Consumerist
Mike and his wife are backpacking their way around the world, and like a smart consumer, before they left he looked around for a credit card without a currency conversion charge. Capital One is fee free, which in theory makes it ideal for travel. In reality, there are hidden costs, and they're called human stupidity and random interpretation of the rules. As a consequence, he's "pre-paid" $6,000 onto a Capital One card that has been red-flagged and frozen, and Capital One refuses to budge—even though they acknowledge there are notes on the account that indicated he would do this before he did it, and even though they're the ones who told him to pre-pay.
The problems began when Mike discovered his new card would have a credit limit of $1000, far below what they'd need for such a long time away in multiple countries. Capital One wouldn't increase the credit limit, but they told him he could pre-pay above his limit—in effect, turning it into a Capital One-branded debit card.
Before he did any of this, he verified that it was allowable, first via the enrollment agent when he applied for the card and then again when he called to activate it. But when he tried to pre-pay online, the transaction was rejected, telling him: "You are only allowed to transfer up to 110% of your current balance. Your current balance is $0.00."
I once again called Customer Service, dreading the hold times and quality of service that I would surely be in store for on the day after Christmas. I slowly and carefully explained everything: the trip, the limit, the conversations with earlier reps. The agent told me that if I wanted to pay an amount that was more than 10% over the current balance, I would have to mail them a check. It couldn't be done on the website or over the phone.Not the most comforting CSR interaction, but Mike mailed in the check and hoped for the best. A week later, his card is rejected in Costa Rica. The reason?I again asked for a higher limit, and was told it would come naturally when the time was right. When would the time be right? "Oh, that varies." Varies? Like what? Months? Years? "Oh, it should probably happen within a year." Giving up hope of a higher limit and now wary of believing what the reps tell me, I went over the plan step by step: I would write a check for $6000 and mail it to the address he had given me. A few days after it arrived, I would be able to charge up to $7000, using my credit card like a debit card. He confirmed all of this, but I still insisted he make a note on my account and read it back to me. I also spoke to the Fraud Department, repeated my whole life story, and begged them not to place a hold on my account if our travel looked like suspicious activity. I started to enumerate the dozens of countries and expected dates, but he cut me off and said he would make a general note that we were traveling.
[The account specialist] told me that a $6000 deposit on a zero balance was a huge red flag, and there would be a mandatory hold on my account. I started to explain everything, but he cut me off: "You have to understand, there are rules. I know you wish you could make the rules, but these are Capital One's rules." I was rather upset at being talked to like a fifth-grader, but I set that aside to focus on the matter at hand: how could I get the hold removed as quickly as possible?Mike's biggest problem is that he got the Capital One card at the last minute—which is one reason he wrote in, to make sure other people who attempt the same money-saving tactic give themselves six months or more after opening the card before they try to pre-pay:I spent the next hour talking to him, his boss, the guys in Fraud, and even the fancily-named Account Supervision department. They all confirmed that: (1) Yes, the notes from the December 26 call clearly show that I did exactly what the rep had told me to do, (2) Despite that, this was still my fault because I shouldn't have listened to him, and (3) There was absolutely no way the hold would be removed.
If you live in a state where it's legal to record your customer service calls, you should consider that as well, so that you'll have evidence to help persuade the company to take responsibility for their CSR's promises.Some final tips for anyone who might be planning a similar trip:
- Definitely shop around for a card with a low or nonexistent foreign currency fee; it adds up!
- Get the card as far in advance of the trip as possible. I was told multiple times that if my account had been more than six months old, they might have been able to work with me, but as a new customer I was screwed.
- Once you get the card, use it enough that they raise the limit, so you can avoid everything I'm going through.
- Add someone back home to the account so they can act on your behalf.
- Consider doing all of the above with multiple credit cards; it's not likely that they'll ALL leave you high and dry on New Years Eve.
(Thanks to Mike!)
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Comments
But...but...is he still stuck in Costa Rica? Is he selling souvenir pencils to tourists trying to scrape up the cash to leave?
It's too early for cliff hangers like this.
I think the question that needs to be asked here is...
"What's in your wallet?"
Backpacking around the world sounds like quite a trip, though I guess you better be a heck of a swimmer.
I have now had a Capital One credit card for two months and cannot access my transactions or statement online. After repeated calls to them, they finally admitted that all new users were having problems with online access and they didnt know when the problems would be fixed. Of course, the online payment function works correctly!
@rasbach: lol ah you beat me to it
So is Mike and his wife stranded in Costa Rica without any money? Do they have backup funds? Are they continuing their trip?
What about the $6000 is that lost forever? Is Mike's red-flagged Capital One card going to ruin his credit history?
There does seem to be a trend forming; verifying important information with a CSR means shit, especially if it'll cause problems later. What good is that?
the idiots that sign you up for a card will tell you anything to get you to sign.
@rasbach: A Citibank Platinum Select card, which I use religiously, and a Capital One card that hasn't been used in over a year. Long story short Cap. One dinged my credit report for a 30-day late notice on a $10 balance after they said they wouldn't. I'd close the account, but it's the oldest revolving credit account I have. It's good to keep it around even if I'm not using it, right?
Um, why prepay? Why not just use the charge card like, well, a charge card, and then make payments at the end of the month, just stop into an internet cafe?
I thought the travelers check companies had debit cards that you could use to pull money rather than the paper checks they used to issue? Sounds like a more sound option than chancing it with a new credit card account.
When we travel we try to make sure we have money in multiple existing accounts in case something happens to lock our main account.
The last trip we took with no notice spawned a fraud lock on our debit cards and bank account. They saw unusual charges and locked it. We had to call them and explain we were on a trip to get it unlocked. We have had the account for over 15 years.
@Maude Buttons and @Asvetic: At the end of his email, Mike added, "I'll call back again later in the week and keep you posted on the results. Unless we run out of money and can't pay for Internet access." Here's hoping they have some other credit cards and access to more cash.
@JustAGuy2: Why worry about making payments while taking a long trip like that? You have to schedule your visit around internet cafes throughout the trip. I wouldn't even know where to start looking to integrate those into a backpacking trip. I would also be hesitant to do financial transactions in an internet cafe in a third-world foreign country.
@JustAGuy2: The post doesn't explain it very well, it sort of jumps in to the middle of the story, but apparently the card only had a $1000 limit and Mike needed more money available. So he pre-paid the CC so he could (he thought) charge $1000 plus the pre-paid amount. And he used CapOne (instead of, say, other pre-paid card options or debit card) because they don't charge currency conversion fees.
My condolences to the victims of corporate ineptitude. As another traveller, I can tell you that credit cards aren't the only "guaranteed" cash that can go wrong.
Travellers' cheques aren't always hassle free either. I bought cheques in Euros two years ago (rather than the sinking US dollar) and most places in the Philippines wouldn't take them, or if they did, they were offering the same exchange rate as the US dollar (and it was US$1.40 to the Euro at that time). The was only one place to get a fair exchange rate, and even that was a ripoff.
I still find it safer to use travellers' cheques, but I wouldn't want all my money tied up in US dollars in case I was in another country and the dollar collapsed (no impossible in this economy).
One good thing - one of my US$100 cheques did go missing once and, true to their word, the company (no product plugging) got me the money back in a week. That might be too long for some, but I wasn't in a hurry or short of cash.
@ncboxer:
It's once a month - not really that hard. Also, there are internet cafes practically everywhere. Finally, if it's an emergency, you can just call someone at home and have them do it.
What was the advantage to pre-paying again? I used my capital one card in brasil for a month and I didn't have any conversion fees just like the guy said. Was he just trying to up his available balance?
I used to prepay my credit cards when going overseas so that I could get cash advances at overseas ATMs and not get hit with interest (which starts from the day of the cash advance). That used to be by far the cheapest way to convert currency.
I'd be furious if a credit card company froze my account with a credit balance due to me. What possible excuse could they have other than trying to steal the deposited money?
@Justaguy2: I'm Mike's wife Hilary. Just renting a car, they put a $750 "pre-authorization" on the card. That gives us $250 for eight days of food and lodging. Not quite enough. Plus there can be delays and problems when transferring money -- we want the peace of mind of knowing the card will work.
BTW, you can see photos and stories of our trip at [spothopping.com] -- it's an ad-free labor of love, and we hope you like it.
As humphrmi pointed out, I probably over-condensed the story to make it a bit more readable. The problems began when Mike discovered his card would have a credit limit of $1000, far below what they'd need for such a long time away in multiple countries. Capital One wouldn't increase the credit limit, but they told him he could pre-pay above his limit—in effect, turning it into a Capital One-branded debit card.
I've gone back and added that into the post.
@Jillsy: ha ha, I didn't mean Mike's email was "unreadable" btw — quite the contrary. But it was too long to post in its entirety. Good luck with your travels!
@SpenceMan01: actually, if you're not using it and don't intend to ever use it again, AND if you aren't making a major purchase anytime soon (buying/refinancing a house or a car), then you can go ahead and close the account. It'll reduce your credit score for awhile, but that doesn't really matter unless you need to score a low interest loan sometime really soon. I heard this from a financial guy on NPR. It just doesn't makes sense to have to keep around every single CC you've ever opened.
@JustAGuy2: I initially had the same thought. You can make payments online, and you can typically do up to 4 per billing cycle. Why couldn't he just pay off his credit card online on a regular basis?
But, having traveled abroad, I definitely know that there are times when you put way more than $1k on your credit card at one time. Plane tickets for two can certainly stress or break that $1k limit. Heck, even just putting on everything for your trip at once might be a problem. When I went to New Zealand, I bought my flex bus pass and a bunch of hostel nights all at once and charged $700 my very first day there. It hurt at the time, but then I realized that I wouldn't have to pay for busses or hostels for the rest of my 3 week trip, and it wasn't so bad anymore.
@bohemian: We had a similar story - before leaving for the UK, we dutifully called the Mastercard people (at one bank) and the Visa people (at the other bank.) Both thanked us and wished us well.
Unfortunately, I assumed the VISA people would also update the retail banking people as this was where we keep our personal accounts. Hmmm
A few days later, we're in Bath, UK with about 4 pounds between us (in change) and the ATMs are refusing to issue anything. Luckily one receipt said "Your home bank has refused the transaction."
After an hour of finding a pay-phone (yes, we're morons and didn't have a cellular!) and getting in touch with the bank, the CSR said "Ok, sorry, your accounts been freed. Enjoy your trip!" He even gave me a European toll-free number that would connect me to telephone banking back here in Canada.
With that cleared up, we used the ATMs for cash. Yes, there was a service fee for each withdrawal, but we're good at planning the cash we'd need for several days. And, of course, you're never far from a Barkley's Bank.
@Leah:
Yeah, I guess it's the limit that I wasn't thinking about. My Visa has something like a $32k limit, so hitting the ceiling has never been an issue for me.
As to why it has such a high limit? Well, the bank offered me one of those cash advance checks with 0.0% interest for a year, and a fee that maxed out at $75. I called up, and asked how high they would take my limit. They went to $25k (they've raised it since then), and I wrote it and cashed it. $800+ after tax profit.
I looked into getting a Capital One card before going abroad because I read it was one of the only cards with no foreign transaction fee. I called customer service several times to verify this (much more painful than it sounds - warning #1), and also asked how they calculate the exchange rate. I finally found out (after asking several very confused CSRs - warning #2) that they add 3% to the exchange rate set by Visa/Mastercard, which pretty much negates the lack of FTF. So I decided to stick with getting money from ATMs with my debit card (1% FTF). I'm interested in trying the pre-paid cash advance method - does anyone else have experience with that?
@Jillsy: renting a car? i thought you were backpacking. cheaters! =P
Two years in a row my Capital One card was frozen while I was out of the country. Both years I called in advance and told them exactly where I would be. The lack of a conversion charge doesn't mean much when you are unable to use the card. I cancelled the Capital One and now use my Amex when traveling. Paying a fee sucks, but it sure beats the alternative.
Here is a heads on on crapital one. They did state they would change it at the end of 2007 so I am not sure if they have done so yet. Crapital one does not report credit limits. How does this affect your credit? 1/3 of your credit score deals with how you use your revolving credit i.e. credit cards, store charge cards, and home equity lines of credit. There are many factors that go into this such as your total % usage and your individual card usage. As you go above say 30%, 50%, 75%, 100% usage you lose points and alot of them from your fico score.
Imagine if you will the damage done to your score if you go over your credit limit. Then imagine what would happen if the credit card company reported your credit limit as $0 to start out with. You put $1 on the card and you are over the limit. The credit bureaus, most of the time, will then switch out your credit limit for your high balance. When this started to happen people would max out their crapital one card with say a balance transfer, wait a month, and then pay it off. It was the only way to not ruin your credit.
Why would crapital one do this? In court crapital one stated they did it to purposely ruin consumer's credit reports so they could not get another credit card with another company. Had a crapital one card and wondered why your fico score was a little lower than usual and you paid more for your car or mortgage loan? Get turned down for a card because of high credit usage? Now you know.
It's not rational to defend a stupid action by saying it's your policy. Capital One sets Capital One's policies, and is responsible for them, and can override and change them at will. If I don't make any credit card payments for a few months, I can't get away with it by telling the credit card company that my policy is to pay my bills on a quarterly basis only and to not pay any fees or interest so long as I pay my bills on time according to my policy. Well, I can, but the credit card company probably wouldn't say "Oh, that's fine, thank you for letting me know, I'll update your account."
he was hiking with his buddies who all had mountain bikes. he's still waiting for is rewards.
@cwalters: We didn't take it that way! Thanks for posting our story -- commiserating with you and the commenters makes us feel better.
And thanks commenters for your concern. We have Citi credit and ATM cards, which charge 3% on currency conversions, plus an extra 1% for Mastercard. That'll add up over a 7-month trip, so we were hoping to only use them in emergencies. It's mainly the principle here that's got us so worked up -- that Capital One won't take responsibility for what their CSR's say.
Mike just spent 40 minutes on an outdoor mosquito-plagued payphone trying to reach them but kept getting disconnected. We'll go enjoy ourselves and try again later.
@picantel: They've been reporting my limit for awhile now.
So what's wrong with placing the $6000 in a high interest bearing account and setting up auto transfers?
This reminds me that I still need to cancel the "credit protection" service on my Citi card. Of course I never authorized them to sign me up for said service in the first place - they just did it, even though I told the CSR "I DON'T WANT IT". Probably didn't help that the CSR barely spoke English. All my attempts to cancel it have been fruitless so far. They basically won't let me do it. As far as I know, the credit protection service wasn't part-and-parcel with the card when I signed up for it. It's an extra service designed to nickel-and-dime you.
Sorry, that rant wasn't exactly on topic...it's just another example of how customer "service" is designed to do anything *but*.
i also had a similar problem with Capital One, but with a much smaller amount. after i received a statement, i knew i had additional charges and wanted to pay it in full. the amount i paid was over the amount due on the statement, but NOT over my limit.
after making my payment, my account was frozen. they wouldn't allow me to make ANY charges. no one could tell me why. they just said it was frozen for a few weeks. i thought maybe they were punishing me for paying in full, and not earning any interest on account.
finally, after several calls, i got a smart rep who knew the deal. it's a fraud thing. here's the scam: scammer makes a payment by check for MORE than their limit. as soon as payment posts, scammer spends the full amount paid.
BUT, their check is no good + bounces. cc gets screwed. the way that Cap One now prevents this from happening, is by putting a 'hold' on the account until the check clears.
i've never heard of a credit company increasing someone's limit just because they sent in a bigger payment. this guy should have realized he was probably dealing with overseas call centers, where they don't know jacksh*t. if his check clears, and they won't increase his limit for the amount paid, he should request a refund. if they won't, then he needs to sue in small claims.
Is there any way to transfer that money away to another account and close the account? They obviously don't care about you.
@veraikon: i used to work as a 30-day collections agent for a major credit card company and this is tragicly common. i hate to be the barer of bad news but my experience tells me your call to credit protection to try and get it removed will probably consist of 2-4 hours of repeating yourself that only has a 5-10% chance of actually succeding in removing said 'protection.'
the worst part is that when i called people for 30-day collections who had credit protection it actually made it harder to get back on time because they couldn't activate it after they were late on payments. you literally have to be clearvoyant to actually use the service.
Capital One was my first credit card, and I had a $200 limit. I called about increasing the limit, and was told that since I didn't have a credit history, I was stuck, but that I COULD overpay my bill and have additional credit. I got the same screwing. I applied for a card from the now defunct NetBank, they gave me a much more livable limit, and I immediately cancelled with Capital One.
To their credit, they sent me a refund check for my positive balance within the week. But I'll never sign with them again.
@tetracycloide: That's why you send a certified registered letter and if they don't kill it, cancel the card and complain to your state AG.
FYI- There are pre-paid debit cards designed just for travel. I think one is called Visa Travel Money. New City Bank offers them.
They're reloadable like a starbucks card. I usually put 3/4 my money on one of those and leave the rest with my regular account. That way, if I lose one or one gets refused, there's at least some money to live on while things get cleared up. The other benefit is that if you're a victim of fraud (a real problem in a number of countries), you can get the money back like a regular Visa and you're not exposing your "normal" credit card.
He wouldnt even need to go to a internet cafe to transfer the money. He could have just called his bank and told them to make a bill payment. That would have been much easier. I would never tack on $6000 onto a credit card, I would not trust them with my money.
@JustAGuy2: "Why not stop into a n internet cafe?"
You should never ever use a public internet cafe computer for banking/credit/etc sites. They're almost filled to the brim with keyloggers and other nefarious software.
When I went overseas I just used my credit union account and paid for things mostly in cash. My credit union allows me to have 10 free atm withdrawals overseas every month, and although I was reluctant to trust it, I believe they told me I could use debit as much as I wanted. I was in a country where I could basically only pay with cash anyhow, so all was good.
I really recommend credit unions because they're much likely to have lower or nonexistent fees for such things. They care that you have that minimal deposit in your savings. My boyfriend who went with me had another credit union, but similar benefits. We both had a lovely trip. If you are going to use credit and ATM in another country you need to research if you will even be able to use it and how. EX: In Japan, most places do not take credit, and the only ATM machines with English menus and which are able to work well on foreign accounts are in post offices.
Capital One wouldn't increase the credit limit, but they told him he could pre-pay above his limit
I've never known this to be the case with any card. Most don't let you pay more than you owe when paying online.
Way back when, I remember paying a Home Depot CC bill twice, resulting in an overpayment. Rather than "hold it" in credit to be deducted from, they returned me a check for the overage.
We've set up a page on our site ([spothopping.com]) with the full (and long) story. We'll post news there as it happens.
When you travel, leave the credit cards alone. Get an old fashioned ATM card and take out however much money you think you'll need in that particular country. Then just spend the cash. Usually the fees and exchange rates are more favorable doing this opposed to using a credit card. You may have to plead and beg to get a plain ATM (not debit) card from the bank, but generally they're available if you ask. Use a money belt (hidden under your shirt) and you're mostly safe from pickpockets, which are the biggest theft risk in most countries.