The first one I'm kind of confused about...while I don't think a company should go out of its way to screw customers (such as BoA putting transactions through highest to lowest to maximize overdraft fees), it sounds to me like telling a credit card company they shouldn't charge anything but the cost of the item means we think they shouldn't make money at all. How does that make sense? They ARE a business, and they ARE out to make money. Can they be less sleazy about it? Sure. But we can't expect them to do this out of the goodness of their hearts.

"Reduce reliance on the credit score. ...Banks should employ much greater flexibility and give their branch managers more latitude to use their personal judgment."

What!? You mean the way it used to be? When branch managers were allowed and even encouraged to think? What will they do with all of the monkeys running the branches now?

"Better financial education. ...More schools should offer classes devoted specifically to teaching students how investing works, how debt can be accrued, and how credit is not a blank check."

Great idea.

Having Visa or Chase come in and teach financial education, Bad idea.

Much as the schools could remedy this, I blame parents for not teaching their children how to manage credit. The schools have enough to do as it is. The Krebs cycle is the school's responsibility. Discipline, manners, and money management are a parent's responsibility. It'd be awesome if no one had lousy parents, but the schools can't possibly compensate for all that lousy parents lack. But somehow that's always the first place to blame when kids are obese or disrespectful or spendthrift. It's absurd, and it hurts our educational system more than anything.

@5yearwinter: I think what people are looking for is for credit card companies to stop jacking up the interest rates the second a payment is late, or if your credit score changes, even if your payment history has always been perfect with them.

Charging a late payment fee is one thing, but automatically increasing your interest rate by 5% or more the first time it happens is another. --This is just an example of what Ben is talking about, I'm guessing.

@etinterrapax: Sorry, I don't get it. At what arbitrary line is good credit management the parents responsibility and knowing the Krebs cycle the schools?

What about parents who, themselves, do not (and possibly never will) understand responsible credit management? We'll just doom their kids to forever live in the same hell? We should never break the cycle?

Parents are responsible for the "big things" - right vs. wrong, how you live your life, how you treat your fellow man. The details should be filled in a by skilled professionals.

As is common practice at all universities, the credit card bastards give out shirts and hats at Florida State football games if you sign up for a card. While waiting in line for my free shirt once upon a time, a drunk guy walks up to the lady handing out shirts and yells "F you! That "free" shirt cost me $8,000!". That put things into perspective for me and I abruptly left the line. Maybe we need one of these guys on all college campuses.

You know, back in the day, loaning people money with 32% yearly interest used to be called usury.

Much as the schools could remedy this, I blame parents for not teaching their children how to manage credit. The schools have enough to do as it is.

Then why make us take Economics at all?

I didn't get a free shirt when I signed up for a credit card my first year in college! I feel slighted.

What in the hell is the Krebs cycle?

End punitive practices. Cardholders should pay the money they owe, no more, no less.

Why pay off a card at all if you don't get punished for being late? I vouch for ending, say, exorbitant penalties, but the penalties have to be there somewhere. The problem to me stems from how they're calculated, not that they exist. And there there are the Capital One cards with a $300-$500 credit line. They are often issued to high-school and college students and can easily rack up late fees, which then incur over-limit fees. Yuck.

Reduce reliance on the credit score. ...Banks should employ much greater flexibility and give their branch managers more latitude to use their personal judgment.

I agree with this in principle, but there is no guarantee that this would work in the consumer's favor. What's to stop a branch manager for using decentralized lending benchmarks to deny credit?

@Jesse McBesse: Yeah, you have to watch out for those t-shirts that steal your card and go on a spending spree.

@Rectilinear Propagation: I don't think we learned a single thing about credit management in econ, which was a state requirement at my high school. There was a lot of stuff about I guess what you'd call introductory business practices, like demand curves, but apparently you had to take Accounting to learn to balance a checkbook. Possibly they taught practical skills for everyone in a different class that I didn't take--I was in a different school system before high school.

I don't think that the distinction I make is arbitrary, but I suppose it might be. I just see a disturbing trend whereby the schools are increasingly expected to be responsible for every aspect of education, even as we cut funding, don't reinforce lessons at home, and can't agree about what lessons should be taught. So I think that it's a very easy thing to say that the schools should handle it, but much more difficult to implement.

What ever happened to personal responsibility for one's actions? There are plenty of folks who manage their finances and credit cards without trying to blame anyone else for the situation. This is indicative of a societal problem that seems to be getting worse, every negative thing has to be blamed on something that protects the "victim" (perp) rather than refocusing the negative outcomes as a natural consequence of bad behavior. Examples include sexual predators who "had a bad childhood," credit bums who never learned how to manage money in school, child abusers who were abused as youths, the list goes on. I guess the idea of free-will is not a part of the belief system here. Every damn thing that's wrong is the fault of someone else. Interestingly though, when these same folks do something good, there they are, standing up to claim the credit (No pun intended.)

I'd love if they could tack on a requirement that credit card signatures be phased out permanently in favor of chip-and-pin. Chip-and-PIN is *much* more secure than signatures, which cannot be verified in any way. Chip-and-PIN requires that you have the actual card in hand and that you know the PIN. Signatures require neither.

I would also like CID/CVC/CSC codes to be required in all transactions where the card is not present, such as online purchases. This would pretty much end card number generator fraud.

@robbie:

I agree with this in principle, but there is no guarantee that this would work in the consumer's favor. What's to stop a branch manager for using decentralized lending benchmarks to deny credit?

Right. This brings up problems where subconscious racism, sexism, ageism, etc. of the lender might come into play.

@paulcrist:
It's the metabolic process that all organisms that breath air go through for energy. Something like that.

@Terminixsux:
No offense, but it seems like you lead a very naive life. It's true, there is a good population of people in over their heads with credit because of irresponsibility. Some just need the first life's lesson, and others never learn.
However, there's a huge group of people out there that do alright with their credit--perhaps carrying more of a credit debt than they should, but otherwise making their payments on time and holding a good job. And then, a health emergency hits. With no way to pay for the high medical costs, many have no choice but to charge it to their credit card. 30% of low to middle income families with credit debt pointed to medical expenses contributing to their debt. Worse, the medical emergencies can often lead to a double impact where they can't work and have massive expenses piling up. Studies show there is a huge connection between medical expenses and credit card debt and problems: http://demos.org/page495.cfm
This is just one example of normal folks getting the shaft.

These are regular people, Teminisux. Good and otherwise fairly financially responsible people. People who want to do right and pay back their debt, but credit card companies are doing as much as humanly possible to fuck them over. What do you say about that?

Don't sit in your ivory tower with your naivete and point to your perceived crumbling of America's "victimized" society. Try learning depth and facts behind the issue first.

The linked article has a confusing point subsequently copied into the Consumerist article.

It says "End punitive practices." Punitive refers to punishment and I think what they intended is a call for ending practices like two-month average balance interest calculations, universal default and exorbitant fees. Unfortunately the very next sentence in the article is "Cardholders should pay the money they owe, no more, no less." This seems to imply ending even the regular accumulation of interest.

As for reducing the reliance on the credit score, this seems like a terrible idea to me. The credit score is based on well-founded analytics concerning default rates, etc. I don't trust bankers to make judgements of credit-worthiness. My wife and I have a strong relationship with our local branch manager; but that shouldn't play any role in the rate we get on a car loan or a mortgage. Likewise, if someone walks into a bank wearing sweat pants and is unkempt that should not influence the bankers decisions on said person's credit-worthiness. Allowing branch managers more latitude in their personal judgement opens consumers up to superficial judgements, and opens the bank up to their branch managers making judgements influenced by the wrong data (for example, it's well-known that consumers consistently overstate their income on credit card and loan applications).

The problem with the credit score is not its use as a judgement in making credit decisions. It is a statiscally reliable indicator of credit risk. The problem with the credit score is that it's too hard for those with low scores to get the credit they need to build a higher score. Those with a low credit score can get trapped in a vicious cycle.

Low credit score -> increasing interest rates -> increased financial burden (on an already financially strained situation) -> increased likelihood of default -> lower credit score -> ....

As a side note along these lines, Enron defaulted when and only when their credit rating was downgraded. Once they were downgraded they were trapped. The downgrading triggered clauses in their loan agreements causing their loans to become due in full. It was at that point they defaulted and were forced them into bankruptcy to seek protection.

The main criticism of the Moody's and S&P credit ratings is that they are too easily influenced by the management of the very companies they are suppose to be indepedently rating. That is personal judgement plays a role in the ratings and it does so to the detriment of the rating system. The market and the analytics do a far better job than the rating systems of monitoring corporate credit-worthiness.

@mroach: The credit-card companies have no interest in increasing the security of their product. If a credit card is used fradulently, the credit-card company merely issues a chargeback to the merchant. The merchant returns the charge to the credit-card issuer and pays a chargeback fee. The merchant is out the fradulently purchased product, the charge fee and the chargeback fee; the credit-card company gained the charge fee and the chargeback fee and is out nothing. They lose nothing by having an insecure product. What they gain in having an insecure product is that their cards are exteremly easy to use for consumers increasing the likelihood that they are used. Add barriers to the ease-of-use and the frequency-of-use decreases.

@BareFeet: Just because it has a perjorative name ("usury") doesn't mean it's wrong. There are some borrowers for which 32% interest is the "right" rate to capture the credit risk of that borrower. That is, only with a 32% interest rate is the expected value of issuing loans to those borrowers positive. If credit-card companies weren't permitted to charge such rates, they'd be forced to charge rates for which their expected value would be negative. No business would enter a losing proposition so they'd never issue loans to those borrowers and thus these borrowers would be unable to get any credit. In theory, market equilibrium determines these rates.

I'm fine with credit card companies charging fees for stuff like late payments, going over on credit limits, etc. I understand why they do it -- it's a negative incentive to get your payments in on time and keep your financial business in order. It's their money, and they want it back. Duh. But frankly, they act in bad faith a lot of the time by changing interest rates, changing minimum payments, changing payment due dates, an other stuff like that. Sure, they have every right to charge us fees for not upholding our part of the agreement we signed when we got the credit card, but what they don't have is a right to be dicks about it. They pretty much hold all the cards, and by changing the rules in the middle of the game without letting us know, they're acting in bad faith.

Here's a good frontline piece on credit cards that I got this from another comment on consumerist: http://www.pbs.org/wgbh/pages/frontline/shows/credit/

@BareFeet: There is no denying that credit-card companies (and businesses in general) do as much manipulation of the consumer as they can to increase their bottom line. I wasn't arguing otherwise.

But caveat emptor, and all that.

@j.a.s.o.n: your chargeback statement is only partially correct. there are very stringent guidelines for a chargeback & a merchant is only liable if it can be determined that they did not follow the guidelines for a valid purchase. for the record, there are only 3 guidelines (for VISA/MC network): 1) the card is present (obtained by a "full magnetic read"), 2) the user was present (a signature was signed. please note that it does not matter if the signature matches the card or even an ID - a simple "X" constitutes that the user was there), 3) the card received an authorization (unless it's under a merchant floor limit, in which case no authorization is required).

chargeback fees are actually paid by the card-issuer to their interchange bank which represents their chargeback case to VISA. the merchant only pays the charge amount bank if all 3 conditions above are not met.

transactions that are approved on a fraudulent card are the responsibility of the card-issuing bank, if they meet the above conditions. incidentally, this is the #1 cause of chargebacks ONLY WHEN they accept a fraudulent card that does not receive a "full-mag read" by manually typing in the card #. transactions approved on a stolen card before the card is "captured" are the responsibility of the card-issuing bank. it gets even worse if the card or card info is stolen abroad, b/c merchant floor limits are higher for international purchases (a floor limit is the minimum amount needed for an authorization & can be anywhere from $10 to an unlimited amount).

card-issuing banks & bond companies are very interested in increased card security, but they don't set the rules. rules are set up in favor of merchants to increase acceptance & b/c VISA/MC (& other card networks) are merchant organizations. plus, merchants pay card-issuers interchange fees which are essentially protection payoffs designed to offset losses due to fraud.

the ATM network was created by banks to compete with the VISA/MC network & provide more security, but similar problems have ensued regarding fraudulent PIN transactions due to card skimming, unsafe PIN handling (don't write your PIN on your card or carry it on you, PLEASE), & successful phishing by fraudsters.

@BareFeet: There's no doubt that credit-card businesses (and businesses in general) manipulate the consumer to their advantage. I wasn't arguing otherwise.

But caveat emptor, and all that.

I don't have a problem with credit card co's charging fees, interest, etc -- without this, they'd go out of business and I wouldn't get the cash back. That said, some of the fees are a bit predatory in nature (thinking about the universal default setup).

I'm with Terminixsux -- credit is a personal responsibility, no different than obesity. Don't go suing McDonald's ('though their menu is far healthier than Ruby Tuesday) because you're now a 300+ lb whale. It's almost time we hit a recession again and I'm not sure how the public will respond to it, especially the younger members of our society. I see the college age kids with all of the latest electronics, newer cars, $2,000 handbags and know damn well it's either Mommy & Daddy paying for it or they've got a credit card balance that rivals their tuition fees. They're supposed to be COLLEGE STUDENTS, they should be perfectly capable of reading agreements and knowing what they're getting themselves into.... but alas, even that's another subject.

NeoteriX's comments are off-base for this discussion, the healthcare system in the USA is broken; people accumulating large amounts of debt due to medical expenses is just a symptom. I've been sick as hell over the past 10 years and have racked up plenty of medical bills and had plenty of battles with the insurance cos to pay for it. I won't claim to know the answer for how to fix our system. I'm all for socialized healthcare, but NOT in this country -- we'd screw it up worse than the existing system.

@FLConsumer:

NeoteriX's comments are off-base for this discussion...

Respectfully, I beg to differ.

My basic point is that those who lack sympathy for masses of people embroiled in credit problems are often conveniently stereotyping those people as a spoiled, material, irresponsible people who cannot manage their own finances, and are playing the blame game with credit card companies instead of owning up to their own problems.

I'm pointing out the fact that this perspective is painfully naive and ignores the significant population of people who would otherwise be fairly responsible people but for some catastrophic reason have (involuntarily) gotten themselves into a sizable credit card debt.

This situation would be bad enough, and would be for the most part isolated to a commentary of US healthcare, but because of the credit industry's shady practices like universal default, double cycle billing, etc., these people end up getting into serious credit trouble--their credit scores are demolished, dirtbag credit collectors harass them, etc.

This healthcare example is one that is particularly compelling and tends to evoke some sympathy, but is illustrative of the bigger picture where, for whatever emergency reason, people get into credit card debt and because of the ballooning costs, suffer much more than they have any right to.

I'm ok with the credit card industry making a profit, and clearly people who are irresponsible consumers are another story... but it was would take the most die hard shill to refuse to admit that a considerable amount of the practices of the credit card industry are designed to illegitimately rape and pillage consumers.

Better financial education. ...More schools should offer classes devoted specifically to teaching students how investing works, how debt can be accrued, and how credit is not a blank check.

Aaaugh! No! We already expect too much of the schools. It's no wonder many schools struggle to teach the standard academic subjects when so much time is already taken up by watered-down health, sex ed, civics, etc. courses.

@NeoteriX: I don't disagree that the credit card companies DO have some shady practices, some which make it virtually impossible for people to dig themselves out at their current income level. HOWEVER, the majority of people with credit card debt got there through irresponsibility. No one ever intends to rack up a huge amount of debt. It usually happens due to a lack of planning. Lack of sufficient financial reserves a.k.a. a "rainy day fund" is irresponsibility. You may say that some people might not be able to afford to save money. In most cases, I call bullshit. Most people with credit card debt work 40 hrs/week or less and have plenty of areas in their life where their spending could be curtailed, often with very little impact to their quality of life.

Life before credit cards was not that dissimilar before it was today. Unexpected financial crisis still happened back then and people still found ways to get through it without credit cards. Most often, people went to banks or friends for money and it worked, and it still can.

Need more money than you have? Get a loan, don't leave it on the credit cards. I spend a small portion of time each week helping people work on their finances. 95% of the time, it's about how to pay off credit card debt. Many times, these people racked up this debt in their early years (18-24) and have been paying for it ever since. What I find appalling is that many of these people CONTINUE to charge even more things to these same cards despite being in debt.

I'm shocked at where people put priorities today. I had one couple go apeshit when I suggested they cut back on the # of times they went to Starbuck's every week. (Note: CUT BACK, not CUT OUT entirely!) I told them that if they couldn't change what they drink in the mornings, how did they ever expect to change their spending habits as a whole? I only saw them twice, but since then, they've built a brand new house, sold their townhouse, bought 2 cars, and the last I heard, they stand to lose the house within the year.

Keep in mind that I'm talking about the "typical" person with credit card deb. There will always be exceptions, but for the majority, they got themselves into this mess willingly and are unwilling to sit down and make the sacrifices necessary to break free from it. In many cases, people just don't realise how serious of a problem they are in.

@Paul: Hmm... I wonder what a school-based edukashun on credit / finance would look like. How would they possibly incorporate diversity/affirmative action into it? I shudder at the thought.

schools cannot effectively teach financial management b/c most students have no relative base for comparison. if you have no income, then you cannot budget, & even though you can teach the math of checkbook balancing, it is just another math exercise until value is added.

the good news is that many banks & credit unions offer tools for parents to help their kids learn about saving money, building credit, etc. check out the credit union national association's googelplex