature-less credit card transactions are increasingly common.
According to Visa, using a debit card as “credit” helps to ensure you’ll receive the credit card network’s protections like “Zero Liability.” This also ensures that Visa receives a bigger chunk of the merchant’s money.
If you have questions, let us know. You can email your questions directly to me (or to Smithee, Jeff, or Tom) or leave your questions in the comments area.
The Office of the Comptroller of the Currency (OCC), a governmental regulatory organization feeling the pressure with the White House proposing replacing many of their duties with a new consumer-oriented regulatory body, has sent out a warning to the CEOs of all national banks. The Credit CARD Act of 2009 requires credit card issuers who raise a customer’s interest rate to abide by a number of regulations.
These regulations, such as the requirement to reassess the rates for anyone whose rate increased since January 1, 2009 and for the bank to provide a specific reason for any rate increase, don’t take effect until August 10, 2010. The OCC’s warning is designed to remind credit card issuers that although the rules don’t change until a year from now, they will be in effect for any customer who has been effected since January 1, 2009 — before the Act became a law. The banks will need to maintain these records so they will be available when the regulators come calling next year.
Unfortunately, I am unaware whether my credit cards have increased their interest rates. It has been a long time since I’ve used a credit card to pay for something I could not pay back by the date the credit card payment was due. But I consider myself lucky and thankful to be in that position.
Fair Isaac, the company that created and owns what is generally known as your credit score, is suing Experian and TransUnion, two of the three credit reporting bureaus, for creating a competing product that blurs the line between the “real” credit score and the others. The third credit reporting bureau, Equifax, agreed to settle with Fair Isaac. Fair Isaac uses data from the three bureaus to determine the main credit score used by lenders, security companies, employers, landlords, and many others. This is the FICO score. Fair Isaac has also been developing a new and improved score, FICO 08, used less frequently.
After years of selling their own credit scores to customers — “FAKO” scores — the credit bureaus worked together to create VantageScore, a product to compete with the FICO score. The bureaus claim the VantageScore is more accurate for determining the credit risk of an individual, but Fair Isaac believes the credit bureaus have marketed the VantageScore as if it were the “official” FICO score and the VantageScore infringes on Fair Isaac’s copyright.
There is always an advantage to having competition in the marketplace, but in this case, competition and the lack of clear marketing creates confusion. An individual’s credit score can vary wildly from one company’s calculation to another. It’s also important for consumers to know exactly what they are buying, or even accessing for free.
Even with CreditKarma, which promises to provide your real credit score for free thanks to the support provided by advertising, there is no indication on the website to explain which credit score you are receiving. It is my understanding that CreditKarma receives the score from TransUnion, but it is unlikely they provide the FICO score used by the vast majority of lenders. If it were, CreditKarma would be advertising the fact that you can receive your FICO score for free.
Fair Isaac wants customers to go directly through Fair Issac, and only Fair Isaac, to obtain your FICO credit score. Through myFICO, Fair Isaac charges $15.95 for the “standard” FICO score, and they want to stop credit bureaus from selling or offering products that are confusingly similar to the FICO score.
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[00:00] Introduction from Flexo
